Salary increase in budget 2021-22 pakistan/ federal budget 2021 22 pakistan
1. INTRODUCTION
PTI government
has presented its third budget. The incumbent Finance Minister was expected to
spell out new directions of the government which are pro-growth and reflected
with fiscal allocations that are in agreement with the Fund while encouraging
the existing and new enterprises.
At least from the Budget speech it appears he
has been successful. However, a critical appraisal is required to qualify this
stance. Government has faced numerous economic challenges, aggravated by the
Covid 19 Pandemic but the Government has successfully progressed from recovery
and stabilization to sustainable growth. Provisional GDP growth rate for FY
2021 is estimated to be 3.94 percent against the targeted growth of 2.1 percent.
The Current account balance during Jul-Apr, FY 2020-21 had been in surplus of
$0.8 bn (0.3 percent of GDP) against a deficit of $4.7 bn (–2.1 percent of GDP)
in the corresponding year.
This had been possible both by an increased export
of 6.5 percent to $21.0 bn and remittances significantly growing by 29. 0percent to
$24.2 bn.
FBR tax collection grew by 14.4 percent to Rs3,780 bn during Jul-Apr FY
2020-21 against Rs.3,303 bn last year and is expected to post a healthy Rs.
4,691 collection by the end of FY 2020-21. Government has posted a primary
surplus for the first three quarters of FY 2020-21. This has enabled the
government to resume the $6bn Extended Fund Facility and completed the second
to fifth review under the program with IMF.
However the journey to growth from
stabilisation along with unwarranted risks of Covid-19 is tough and requires an
out of the box thinking. This is recognised by the government; Federal Minister
for Finance and Revenue Mr. Shukat Tarin stated in his interview for PIDE
Pre-Budget P & R Volume II, Issue VI Tax, Expenditures, And Debt: Trica of
Budget Challenges “...Well I'm very impressed with the work that PIDE has done.
We are making broad use of the recommendations which we have found over there.
For instance, the growth areas, productivity, investment, vibrant cities,
markets, openness, creativity, internet access and technology usage, those are
the areas of growth and those are the, I would say, engines of growth”. While
the growth enablers
قومی اسمبلی نے وفاقی بجٹ کی منظوری دے دی
اسلام آباد: قومی اسمبلی نے وفاقی بجٹ کی منظوری دے دی، فنانس بل 2021-22 ترامیم کے ساتھ کثرت رائے سے منظور کرلیا گیا۔
اے آر وائی نیوز کے مطابق قومی اسمبلی میں مالیاتی بل وزیر خزانہ شوکت ترین ن پیش کیا، فنانس بل 2021-22 ترامیم کے ساتھ کثرت رائے سے منظور کیا گیا۔
اس دوران ایوان میں حکومتی اور اپوزیشن اراکین کی نصف تعداد موجود تھی، ایوان سے نصف سے زائد اراکین لابی میں چلے گئے تھے۔
فنانس بل پیش کرنے کی تحریک کے حق میں 172 ووٹ آئے جب کہ 138 ووٹ تحریک کے خلاف آئے۔
وزیر خزانہ شوکت ترین نے قومی اسمبلی میں اظہار خیال کرتے ہوئے کہا کہ 74 سال میں پہلی مرتبہ اس حکومت نے غریب کے لیے روڈ میپ دیا، 40 لاکھ غریب لوگوں کو گھر ملیں گے، صحت کارڈ ملیں گے اور سہولیات ملیں گی، کور انفلیشن ابھی بھی سات فیصد ہے تاہم فوڈ انفلیشن میں اضافہ ہوا ہے جب کہ کھانے پینے کی اشیاء کی قیمتوں میں کمی صرف زراعت کی ترقی سے ممکن ہے۔
شوکت ترین نے کہا کہ آپ جو خسارہ چھوڑ کر گئے اس کی وجہ سے آئی ایم ایف کے پاس جانا پڑا، اگلے چند سالوں میں نچلی سطح پر خوشحالی ہوگی، ہمارا مقصد لوگوں کو گرفتار کرنا نہیں، آپ سیاست نہ کریں میرٹ پر بات کریں اور مجھ پر میرٹ پر تنقید کریں میں ٹھیک کروں گا۔ ان کا کہنا تھا کہ ڈیڑھ کروڑ افراد کی فہرست ہے ہمارے پاس جو جان بوجھ کر ٹیکس ادا نہیں کرتے، جان بوجھ کر ٹیکس ادا نہ کرنے والوں کو گرفتار کیا جائے گا۔
پی ٹی آئی کے سینیٹر فیصل جاوید کا کہنا تھا کہ کورونا کے باوجود ایسے بجٹ کی منظوری ابھرتی معیشت کی عکاس ہے، جہاں دنیا بھر میں اکانومی کو دھچکا لگا وہاں پاکستان پر اللہ کا خاص کرم رہا ہے۔
فیصل جاوید کا کہنا تھا کہ انشا اللہ وزیراعظم کی قیادت میں ملک ترقی کرے گا، احساس پروگرام اور ہیلتھ انشورنس بہترین منصوبے ہیں۔
2are understood the approach towards these enablers still
needs to step-up. PIDE Growth Commission has
presented a detailed
report titled “The PIDE
Reform Agenda” to
unleash Productivity, Investment,
Vibrant Cities, Markets, Openness,
Creativity, Internet Access,
and Technology Usage.
