Saddam Hussein
The Minister for Finance Shaukat Tarin presented the federal budget yesterday, with a total outlay of over PKR 08 trillion. The budget or the total expenditure for the next year stands at PKR 8.487 trillion – almost 19 per cent higher than last year’s budgeted expenditure of PKR 7.136 trillion. The growth benchmark for the next fiscal year is set at 4.8 per cent. Current Account Deficit (CAD) would be limited to 0.7 per cent. Inflation to be capped at 8.2 per cent. Whereas, substantial allocations for environment, water security, social safety nets and pro-poor schemes are part of budget.
The Minister announced that the country’s economy was now entering the growth period, adding that almost every sector is growing. Pakistan is seeing a “historic growth” in agriculture, stating that apart from cotton, all other crops saw extraordinary increases. Growth in the services sector helped improve numbers pertaining to poverty and had also played a major part in generation of wealth in Pakistan.
Tarin also acknowledge the bitter truth that Pakistan has become a food deficient nation, thanks to the policies of the previous governments. “We will have to become a food sufficient nation and for this, we will have to provide lots of incentives to farmers,” he added. His statement is well reflected in incentivizing agriculture sector in the current budget.
Speaking about the significance of boosting exports, so Pakistan can earn foreign exchange, the Minister said the government is focused on the creation of economic zones to facilitate industries, create jobs and boost exports. Pakistan has also introduced mortgage financing for the first time ever, adding that the passing of the foreclosure law had enabled banks to start lending to people.
In another surprising move, Tarin also announced that the Public Sector Development Programme (PSDP) will be increased from PKR 630 billion to PKR 900 billion to counter the adverse impact of the coronavirus pandemic. This is a massive increase of around 40 per cent. This would really turn the wheel of economy running, along with spurring the growth in dozens of industries linked with development projects and construction. Besides, it would be creating employment opportunities and alleviating poverty as well.
It is pertinent to note that during the last three years the government faced economic crunch, intensified by the COVID-19 pandemic. The budget 2021-22 can rightly be called as a corrective budget, in the sense that earlier the government was imposing more taxes, along with some of the predatory and exploitative taxes, such as withholding taxes (WHTs) even on small transactions. It was merely firefighting, without having any space to take daring decisions.
The government has subsequently effectively transitioned from recovery and stabilization to setting on the path of sustainable growth. Nevertheless, it will take a bit of time to decipher the technical details and gauging the impacts, and comprehensive assessment of the budget 2021-22. As the saying goes by, the devil lies in the detail.
Having said that, as per initial impressions, the budget appears to a very balanced one in the backdrop of limited fiscal space – in the context of COVID-19 pandemic and IMF programme. The budget is a pro-growth and people’s friendly at large. There is no new taxation; so a relief for middle and lower middle class. Incentives for business and industry are also being offered, along with recipe for augmenting growth.
The government’s priorities for the next fiscal year as reflected in the budget 2021-22 henceforth are: inclusive and sustainable economic growth, pro-poor initiatives and social safety net through the Ehsaas Programme’s vertical and horizontal expansion, increased development spending for more job creation, PM’s initiatives including Kamyab Jawan and Kissan Programmes, impact mitigation of COVID-19, and the continuation of the stimulus package.
Moreover, the government focus is also on circular debt financing and power subsidies, revenue mobilization without new taxes, support of the housing sector and the construction industry through Naya Pakistan Housing Scheme and Small and Medium Enterprises (SME) support programs, facilitating expatriates’ remittances and savings through Roshan Digital Account and Pakistan Remittances Initiatives and other such schemes
The only challenges include inflation and handling IMF programme. Inflation is expected to remain in high trajectory given spike in global food and commodity prices (oil). Although, decrease in some of the taxes may slightly push inflation downwards. The other issue in handling the IMF on potential revenue shortfall and convincing them smartly to let us play our game and correct our home ourselves and give results.
Summing up, the budget has reinforced the confidence in the sitting government by the masses, investors and business community. Though, the real task lies ahead. It is not the end, but just the beginning towards sustainable growth. Only thing the government has to do is stick to its policies in the long run and infuse certainty and predictability in the economy, so to create a conducive environment for the generation of productive economic activity.
