Govt eyes higher growth as it unveils Rs8,478 billion budget
Tax revenue target set at Rs5,829b: Rs3,105 set aside for debt retirement: Growth rate target set at 4.8pc: Inflation estimated at 8pc: Rs260b spared for Ehsaas programme: Cuts sales tax on locally manufactured cars from 17% to 12.5%: Development package for 14 Sindh districts announced: CGT on share prices reduced: Withholding tax on bank withdrawals, credit cards, air travel goes
Finance Minister Shaukat Aziz has presented the annual budget for the fiscal year 2021/22 in the National Assembly amid the deafening uproar raised by the opposition parties, reported 24NewsHD TV channel.
The finance minister started his budget speech on Friday afternoon amid the hullabaloo of the opposition in the National Assembly which was hell-bent not to give the minister any chance to continue his budget rendition. However, the finance minister showed his utmost resolve to continue and deliver his speech. He put on earphones so that he could not be distracted by the opposition noise.
National Assembly Speaker Asad Qaiser presided over the budget session of the lower house.
Tarin began his speech by saying it was an honour for him to present the PTI's third budget. He said the government had to face lots of difficulties but now it had prepared grounds for the revival of the economy. ‘Now the economy will march towards development and prosperity.’
He recalled when the PTI government was installed, it inherited a tattered economy and it was on the verge of default. When the PTI took reins, the country was under the burden of so many loans, he said, adding that the current account deficit had ballooned to a whopping $20 billion.
He said during this time the exports were shrinking and there was a 100% increase in imports. "In this context, a 5.5pc growth rate was flaunted."
Tarin said that the PTI government had to make payment to retire a huge debt in order to save the country from default.
He said the country needed time to come out of the shocks of the coronavirus pandemic that hit economies hard all over the world. He, however, said that that the government attained its desired targets. He touted that the current account deficit amounting to $20bn has been turned into a surplus of $800 million while a 3.6pc primary deficit reduced to 1pc.
He said it was due to the untiring efforts of the present government that the economy was now able to stride on the path of recovery and development.
The finance minister announced that for the fiscal year 2021/22, the government had set the GDP growth target at 4.8pc.
But he hoped that the growth will be in a higher bracket while relying on the measures the government had taken in this budget. Like in the past, we will not leave the weak segments of our society and they will be benefitted from the trickle-down effects of the economy.
He was optimistic that in the next couple of years, the government would achieve a 6-7 per cent growth rate.
The minister paid tribute to the PTI government for stemming the spread of the coronavirus pandemic and taking timely steps to ensure businesses did not suffer massive losses in the country due to the lockdowns.
"The government, through the Ehsaas Emergency Cash Programme, provided cash to 12 million people across the country," he said.
The finance minister announced that the government had set aside Rs260bn for the Ehsaas programme in the budget.
Tarin said remittances had increased in Pakistan to record levels, adding that these are expected to rise to $29bn by the end of this month.
"This is proof of the love that overseas Pakistanis harbour for Prime Minister Imran Khan," he said.
Tarin said the economy had grown and as a result, more people had secured jobs over the years. The finance minister said that despite the coronavirus pandemic, the per capita income of the common man had increased by 15%.
Speaking about tax collection, he said it had grown by 18% and had crossed Rs4,000bn, adding that critics had no response to the government's impressive performance in this regard.
The finance minister announced that the country's economy was now entering the growth period, adding that almost every sector is growing.
He said Pakistan was seeing a "historic growth" in agriculture, stating that apart from cotton, all other crops saw extraordinary increases.
He said that growth in the services sector helped improve numbers pertaining to end poverty and had also played a major part in the generation of wealth in Pakistan.
Tarin said Pakistan had 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 said.
"We will need to bring back administrative controls which were removed during the Musharraf era," he added.
Tarin said the government had kept the growth target at 4.8% for the fiscal year, adding that the government will not leave the poor and the destitute at the mercy of inflation.
"Never in our economic history, were poor people able to realise their dreams," he said, adding that PM Imran Khan wanted to uplift the poor.
He said the government had decided to provide interest-free loans of up to Rs500,000 to the poor.
Speaking about the importance of boosting exports so Pakistan can earn foreign exchange, the finance minister said the government was focused on the creation of economic zones to facilitate industries, create jobs and boost exports.
The minister announced that Pakistan has introduced mortgage financing for the first time ever, adding that the passing of the foreclosure law had enabled banks to start lending to people.
He announced that the Public Sector Development Programme will be increased from Rs630 billion to Rs900 billion to counter the adverse impact of the coronavirus pandemic.
The finance minister is interrupted by Speaker Asad Qaiser as he urges Opposition lawmakers to observe silence and the women MNAs in the Parliament to sit down.
"I would request all members to remain in their seats," he said, as the Opposition lawmakers continued to thump their desks and shout slogans against the government.
Tarin announced a development package for 14 districts in Sindh, adding that these will focus on improving education, solving the province's water issues and carrying out development in these districts.
The minister announced that the government has slashed sales tax on locally manufactured cars from 17% to 12.5%.
Shaukat Tarin announced that it has been proposed in the budget to lower capital gain tax on share prices from 15 percent to 12.5 percent and eliminate withholding tax on profits. Withholding tax will also not be charged on withdrawing funds from the banks, air travel and credit cards.
The withholding tax on mobile phone users has also been reduced.
The federal government has proposed a minimum wage at Rs20000 per month which was Rs17500 previously. He also mentioned relief measures provided for the government employees, who will be granted a 10% adhoc relief allowance. Meanwhile, pensioners will get 10% rise. Integrated allowance for Grade 1-5 has been raised from Rs450 to Rs900.