2.
EXPENDITURES..
1. Current Expenditures
●Total current expenditures
for the year
2021-22 are estimated
at Rs 7,523 billion (see Table 4.1). ●As
last year, the
mark up in
the current year
is still driving
the current expenditures with
a 7.3 percent
increase in 2021-22.
The mark-up payments for the year 2021-22 have been estimated at Rs
3,059 billion, out
of which Rs
2,757 billion would
be paid on domestic debt and Rs 302 billion on
foreign debt.
●The major component
of the current
expenditures is defense-related expenditure.
This has increased
to Rs1370 billion.
The growth in allocation for 2021-22 (5.7 percent) is less than the last
year (11.3 percent). ●Regarding
subsidies, there is a sharp rise of 58
percent for 2021-22. This is a huge burden for the government
3●Grants and transfers, Rs 1167 billion, have been estimated
against a revised estimation of Rs 932 billion for the year 2020-21.●For running
the business of
government, a lesser
amount of Rs 479
billion have been
estimated for the
fiscal year 2021-22 against revised expenditures of Rs
487 billion in 2020-21.
2.2. PSDP Expenditures
●This is a
development Budget. The
government has allocated
Rs 900 billion under PSDP. This is an increase of 40 percent. ●The figure presents the sectoral priorities
for next year’s PSDP allocations. ●The
focus this year
will be on
food security (12
bn). These include locust
emergency fund (1
bn), rice, wheat,
cotton (2 bn) and olives (1 bn). ●Rs 91 billion for
water resources which include Daso hydro power project (57
bn), diameter bhasha
dam (23 bn),
mehmand dam (6 bn) , neelum jehlum (14 bn).●Public
private partnership and
PSDP plus has
been introduced. This would involve
the privat esector in 50
projects worth Rs 2000 billion.
Government will contribute
Rs 61 billion
as grant through viability
gap fund. These
will include roads,
railways, logistics, science and technology, water etc.
●Though it is
ideal allocation under
given circumstances, there must be a cost-benefit analysis of the
assigned projects. ●The government should
prioritise projects of
soft infrastructure,
including health and
education, for inclusive
economic growth momentum.
●Currently, the allocation to the education sector is only 4 percent, and the
health and population sector is 3 percent of total PSDP allocation. 2.3.
Pension
●There is a considerable burden of pension on the government
budget. ●The budget allocation
for pension increased
by 12 percent
in 2019-20. This year the
allocation has slightly increased from 470 billion in 2020-21 to 480 billion in
2021-22 with the slight growth of 2.1 percent.
●The pay and
pension commissions working on
a sustainable pension model.
52.4. Social
Protection
●The government has
increased budget allocation
for the Ehsaas program from 208 billion to 260
billion. The government has also allocated 68 billion to provide subsidies in
energy, food, and other sectors with the focus to target the vulnerable
segments only.
●To carry forward
the stimulus package,
the government in the
current budget earmarked
Rs 100 billion
for Corona virus-related
schemes. The SME
sector has been
provided Rs 12
billion for loans and other
schemes.3. TAXES AND REVENUES Tax
and Revenues Federal
Budget 2020-21 has
presented an ambitious revenue
plan (see Table 3.1). Considering the past performance, it is
likely that the
targets will be
underachieved. Revenue forecasting models, if
any, used by
the Ministry of
Finance and the
FBR, always overestimate the
expected revenue performance.
The total tax
collection grew by 6.1 percent
in FY2020 against the meagre growth of 0.1 percent in the
comparable period of
FY2019. In absolute
terms, tax collection stood at
Rs 4,747.8 billion
in FY2020 against
Rs 4,473.4 billion in FY2019.
Tax Revenue target
for the FY2021
has been set
at RS 5.83 trillion. Table 3.1 shows the
composition of tax and non-tax revenue along with performance and target value
for the next fiscal year.
The revenue collection
target has been set at Rs5.83 trillion for the upcoming fiscal year 2022 and is
less than the IMF recommendations of Rs6 trillion. This collection, if
achieved, would be a 24 percent increase in YoYon the Rs4.7 trillion target
Surpassed by the revenue collection agency FBR. The
non-tax collection target will be set at Rs1.42tr, an increase of 22 percent.
