ISLAMABAD – The federal budget for the financial year 2020-21 was presented in National Assembly by Federal Minister for Industries and Production Hammad Azhar today on Friday.
The budget 2020-21 has total outlay of Rs 7,294.9 billion. This size is 11% lower than the size of budget estimates 2019-20. The net revenue receipts for 2020-21 have been estimated at Rs 3,699.5 billion indicating an increase of 6.7% over the budget estimates of 2019-20.
The provincial share in federal taxes is estimated at Rs 2,873.7 billion during 2020-21, which is 11.7% lower than the budget estimates for 2019-20.
The overall expenditure during 2020-21 has been estimated at Rs 7,294.9 billion, out of which the current expenditure is Rs 6,345 billion. The development expenditure outside PSDP has been estimated at Rs 70.0 billion in the budget 2020-21.
The size of Public Sector Development Programme (PSDP) for 2020-21 is Rs 1,324 billion. Out of this, Rs 676 billion has been allocated to provinces while Federal PSDP has been estimated at Rs 650 billion.
In the Federal PSDP, Rs 418.7 billion are allocated for Federal Ministries/Divisions, Rs 100.4 billion for Corporations, Rs 3 billion for Earthquake Reconstruction and Rehabilitation Authority (ERRA), and 7 B for COVID response and other Natural Calamities Program.
GENERAL PUBLIC SERVICE
Under the head of General Public Service, the major portion goes to executive and legislative organs, financial, fiscal and external affairs which stood at Rs 3,663,740 million.
The main heads of expenses are Superannuation Allowances & Pensions, Servicing of Foreign Debt, Foreign Loans Repayment Servicing of Domestic Debt and Others. Transfer payments constitute another important item.
DEFENCE AFFAIRS AND SERVICES
Details of estimates of expenditure on Defence Affairs and Services in 2019-20 budget were Rs 1,152,535
Million and the revised was Rs 1,227,388 million. For Budget 2020-21, Rs 1,289,134 Million have been allocated.
PUBLIC ORDER AND SAFETY AFFAIRS
Under the head of Public Order and Safety Affairs, an amount of Rs 169,927 million has been provided in the budget 2020-21 as compared to Rs 152,919 million in the budget estimates 2019-20 and Rs 153,269 million in revised estimates of the outgoing fiscal year 2019-20.
The allocation for Police (Rs 158,621 million) forms the major component, with a share of 93.35%, in the total allocation under this head.
The allocation under the head of Economic Affairs in the budget 2020-21 has been projected at Rs 71,751 million, as compared with Rs 84,167 million in the budget estimates 2019-20 and Rs 106,411 million in revised estimates 2019-20.
Major share of this head goes to Construction and Transport is 21.79% of total allocation for Economic Affairs.
Under the head of Environment Protection, an amount of Rs 431 million has been estimated in budget 2020-21 for Waste Water Management, which is lower by 8.3% than budget estimates 2019-20.
HOUSING AND COMMUNITY AMENITIES
Under the head of Housing and Community Amenities, an amount of Rs 31,000 million has been provided in the budget 2020-21 for Housing Development as compared to Rs 31,000 million in the Budget 2020-21 as to Revised 2019-20 i.e Rs 252 million in revised estimates 2019-20.
HEALTH AFFAIRS AND SERVICES
Under the head of Health Affairs and Services, a total allocation of Rs 25,494 million has been made in the budget estimates 2020-21, which is higher by 130.55% from the budget estimates 2019-20.
The allocation for Hospital Services forms the major component with amounting to Rs 22,774, which is 89.33% under this classification.
RECREATION, CULTURE AND RELIGION
In budget 2020-21 an amount of Rs 9,822 million has been budgeted for Recreation, Culture and Religion. Overall estimates under this classification for 2020-21 are almost equal with budget estimates 2019-20, and higher by 5.6% when compared with revised estimates 2019-20.
The bulk of expenditure at Rs 7,500 million under this head has been earmarked for Broadcasting and Publishing i, which is 76.36% of the total allocation.
EDUCATION AFFAIRS AND SERVICES
Education Affairs and Services have been provided with Rs 83,363 million in the budget estimates 2020-21 as compared with Rs 77,262 million in budget estimates 2019-20 and Rs 81,253 million in revised estimates 2019-20.
The bulk of expenditure at Rs 70,741 million has been allocated for Tertiary Education Affairs and Services in budget 2020-21, which is 84.86% of the total allocation under this head.
