Pakistan Targets Ambitious Growth & Revenue in its Financial Year 2020-21

Pakistan Targets Ambitious Growth & Revenue in its Financial Year 2020-21

On Friday, Pakistan announced its yearly budget for the financial period 2020-21, placing lofty targets of 2.1% GDP increase, a 7% fiscal deficit, and an increase in tax revenues, despite as it sways from a surge in coronavirus cases.

The GDP target is much higher than a recent World Bank forecast that Pakistan will have another year of negative increase at -0.2%. The fiscal deficit is much below the 9.4% it is anticipated to hit in the current period.

Headline inflation that scored a decade-high of 14.56% in January is valued at an average rate of 6.5% in the next year.

Economic analysts termed the targets silly, forecasting that the administration will require to propose a mid-year additional budget provided the economic disturbances produced by the virus outbreak.

“It looks strange that they will reach the fiscal deficit target,” stated Saad Hashemy, Executive Director at BMA Capital.

What to Follow in Pakistan’s Budget Amid COVID-19 Pandemic
Pakistan reports a negative GDP growth rate of -0.40% for FY20 against a set target of 4.40%. Source: Capital Stake

Total expenditure for the subsequent financial year is going to be 7.136 trillion Pakistani rupees ($43.45 billion), announced Minister for Industries and Production Hammad Azhar, who presented the budget during a boisterous session of parliament.

Only 25% of members were attending to make sure social distancing.

Pakistan has fought to restrain the virus, and therefore the World Health Organization has advised that the quickening of infections could submerge the under-funded healthcare structure.

Official statistics showed a record of 5,248 new cases and 97 deaths on Monday, taking the tally to 144,478 cases and 2,729 fatalities.

Azhar said in his speech that the outbreak had caused Pakistan’s nearly $300 billion economies a loss of three .3 trillion Pakistani rupees ($20.09 billion).“The long lockdown, a state shutdown of business, travel restrictions, and social distancing have diminished economic activities, which have harmed growth rate and investment,” Azhar added.

What to Follow in Pakistan’s Budget Amid COVID-19 Pandemic
Data by: Pakistan government. Graphic Source: Bloomberg

On the expenditure side, debt servicing will take up 2.946 trillion Pakistani rupees ($17.94 billion) – 41% of the country’s expense.

The next largest spending head, 18% of expenditures, will be on defense, for which 1.29 trillion Pakistani rupees ($7.85 billion) have been allocated. Defense spending is up 12% from last year’s allocation despite Pakistan’s financial crunch.

Little is left to spend in other areas, and even the present expenditure of running the govt requires local and international borrowing.

Pakistan intends to collect 4.96 trillion Pakistani rupees ($30.22 billion) in tax by its revenue board – which is about a trillion rupees, or 25%, quite the last year’s amount.

Pakistan Targets Ambitious Growth & Revenue in its Financial Year 2020-21
A man wears a protective mask as he gets sanitized before entering a shopping mall, after Pakistan started easing the lockdown stipulations. Image Source: Reuters

“We believe the collection target seems very over-optimistic in prevailing economic circumstances,” stated analyst Mohammed Sohail of Topline Securities.

To fill the spending and revenue gap, Pakistan will attend to obtain 2.2 trillion Pakistani rupees ($13.5 billion) in gross external finances, including loans, aid, and grants – much of which will be utilized for reparation of outstanding foreign credit.

Pakistan last year entered a three-year, $6 billion IMF bailout program.

Tags : Budget 2020-21businessCOVID-19EconomyFinancepakistan

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