ISLAMABAD, June 12 (APP):Despite unprecedented financial constraints and economic slowdown caused by the coronavirus pandemic, the Federal Government on Friday unveiled Rs 7.137 trillion growth and relief-oriented budget for the fiscal year 2020-21, without imposing any new tax.
“No new taxes have been introduced in the budget for the upcoming fiscal year to provide relief to the common people and boost economic activities across the country,” Federal Minister for Industries and Production Hammad Azhar said while presenting the federal budget in the National Assembly.
He said the federal budget focused on striking a balance between corona expenditure and fiscal deficit, keeping primary balance at sustainable level and protection of social spending under the Ehsaas Programme to support the vulnerable segments of the society.

In addition, he said, resource mobilization without unnecessary changes in tax structure, successful continuation of International Monetary Fund (IMF) programme, carrying forward of stimulus package, keeping development budget at adequate level to inject economic growth, and according importance to defence and internal security of the country were the main features of the budget
He said the budget also provided funds for housing initiatives, including the Naya Pakistan Housing project and special areas i.e erstwhile FATA (Federally Administered Tribal Areas), Azad Jammu and Kashmir and Gilgit Baltistan while special initiatives launched by Prime Minister Imran Khan like Kamyab Jawan, Sehat Card, Billion Tree Tsunami etc had also been protected
The minister said during the fiscal year 2020-21, the government had set the revenue collection target of Rs 6,573 billion, including Rs 4,963 billion tax revenues and Rs 1,610 non-tax revenues.
He said against the total Rs 7.137 trillion federal expenditures, the budget deficit would be recorded at Rs 3.437 trillion during the fiscal year 2020-21, which was 7 percent of the gross domestic product (GDP) while the primary balance would remain at 0.5 percent.
He said the provision of relief to the vulnerable and deserving segments of the society was the government’s priority. The funds for Ehsaas Programme had been increased from Rs 187 billion last year to Rs 208 billion for the current year.
Likewise, he said, the government set aside Rs 179 billion for provision of subsidies on energy, food and others to ensure relief to the low income people.
The targeted subsidy would be provided to the deserving segments of the society, he added.
Hammad Azhar said the government also intended to review the National Finance Commission and fulfill its commitment that were made at the merger of erstwhile FATA in the Khyber Pakhtunkhwa province.
He said effective measures had also been taken to enhance remittances, improve railway infrastructure, promote e-governance, and provide funds for the welfare of artists.
The minister said the allocations for Higher Education Commission had also been increased from Rs 59 billion to Rs 64 billion, while the government allocated Rs 55 billion for Azad Jammu and Kashmir, Rs 32 billion for Gilgit Baltistan, and Rs 56 billion for the merged districts of KP. In addition, the Sindh and Balochistan provinces would be given Rs 19 billion and Rs 10 billion respectively.
He said the government would try to enhance revenue collection without any change in the existing taxes.
For providing relief to the construction industry, he said, the government would provide resources for the New Pakistan Housing Project.
The minister said the GDP growth remained negative 0.4 percent during the current fiscal year and the government set its target for next year at 2.1 percent.
The current account deficit, he said, would be curtailed at 4.4. percent of the GDP and inflation to be brought down from 9.1 percent to 6.5 percent while the Foreign Direct Investment would be increased by 25 percent during the fiscal year 2020-21.
Hammad Azhar said the government was successfully implementing its development agenda to help promote the overall growth, alleviate poverty, develop primary infrastructure, and ensure food, water and energy.
He said the total outlay of the federal Public Sector Development Programme (PSDP) for the next fiscal year was Rs 1.324 trillion, which included federal share of Rs 650 billion and Rs 674 billion funds for the provinces.
He said keeping in view the financial crisis owing to the coronavirus outbreak, the government had developed the PSDP in a way to do away with extra spending, providing 73 percent funds for the ongoing programmes and 27 percent for new schemes.
Hammad Azhar said in 2018, the incumbent government had inherited an economy which was in a very bad condition. It had become difficult for it to repay the debt, which had doubled during the past five years. Likewise, he said, the current account deficit was at its peak, $20 billion, while the trade deficit was $32 billion with stagnant exports. Moreover, the Pakistan rupee exchange rate was artificially managed, which had reduced the exports and enhanced the imports.
The foreign exchange reserves held by the State Bank of Pakistan (SBP) had reduced from $18 billion to $10 billion, which had brought the country on the verge of bankruptcy, he added.
Similalrly, he said, the budget deficit had reached Rs 2,300 billion and the circular debt Rs 1,200 while the public entities were inflicting loss of Rs 1,300 billion due to the failure of respective governments to take concrete measures.
Excessive loans were borrowed from the SBP, which had badly damaged the banking system, he added.
The minister said the Financial Action Task Force had put the country in the Grey List as appropriate measures were not taken to check terror financing and money laundering.
