Rs 7.022 trillion economic stabilization budget for FY2019-20 presented

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ISLAMABAD, Jun 11 (APP):The Pakistan Tehreek-i-Insaf led government Tuesday presented its first federal budget for the year 2019-20, with total outlay of Rs7.022 trillion, focusing on fiscal consolidation, revenue mobilization, austerity measures and protection to the vulnerable segments of society.

“The overriding goal of the government in this budget of course is the welfare and prosperity of the People of Pakistan,” Minister of State for Revenues Hammad Azhar said while presenting the budget 2019-20 amid protest from opposition parties in the National Assembly.

The minister said that managing the external debt, reduction of fiscal deficit, enhanced tax collections, taking austerity measures, and protection of vulnerable segments of society were the guiding principles of the federal budget.

“A new journey has begun under the leadership of Prime Minister Imran Khan. Tehreek-e-Insaaf brings a new vision, a new commitment, a new Pakistan… It is now time to improve the lives of citizens, to remove corruption from public life, to inject merit in our institutions, and to lead the economy, to remember the forgotten and to fulfil the destiny of our people,” the minister resolved.

He said that the outlay of the federal budget for FY 2019-20 was 30% higher than the revised outlay of Rs5,385 billion for the outgoing financial year (2018-19).

The gross federal revenues, he said had been estimated at Rs.6,717billion during FY 2019-20 as compared to Rs.5,661billion budgeted for Financial Year 2019-20, reflecting an increase of 19%, adding that the Federal Board of Revenue (FBR) is expected to generate Rs.5,555billion, reflecting an FBR tax to GDP ratio of 12.6%.

He said that out of federal revenue collections, a sum of Rs.3,255 billion would be transferred to the provinces under the 7th National Finance Commission (NFC) Award as compared to Rs.2,465 billion during the current financial year, which means an increase of over 32%.

The net federal revenues are estimated at Rs.3,462 billion during 2019-20 in comparison to the Rs.3,070 billion budgeted in the current year, which indicate an increase of 13%. This is expected to produce a federal budget deficit of Rs.3,560 billion while provincial surplus is estimated at Rs.423 billion during Financial Year 2019-20.

The consolidated fiscal deficit is estimated at Rs.3,137 billion or 7.1% of the GDP as against 7.2% of the GDP in Financial Year 2018-19, the minister added.

The minister announced Ad-hoc Relief Allowance @10% on running Basic Pay of BPS 2017 to civil government employees in BPS grade 1 to 16, and employees of Armed Forces whereas civil employees BPS 17 – 20 will be given ad-hoc Relief Allowance @5% and civil employees in BPS 21 and 22 will receive no increase in pay.

The government also increased in net pension @10% to all civil and armed forces pensioners of federal government.

The minister said that the budget was focused on managing the external deficit by reducing imports and aiming for higher exports and bring current account deficit from $13 billion estimated this year to $6.5 billion in 2019-20.

For reduction of fiscal deficit, he said a challenging target of Rs.5,555 billion FBR revenue collection will be combined with aggressive expenditure controls to reduce primary deficit to 0.6% of GDP. Both the civil and military governments have announced unprecedented reduction in expenditure, he added.

He said government would focus on tax enhancement as the country had one of the lowest tax-to-GDP ratios at below 11 percent which is lower than others in the region. Only 2 million people file income tax returns – of which 600,000 are employees.

He said that austerity would be put in place in the regular civil and defence budgets to reduce running expenditures of civil government from Rs.460 billion this year to Rs.437 billion for the coming year, a decrease of 5%. The defence budget is being maintained at the last year level of Rs.1,150 billion.

Another salient feature of the budget is protection to vulnerable segments of society through different initiatives of Ehsas programme, SehtSahulat programme, low cost housing and subsidy on electricity, for which Rs200 billion have been earmarked.

The minister said that the combined allocation of national programmes was Rs.1,863 billion including Rs951 Federal PSDP with special focus on building water resources, road and rail networks, energy projects, agriculture, human development, knowledge economy and development packages for Karachi and Quetta.

He said that initiatives have also been taken for job creation in housing sector, Kamyab Jawan initiative and by providing incentives to industries. He said that reforming public sector companies, energy sector, development of merged districts of Khyber Pakhtunkhwa.

Recalling the economic situation, the minister said that when the incumbent government took over, the economy was at the brink of financial crisis as total debt libiliaties were about Rs31,000 billion, foreign exchange reserves had fallen to less than $10 billion, current account deficit increased to a historic high of $20 billion, and trade deficit $32 billion, stagnant exports, fiscal deficit, government’s revenues less expenditures, was a threatening Rs.2,260 billion and circular swelled to Rs.1,200 billion, adding Rs.38 billion per month.

In addition, he added, cumulative loss of Rs.1,300 billion of Public Sector Enterprises, utilization of billions of dollars to overvalue Pak rupee, pressure on commodity prices and loss of growth momentum were the challenges.

However, soon after taking over, the minister added, government had to take actions to control the situation, confronted immediate threats and took measures to stabilise the economy.

He said that the government increased duties to cut imports, took measures to increase remittances, brought down circular debt to Rs26 billion per month, mobilized $9.2 billion from China, UAE and Saudi Arabia and provide incentives for export sector, which helped boost exports of many sectors.

In addition, he added, an agreement has been reached with the International Monetary Fund (IMF) for a $6 billion programme. Once approved by the IMF board, this programme would help generate additional international assistance of $2 – $3 billion from the World Bank and Asian Development Bank at relatively lower interest rates and signal government resolve for fiscal discipline and reforms leading to favourable response from international capital and investors.

A deferred payment of $3.2 billion for purchase of oil and gas products from Saudi Arabia acquired to reduce pressures on foreign reserves. The government operationalised Islamic Development Bank for deferred payment facility of $1.1 billion.

1.With these measures, it is expected that the current account deficit for the year will reduce by $7 billion this year, he added.

In addition to the stabilisation effort, the government took other measures including, introducing Asset Declaration Scheme , released required funds were released to complete 95 projects in the development budget besides strengthening accountability and governance.