Under the head of Social Protection, an amount of Rs 230,907 million has been allocated in the budget 2020-21, which is higher by 21.15 % as compared to the budget estimates 2019-20. The bulk of expenditure at Rs 208,258 million has been allocated for Social Protection (not elsewhere class) in budget 2020-21, which is 90.19% of the total allocation under this head.
Submitting tax proposals, Hammad Azhar said it has been suggested to reduce the sales tax ratio from existing 14 percent to 12 percent on point of sale to provide relief to common people and shopkeepers in wake of COVID-19.
He said minimum tax on hotel industry has been reduced from 1.5 percent to 0.5 percent during the months for six months with effect from April. He said a mobile application has been introduced to facilitate salaried class to submit their tax returns, which resulted into an increase of 37 percent.
He said an automatic system has been introduced for filing of tax returns. He said seizures, as a result of anti-smuggling campaign seen a rise of 19 to 30 billion rupees.
Elaborating relief measures, the Minister said the upper limit for shopping without showing identity card has been increased from 50,000 to 100,000 rupees.
He said import of dietetic food for medical purposes will be exempted from sales tax, while exemption on import of medical equipment has been increased for further three months.
The Minister said Federal Excise Duty on imported cigarettes and tobacco is being increased from 65 percent to 100 percent, while e-cigarettes and other substitutes of tobacco have also been included in this list.
To discourage consumption of caffeine based energy drinks, FED is being increased from 13 percent to 25 percent.
He said it has also been proposed to impose tax on double cabin pick-up vehicles as per other cars as wealthy people use these pick-ups as status symbol.
The Minister said it has been proposed that all persons and association of persons are allowed to deduct expenses from property income to provide a level playing field and to remove discrepancies.
He said it has been proposed not to levy tax on cashing foreign remittances or transferring it to other banks.
Hammad Azhar said under Sections 231P and 234, advanced tax will not be collected on auto rickshaw, motorcycle rickshaw and motorcycle upto 200 cc.
He said in order to become withholding agents for individuals and partnership business, the existing limit of sales is being increased from 50 million rupees to 100 million rupees to facilitate small and medium enterprises.
Hammad Azhar said it has been proposed that one hundred percent additional tax is collected on school fees exceeding 200,000 rupees per year from persons who are not in Active Taxpayer List.
The Minister said as all banks do not have required system to deduct taxes on profits received by different persons, it has been proposed to collect withholding tax of 15 percent across the board on proceeds.
He said it has been proposed to provide exemption to donations given to specific institutions with certain terms and conditions to ensure their monitoring.
Hammad Azhar said a proposal is to reduce duration for withholding tax on sale of immovable property to four years from existing five years.
Moving on to the targets set for next fiscal year, Minister for Industries Hammad Azhar said GDP growth target has been set at 2.1 percent, which remained negative four percent in the outgoing fiscal year.
He said the current account deficit will be confined to 4.4 percent while the inflation will be brought down from 9.1 percent to 6.5 percent and the foreign direct investment will be enhanced by 25 percent.
The Minister said 73 percent of the PSDP have been allocated for the ongoing schemes and 27 percent for the next projects. He said special emphasis has been given to the social sector.
For this, allocations have been enhanced to 249 billion rupees from 206 billion rupees. He said the government has formulated a special development programme worth 70 billion rupees to offset the negative impact of Coronavirus pandemic and other calamities and improve the living standard of the people.
Hammad Azhar said the government is focused to improve the power transmission system and reduce the circular debt.
He said sufficient resources have been allocated for the provision of electricity to the special economic zones and the projects to be executed with foreign funding. For this purpose, the government has earmarked 80 billion rupees. These funds will especially be used to reduce the gap between electricity demand and supply.
The Minister pointed out that Pakistan is faced with severe water shortage. He said the government this year will give special emphasis to the water related projects and in this connection 69 billion rupees have allocated.
Ample resources have been allocated for big projects such as Diamer Bhasha, Mohmand and Dasu dams. The Minister said these projects will not only help increase water storage capacity and power generation but will also provide thirty thousand additional job opportunities.
Hammad Azhar said the projects under National Highway Authority have also been given priority to promote businesses and industrial development in the country.
In particular, sufficient resources have been earmarked for the CPEC-related projects including its western route. For this purpose, 118 billion rupees have been allocated.
Similarly, 24 billion rupees have been earmarked for ML-1 and other projects of Pakistan Railways and additional funds of thirty-seven billion rupees for other projects of communication sector.
Referring to the challenge posed by COVID-19 for the health sector, Hammad Azhar said 20 billion rupees have been allocated to improve the capacity of health institutions and production of health equipment with the aim to provide better health services and check diseases in the country.