In his budget speech, Finance Minister Shaukat Tareen told the house that there would be no new tax on the salaried class. He said the development budget had been increased from Rs650 billion to Rs900 billion. The minister told that Rs739 billion has been allocated for the Karachi transformation plan. He said that the provinces would get 25 percent more during the fiscal year 2021-22 from the federal government.
Announcing special packages, he said Sindh would get Rs12 billion while AJK’s special package had been increased from Rs56 to Rs60 billion. Gilgit Baltistan will be given Rs47billion in this regard.
Giving relief in a number of taxes, the finance minister proposed waving of the withholding tax. 12 clauses of withholding tax have been removed. Withholding tax on mobile phone use has been decreased from 12.5 percent to 10 percent. The minister said that collectively withholding tax had been decreased by 40 percent.
The minister proposed exemption of Federal Excise Duty on locally made cars of 850cc and the sale tax has also been decreased on them from 17 to 12 percent. The sale tax on locally produced electric cars has been decreased from 17 to 1 percent.
Rs100 billion has been allocated for the coronavirus pandemic emergency fund. The government has proposed an allocation of Rs66 billion for higher education. An amount of Rs 23 billion has been allocated for the Diamer Basha dam.
The minister told the House that tax authorities’ powers are being clipped
The minister told that there is a lot for the poultry industry, agriculture and livestock. He said that the work opportunities had been increased in the country despite the coronavirus situation in the country.
Electricity, food items and daily use commodities will be given subsidy, the minister said adding that the government had given an economic programme through this budget that would benefit everyone. He said that this was a development budget, which would change the destiny of the country. He said the government was investing in agriculture and there would be a great revolution if we could make farmers export his products instead of selling them locally.
It is suggested to keep the growth rate target at 4.8pc for the next fiscal year. While the rate of inflation is estimated at 8pc.
The growth target for the agriculture sector is estimated at 3.5%; for industrial production it is 6.5pc; for services sector 4.7pc; and for manufacturing the growth target is projected at 6.2pc.
It will be recommended in the finance plan to keep the budget deficit at 6pc and the target for the current account deficit will be $2.30 billion. It is suggested to keep the exports target at $26.8 billion while the trade deficit target will be estimated at $28.50 billion.
All indicators 'positive'
In his tweet on Friday, Minister for Information and Broadcasting Fawad Chaudhry said that by the grace of God, all economic indicators of Pakistan were positive. After a long time, Pakistan is heading towards economic stability, he said adding people and institutes had full confidence in Prime Minister Imran Khan. That’s why the (the dream of) political and economic stability has been realized, he said.
Fawad Ch said that the opposition should keep accountability separate and it should hold talks (with the government) on electoral and judicial reforms.
الحمداللہ پاکستان کے تمام معاشی اعشاریے مثبت ہیں،طویل عرصے بعد پاکستان معاشی استحکام کی طرف بڑھ رہا ہے،عوام اوراداروں کاوزیراعظم پر مکمل اعتماد ہےاس لئے سیاسی اور معاشی استحکام ممکن ہوا،چاہتے ہیں اپوزیشن احتساب کواصلاحات سے علیحدہ دیکھےاورانتخابی اور عدالتی اصلاحات پر بات چیت ہو— Ch Fawad Hussain (@fawadchaudhry) June 11, 2021
In the next fiscal budget, the government has set the overall investment growth at 16 percent. The national saving target has been set at 15.3 while the budget deficit is set at 6 percent.
The government has set the remittance target at Rs31.3 billion. It is proposed to allocate Rs994 billion in terms of grants. The government proposed to allocate Rs501 billion for subsidies. The provincial surplus budget target has been set at Rs440 billion. It is proposed to allocate a total of Rs8,056 billion for federal expenditures.
The FBR’s target of Rs5.829 trillion tax collection will be a challenging task, as the IMF and Pakistan government have divergent views on how to achieve this target.
The FBR presented its strategy whereby it wanted to rely upon enforcement and broadening of the tax base to collect additional taxes of Rs250 billion out of the required tax amount of Rs480 billion.
The FBR argues that its collection could go up to Rs5.32 billion with nominal growth of 13% and the remaining revenues would be collected with the help of slight adjustments in taxes, enforcement measures and broadening of the narrowed tax base.
The FBR’s tax collection and non-tax revenues could fetch Rs7.2 trillion. After paying provinces from the divisible pool, the Centre is left with meeting obligations of debt servicing it had to borrow to finance the budget deficit.
Tax and non-tax recoveries
According to the budget documents, in the total budget outlay of Rs8,487 billion, the target of non-tax recoveries will be Rs2,080 billion and a consolidated target of tax and non-tax revenue will be Rs7,909 billion, reported 24NewsHD TV channel on Friday.
Under the pool of National Finance Commission, the provinces will be granted Rs3,412 billion. The budget deficit is estimated at Rs3,990 billion.
As per the budget documents, the government will borrow Rs1,241 billion from the non-banking sector and the estimation of non-development expenditure will be Rs7,523 billion.
For debt retirement, Rs3,060 billion will be set aside and for pensions Rs480 billion will be earmarked.
Rs1,370 billion will be allocated for defence budget; for non-development grants Rs1,168 billion; for subsidies Rs682 billion; for the expenditures of civil government Rs479 billion; and for the control and eradication of Covid-19 pandemic, Rs100 billion have been earmarked.