The proportion of provincial taxation would be Rs3.41tr, thus an increase of 25
percent revenue given to provinces. The government spending would increase to
Rs8.497tr from Rs7.341tr, an increase of 15 percent in the Fiscal Year
2021-22.
●The share of the total taxes in the revenues is around 75percent. Last
year it went exceptionally high to around 84 percent due to the increase of
economic activity. The FBR contributes around 80percentof the total revenues of
the federal government; therefore, any miscalculation or miss targeting can
severely cripple the budget, not just of the federal but the provincial
governments as well.
Provinces get around
59percentof the FBR revenues as fiscal transfers. Such a small figure has
resulted in the underperformance of FBR in the pasttwo consecutive years. The
provinces suffer immensely if the federal transfer is lower than expected. In
case of lower federal transfers and limited or no options of borrowing
Provincial service delivery suffers badly.
●This year the FBR revenue
targets are expected to grow to RS 5.8 trillion that is 23percent higher as
compared to the estimated collection of Rs 4.7 trillion in FY 20-21Salient
Features
●On the revenue front, targets are once again ambitious and stringent,
possibly leading to an increased debt burden. The government is expected to
achieve this by focusing on broadening the tax base through augmented
documentation as opposed to introducing various new major taxes.
●The government has reduced
sales tax on locally manufactured cars from 17percentto 12.5percent. The
government has also exempted Federal Excise Duty (FED) on 850cc cars and will
slash duty on electric cars.
●The government was
introducing third-party audits which would thwart the FBR harassing any
individual or business entity. Those who are found guilty of evading taxes or
deliberately hiding their income will be fined severely.
●Through the Finance Bill,
2021, the threshold of monthly electricity bill has been reduced from Rs75,000
to Rs25,000 for the purpose of levying withholding tax at the rate of 7.5
percent. However, this tax will not be applied on persons who filed their
annual income tax
returns and are
on the ATL
issued by the Federal Board of Revenue.
expected salary increase in budget 2021-22 pakistan latest news
●The finance bill
proposed to tax
profit on the
debt component of GP fund
and other such
funds. The finance
bill also proposed
to withdraw personal income tax exemptions.
●The specified goods when supplied within the limits of the
Border Sustenance Markets, established
in cooperation with
Iran and Afghanistan, will be
completely exempted from the sales tax.
●withholding
taxes on mobile
phones, will be
reduced to 10 percentat first and then 8 percent later from
12.5 percent
●The rich will
be asked to
pay taxes in
accordance with their wealth, Soth salaries class will not be
burdened with additional taxes.
●Custom duty from
vaccine and medicines
of livestock abolished to promote the livestock sector.
●Tax exemption on paper used for Quran publication, auto-disable syringe, and
oxygen cylinders.
●Tax collections saw an 18 percent increase last year as the
country crosses the limit
of Rs4000 tax
collection.75 percent more
tax refunds were made this year. ●Provincial share
in the federally
collected taxes to
stand at Rs3,411 billion.
Provinces share in NFC increased,
to receive extra Rs 707 bn.
●Sugar
included in the third schedule of sales tax act, helping in the elimination of
artificial hike in prices of the commodity.
●The Federal Board
of Revenue (FBR)
has been tasked
to collect an additional revenue
of over Rs1 trillion in budget 2021-22 over the current fiscal year’s
collection. This additional revenue will be achieved through
the withdrawal of
exemptions in sales
tax, income tax, minimizing concessionary tax rates as well as through
growth in economy and inflation
4.DEBT AND FINANCING
●The federal
government's totaldebt and
liabilities reached a staggering PKR 37,078.5 billion by the
endof April 2021. This is justan
under PKR 2000
billion increase from
June 2020, when the federal government total debt and
liabilities amounted to PKR 35107.1 billion.
9●Against the total
planned expenditure of
PKR 8487 billion
in Fiscal year 22, PKR 3060
billion have been allocated for interest
payments. As a
result, 41percentof the
government’s Current Expenditure
(PKR 7523 billion)
will be spent on interest payments. This
equals 36percentof the
total expenditure for
the year.
●Interest
payments take up
a massive portion
of the budget expenditure, however,
a 5 percentage
point proposal of
decrease can be seen
in interest payments
share in current
expenditure as well as
a 5 percentage
point decrease as
a share of
total expenditure, as shown
in figure 4.1
for the upcoming
budget FY 2021-22. This will allow
the federal government apical space to allocate more
funds on development
expenditures and other growth-oriented measures of the
budget. However, given our debt now has significant long term commitments the
interest cost may not fall. Last year saw a
substantial decrease owing to G20 relief and lowered interest rates.
The federal government
expects to raise over
PKR 2.7 trillion from external resources, including
PKR 2.69 trillion from external loans.