He said the government had taken comprehensive measures and introduced reforms in its first budget for the fiscal year 2019-20, which had produced positive results as was indicated by the macroeconomic indicators.
The current account deficit during the first nine months of the current fiscal year (before COVID-19 outbreak), he said, reduced by 73 percent from $10 billion to $3 billion. Likewise, the trade deficit decreased by 31 percent from $21 billion to $15 billion and the budget deficit from 5 percent to 3.8 percent with primary surplus of 0.4 percent.
The revenue collection increased by 17 percent as the government was in a position to collect revenues of Rs 4,800 billion, he added. Similarly, he said, the non-tax revenues witnessed 134 percent increase to Rs 1,610 billion against the target of Rs 1,162 billion.
He said during the same period, the government repaid $6 billion against $4 billion last year. It also paid interest of Rs 5,000 billion on the loans borrowed by the previous governments, which had adverse impacts on the national exchequer.
He said the government took many initiatives, including austerity measures, restructuring of public institutions and introducing reforms to incentivize businesses, besides taking concrete steps against anti-money laundering and terror financing.
He said all that was happening when the COVID-19 engulfed the whole world and badly affected the economies.
It was initially considered a health issue, but soon it emerged as a big economic issue also denting all the efforts made by the government for economic stability, he added.
The minister said the coronavirus had badly damaged the industry and reduced the GDP by Rs 3,300 billion, pushing the growth rate to negative 0.4 percent while the budget deficit mounted to 9.1 percent from 7.1 percent and revenue collection reduced by Rs 900 billion, besides having negative impact on the exports and remittances.
He said the government was fighting the coronavirus with firm resolve and had taken several measures to save the people from its negative effects.
The government approved the stimulus package of more than Rs 1,200 billion, with its component of Rs 875 billion funded through the federal budget comprising Rs 75 billion allocated for purchase of medical equipment, protective kits and payments to health workers; Rs 150 billion for 16 million vulnerable families and Panagahs, and Rs 200 billion for cash transfer to daily wage workers/employees.
It also included Rs 50 billion allocated for the Utility Stores for provision of subsidized goods; Rs 100 billion for the Federal Board of Revenue (FBR) and the Ministry of Commerce for issuance of refunds to exporters; Rs 100 billion for power and gas bills deferral, Rs 50 billion for payment of three months’ electricity bills of three million small businesses; Rs 50 billion for farmers for fertilizer subsidy, loan remissions and other relief, and Rs 100 billion for establishment of Emergency Fund.
He said the stimulus package had increased expenditures of the Federal Government and that was why it had to approve supplementary grants for different divisions.
The minister while announcing taxation proposals before the parliament, said Pakistan’s tax-to-GDP ratio was 11%, which was the lowest among the emerging countries and had been stagnant over the past 20 years.
For improving the situation, he said, the government initiated a reforms process, comprising of a holistic strategy combining policy and administrative reforms to eliminate the distortions and boost quality revenue collection.
The efforts, he added, had so far produced encouraging results as the historical trend of Pakistan’s import-led growth had been replaced with high domestic-led growth, unprecedented refunds had been issued which were 119% higher than last year while the narrow tax base had been expanded by bringing retailers into the tax net, and successful installation of Point of Sales (POS) system at 6,616 retail outlets with the aim to increase the number to 15,000 by December this year.
The minister said as COVID-19 had affected the business of common man, it was proposed to decrease sales tax rate from 14% to 12 % for the business registered with POS. It would give relief to the common man and to the business also, he said, adding the measure would help in documentation of the economy.
He said the hotel and restaurant industry had been badly affected due to COVID-19 and it was proposed to reduce minimum tax for the industry from 1.5% to 0.5 % for six months (April to September 2020).
Hammad Azhar said a tax return mobile app had been launched to facilitate individuals and salaried persons, which led to an increase of 37% in the number of income tax return filers.
An automated system of payment of taxes through online platforms had been introduced, he added.
The minister said successful anti-smuggling and enforcement drives had been carried out which led to increase in seizures from Rs.19 billion to Rs 30 billion.
In addition, the minister said, the government introduced amendment in the Twelfth Schedule to Sales Tax Act, 1990- Exclusion of Manufacturers and made insertion of the tax Laws Amendment Ordinance 2019 Relating to Tax Concessions and Exemptions to Gwadar Port and Gwadar Free Zone, in The Finance Bill 2020 and also enlarged the Scope of Seizure of Non-Duty Paid Items Subject to FED.
For encouraging foreign remittances, he said, the government proposed withdrawal of withholding tax on cash withdrawal or on issuance of banking instruments / transfers from a domestic bank account to the extent of remittance amount received from abroad in such account in a year may be exempted.
The minister announced extension in the concession and exemptions available to the developers of special economic zones to co-developers, besides announcing tax reduction for toll manufacturing.
He also announced several measures for broadening of tax base and relief in the sales tax on property income.

ALSO READ  UN chief to 'study' Pakistan's dossier on India's terrorism: Spokesman