The Minister pointed out that the government also gave a mega stimulus package of 1200 billion rupees after the breakout of COVID-19. He said the purpose was to protect different segments from the impact of the virus.
He expressed the confidence that the provincial governments will also play their part in the fight against COVID-19.
The Minister said 10 billion rupees have been earmarked to provide relief to the agriculture sector and fight the crop munching locusts.
Turning to the education sector, Hammad Azhar said five billion rupees have been allocated for reforms in this sector. He said steps will be taken to introduce a uniform curricula and quality examination system as well as establish smart schools and bring the seminaries into the national mainstream.
He said higher education is one of the top priorities of the government. He said 30 billion rupees have been allocated to bring innovation in higher education sector with the aim to improve research and development in subjects such as artificial intelligence, automation and space technology.
He said the government has increased budgetary allocations for Higher Education Commission from existing 59 billion rupees to 64 billion rupees.
Minister for Industries and Production Hammad Azhar said assistance to poor and vulnerable segments of society is top priority of the government and for this purpose an integrated system has been devised under which all relevant institutions have been merged into newly constituted Poverty Alleviation and Social Security Division.
He said budget for Ehsaas Programme has been increased to 208 billion rupees from the existing 187 billion rupees. The amount will be spent on vulnerable segments of society in a transparent way.
A sum of 179 billion rupees has been allocated to provide different subsidies in energy, food, and other sectors.
The Minister said the government has provided Naya Pakistan Housing Authority a sum of 30 billion rupees to provide low cost housing to the people.
In addition, through Qarze-e-Hassan Scheme 1.5 billion rupees will be dispersed through Akhuwat Foundation for low cost housing.
Hammad Azhar said 55 billion rupees have been allocated for Azad Kashmir and 32 billion rupees for Gilgit-Baltistan.
A sum of 56 billion rupees has been allocated for merged districts of Khyber Pakhtunkhwa.
Moreover, Sindh has been provided a special grant of nine billion rupees and Balochistan ten billion rupees, which is in addition to their share in NFC.
The Minister said under the steps to improve remittances, a sum of 25 billion rupees has been set aside for receipts through banks.
He said in order to provide affordable transportation services to the people of Pakistan, a sum of 40 billion rupees has been specified for Pakistan Railways.
Regarding empowering youth, the Minister said two billion rupees have been allocated for Kamyab Jawan Programme for capacity building of the youth. He said a sum of 13 billion rupees has been reserved for federally administered hospitals in Lahore and Karachi. He said over one billion rupees have been earmarked for e-governance to improve public service delivery.
The Minister said on the suggestion of President Dr. Arif Alvi, sum for Artists Welfare fund has been increased from existing 250 million rupees to one billion rupees.
Minister for Industries and Production Hammad Azhar stressed the need for enhancing the capacity of research institutions in order to achieve the goal of knowledge economy.
He said initiating e-governance, IT-based services and 5-G services will remain the focus of the government. An amount of 20 billion rupees has been allocated for projects in these sectors.
The Minister said six billion rupees have been allocated to deal with the impacts of climate change.
He said the government has earmarked 40 billion rupees for the execution of different projects in Azad Kashmir and Gilgit-Baltistan.
He said 20 billion rupees have been set aside for the TDPs.
Two billion rupees have been allocated to support the Afghanistan s rehabilitation.
To achieve sustainable development goals, an amount of 24 billion rupees has been set aside while 12 billion rupees will be spent for the development projects in agriculture sector to ensure food security.
The Minister said the government is pursuing the policy of austerity in these difficult times.
He said we are thankful to the armed forces of Pakistan for extending cooperation in the government s austerity drive.
Highlighting major achievements of the government in the outgoing fiscal year, Hammad Azhar said a 73 percent decline was witnessed in the current account deficit, which is now under 3 billion dollars.
He said there is also a primary surplus which we achieved in the past nine months.
He said the budget deficit was also reduced from five percent to 3.8 percent during the first nine months of the current financial year.
He said the FBR collections during this period also witnessed a growth of 17 percent and we were in a position prior to COVID-19 to achieve the target of 4800 billion rupees.
He said the non-tax revenue is expected to be 1600 billion rupees during the outgoing fiscal year, which shows a growth of 134 percent. He said the government paid back six billion dollars foreign debt.
Hammad Azhar said due to the heavy loans taken by the previous governments we paid an amount of 5,000 billion rupees on their interest over the last two years. He said it was during the era of PTI that one million job opportunities were created for Pakistanis abroad, which helped increase our remittances during the first nine months of the current fiscal year.