This will increase
the gross external
resources in the upcoming fiscal year by over PKR 0.5
trillion.
●55 percent of the external resources raised will, however, be
used for repayment of
foreign loans and
credits. This represents
a 9-percentage point decrease in
external resources share set aside for foreign
loans and credit
repayments. Although it
is still higher than
the share in
Fiscal Year 2020,
when 40 percent of external resources were used for foreign
loans and credit repayments. That was
possible primarily due
to rescheduling of
debt payments following the
corona virus pandemic. (Figure 4.2).
●This
also is an
indicator of better
fiscal space available
to the government in the up coming
fiscal year, which is evident through other policy reliefs provided in the
budget as well as an increased development expenditure.
10
●55 percent of the external
resources raised will, however, be used for repayment of foreign loans and
credits. This represents a 9-percentage point decrease in external resources
share set aside for foreign loans and credit repayments. Although it is still
higher than the share in Fiscal Year 2020, when 40 percent of external resources
were used for foreign loans and credit repayments. That was possible primarily
due to rescheduling of debt payments following the corona virus pandemic.
(Figure 4.2).
●This also is an indicator of better fiscal space available to the
government in the up coming fiscal year, which is evident through other policy
reliefs provided in the budget as well as an increased development expenditure.
Fig.4.2.External Re sources
●As mentioned above, Pakistan’s debt and
liabilities increased by nearly PKR 2000 billion (2 trillion) in the 10-month
period from July20-Apr 21. It is expected to further increase by the end of the
current fiscal year on 30 June 2021. Despite increasing debt and liabilities,
Pakistan’s debt servicing cost is on a downward trend, as shown in Figure 4.3.
The final debt servicing cost for the up coming year should further drop once
the debt and liabilities figures for the entire Fiscal Year 21 are known.
●This
represents a decreasing cost of debt despite increase in debt, providing the
federal government some sigh of relief allowing them to improve spending on
other developmental avenues.
Fig.4.3.Debt Profile
Tax Revenue-GDP Ratio has
remained constant over the past few years, as shown in Figure 4.4.
●Tax Revenue
target has been set at PKR 5839 billion, while the GDP is expected to grow at
4.8percent. This will take the nominal GDP to PKR 47, 709 billion by the endof
the upcoming financial year.
●If both these are achieved, the tax-revenue-GDP
ratio is expe12
●Government’s debt policy statement identifies sustaining Public
Debt-GDP and Debt Service-Revenue ratios important for sustained growth.
●It
aims to do the above by a combination of measures including revenue
mobilisation, rationalization of current expenditure and efficient utilization
of debt.
●As shown in Figure 4.5, the
Public Debt-GDP ratio is rather constant, but the Debt Service-Revenue ratio is
showing a downward trajectory. This, coupled with a slightly improving tax-GDP
ratio along with a falling debt servicing cost is a good beginning to sustain
debt levels in coming year scted to increase to 12.2.
12
●Government’s debt policy
statement identifies sustaining Public Debt-GDP and Debt Service-Revenue ratios
important for sustained growth.
●It aims to do the above by a combination of
measures including revenue mobilization, rationalization of current expenditure
and efficient utilization of debt.
●As shown in Figure 4.5, the
Public Debt-GDP ratio is rather constant, but the Debt Service-Revenue ratio is
showing a downward trajectory. This, coupled with a slightly improving tax-GDP
ratio along with a falling debt servicing cost is a good beginning to sustain
debt levels in coming years
The government
has indicated not only aiming to sustain the growth, but to also aim for high
levels of growth rate in the economy. PIDE’s Reform Agenda for Accelerated and
Sustained Growth also highlights the need to grow at higher rates to be able to
sustain debt levels as well as create opportunities for the new entrants in the
labour force.
●While there is
still a lot to be done to achieve a sustainable high level of growth for a
longer period, on the debt front the initial indicators suggest that we are
moving in the right direction and must continue improving in this aspect as
well.
135. CONCLUSION
Government has faced
numerous economic challenges, aggravated by the Covid 19 Pandemic but the
Government has successfully progressed from recovery and stabilization to
sustainable growth.
Provisional GDP growth rate for FY 2021 is estimated to be
3.94 percent against the targeted growth of 2.1 percent. The Current account
balance during Jul-Apr, FY 2020-21 had been in surplus. The FBR tax collection
grew by 14.4 percent during Jul-Apr FY 2020 and is expected to post a healthy
collection by the end of FY 2020-21.
Government has posted a primary surplus
for the first three quarters of FY 2020-21. This has enabled the government to
resume the $6bn Extended Fund Facility and completed second to fifth review
under the program with IMF.
However, the journey to growth from stabilization
along with unwarranted risks of Covid-19 is tough and requires an out of the
box thinking.
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