budget 2021-22 pakistan/salary increase in budget 2021-22 pakistan

 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.

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●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.

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●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.

 

budget 2021-22 pakistan/salary increase in budget 2021-22 pakistan