Rs8.5tr federal budget announced with historic PSDP allocation

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ISLAMABAD: Amidst ruckus by the opposition, Finance Minister Shaukat Tarin unveiled on Friday the federal budget 2021-22 in the National Assembly.He started his budget speech by stating that the biggest challenge for the incumbent government was to bring the national economy back on the path of recovery. Pakistan’s economy has witnessed a V-shaped recovery after contracting by 0.47 per cent in FY 2020-21. The provisional GDP growth rate for FY 2021 is estimated to be 3.94 per cent against the targeted growth of 2.1 per cent through the policy initiatives undertaken during FY 2020-21. The nominal GDP for FY 2021 is projected to increase from Rs45,567 billion to Rs47,709 billion, whereas, the Economic Stimulus of Rs1.24 trillion announced in March 2020 has been extended for the FY 2021 and an amount of Rs155 billion has been released to mitigate the socio-economic impacts of Covid 19 pandemic. Exports during July-April FY 2020-21 increased by 6.5% to $21.0 billion ($19.7 billion last year). On a YoY basis, exports increased by 61.3% to $2.3 billion in April 2021 ($ 1.4 billion in Apr 2020). Remittances grew significantly by 29.0% to $24.2 billion and surpassed the target of $21.5 billion as compared to $18.8 bn during Jul-Apr, FY 2020-21 during the same period last year. The inflation based on Consumer Price Index (CPI) during Jul-Apr, FY 2020-21 is down to 8.6% as against 11.2% during the same period last year. FBR tax collection grew by 14.4% to Rs.3,780 billion during Jul-Apr FY 2020-21 against Rs.3,303 billion last year. A refund of Rs.253 billion was issued by FBR to the business community during JulApril, FY 2020-21, which are 66.5% higher than the previous year’s Rs.151.8 billion issued during the same period last year. Moreover, Pakistan has entered the international capital market after a gap of over three years by successfully raising USD 2.5 billion. World Bank recognized Ehsaas Emergency Cash Programme as amongst the top four social protection interventions in the world in terms of the numbers of people covered. The IMF and Pakistan have resumed the $6bn Extended Fund Facility and completed the second to the fifth review under the program. The IMF has appreciated that the government policies have been crucial in supporting the economy and saving lives and livelihoods in the Covid 19 pandemic. Inflows of foreign exchange through the Roshan Digital Account (RDA) crossed the $1 billion mark in a short span of time after the launch of the scheme. Moody’s rating agency upgraded Pakistan’s outlook to ‘Stable’ from ‘under review for downgrade’ (in August, 2020). Fitch affirmed Pakistan’s rating at B- with stable outlook. The key priorities set by the federal government for FY 2021-22 include inclusive and sustainable economic growth; pro-poor initiatives and social safety net through the Ehsaas Programme’s vertical and horizontal expansion; reduction in inflation and price control and monitoring; increased development spending for more job creation and PM’s initiatives including Kamyab Jawan and Kissan Programmes. Moreover, the impact mitigation of Covid-19, and the continuation of the Stimulus Package; circular debt financing and power subsidies; revenue mobilization without new taxes; support of the Housing Sector and the Construction Industry through Naya Pakistan Housing Scheme and SME support programs; facilitating expatriates remittances and savings through Roshan Digital Account and Pakistan Remittances Initiatives and other schemes are also among the key priorities of the government for the new fiscal year.

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