Remittances rose from 16 billion dollars to 17 billion dollars. The foreign direct investment increased from 0.9 billion dollars to 2.5 billion dollars. He said the IMF also approved a six billion dollars extended fund facility for Pakistan after acknowledging the reforms programme of the government. He said international rating agency Moody s also improved Pakistan s economic outlook from B-3 negative to B-3 positive.
The Minister said Bloomberg declared Pakistan Stock Exchange as one of the top performing markets in December 2019. He said the government s steps led to economic stability.
Hammad Azhar said we stopped the process of taking loans from the State Bank of Pakistan for budget financing and ensured market-oriented exchange rate.
He said no supplementary grant was given during the outgoing financial year and we did away with red tapism to ensure fast execution of development projects.
Better debt management helped us save 240 billion rupees. He said we issued refunds of 254 billion rupees to the business community as against the 113 billion rupees last year.
The Minister said the task force led by Dr. Ishrat Hussain has submitted its report for the structuring of public sector departments.
He said the restructuring process will reduce the financial burden on the federal government. He said transparency has been brought in the administrative structure of Ehsaas Programme and we ousted 820,000 fake beneficiaries from the programme. He said concrete steps were also taken for the revival of two RLNG plants, which were closed to closure.
Later, the House was adjourned to meet again on Monday at four in the evening.
ALSO READ: Complete Budget 2020-21 speech
Economic Survey 2019-20: Hafeez Sheikh says GDP down to negative 0.38% due to COVID-19
Adviser to the Prime Minister on Finance and Revenue, Dr Abdul Hafeez Shaikh said that country’s economy was stabilizing before the outbreak of coronavirus pandemic (COVID-19), which inflicted huge losses and derailed it towards negative growth of 0.38 percent.
Addressing at the launching ceremony of Pakistan Economic Survey for the outgoing fiscal year 2019-20, the advisor said that the fiscal year 2020, before coronavirus spread, showed dedicated efforts of the government for addressing structural issues that had caused macroeconomic imbalances back in FY 2018.
He said that the economic reforms programme and the implementation was also acknowledged by the international financial institutions while International Monetary Fund (IMF) had declared that Pakistan’s programme was on track and bearing fruits for the economy.
He said that the pre-COVID-19 economic recovery was also supported by macroeconomic indicators as on external side, the decline in current account deficit, buildup of foreign reserves and stable exchange rate.
On the fiscal side, there were significant improvements in all major indicators and the trend continued till March 2020, implying that the fiscal consolidation was on track.
The primary balance had witnessed a remarkable turnaround as it had posted a surplus of Rs193.5 billion during July-March FY2020 against a deficit of Rs463.3 billion last year.
He said that the government had repaid around Rs5,000 billion loans and was successful in reducing its expenditures, while no ministry or division was provided supplementary grant.
GDP target for next financial year 2020-21 set at 2.3%
Finance Advisor Abdul Hafeez Sheikh, while addressing a press conference in Islamabad, said that the GDP target for the next financial year ( 2020-21) has been proposed to be 2.3% while the current year’s GDP growth was negative 0.4% against the target of 3%.
The proposed targets of various sectors have been set at:
a) Agriculture 2.9%
b) Industries 0.1%
c) Services Sector 2.8%
d) Trade Deficit 7.1%
e) Current Account Deficit 1.6%
According to the document, inflation is projected to fall from 11% to 6.5% during the next financial year, and there are proposals to reduce government’s non-developmental expenditures.
The document also proposed to further target subsidies in the next financial year.
Agriculture sector grew by 2.67% in 2019-20
The outbreak of deadly Corona virus, which had badly affected the global economies also negatively impacted the national economy and performance of all major sectors remained dismal during the outgoing fiscal year (2019-20).
However, during period under review, the agriculture sector performed well as it recorded strong growth of 2.67 percent considerably higher than 0.58 percent growth achieved during same period of last year.
The maize production in the country grew by 6.0 percent to 7.236 million tons, whereas cotton production declined by 6.9 percent and it was recorded at 9.178 million bales.
sugarcane production witnessed nominal reduction of 0.4 percent as it was recorded at 66.880 million tones. Wheat is the most important crop of Rabi season, which showed growth of 2.5 percent and reached to 24.946 million tons during the year to be ended on June 30.
Livestock having share of 60.56 percent in agriculture and 11.69 percent in GDP achieved the growth at 2.58 percent.
The Fishing sector having share of 2.06 percent in agriculture value addition (and 0.40 percent in GDP), grew by 0.60 percent, while Forestry sector having share of 2.13 percent in agriculture (and 0.41 percent in GDP) grew by 2.29 percent.