Federal Finance Minister – Shaukat Tarin presented Rs 8.4 trillion federal budget for FY2021-22 in National Assembly amid intense protest from the opposition benches on Friday (today).
The federal finance minister began his budget speech by highlighting the fact that the previous PML-N government had left abysmal economic, financial conditions for the present PTI government.
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The previous government had left a current account deficit of US$ 20 billion, which in fact had been turned into US$ 800 million surplus, whereas the primary deficit of 3.6% has been reduced to 1%.
Salient Features
- GDP growth target has been set at 4.8%
- No new taxes on salaried persons
- 10% increment in government employees’ salaries
- Rs 900 billion allocated for federal PSDP — 40% increase from 2020
- Rs 12 billion allocated for agriculture sector
- Rs 260 billion allocated for Ehsaas Program
- Tax collection target set at Rs 5829 billion
- The remittances with the 25% increase, reached US$ 29 billion
- Development budget increased from Rs630bn to Rs 900 billion
- Provincial share in NFC award fixed at Rs 3,411 billion.
- Provinces share in NFC increased, to receive extra Rs 707 billion.
- Rs 118 billion for power distribution
- Rs 61 billion for Viability Gap Fund
- Rs 14 billion for Climate Change mitigation projects
- US$ 1.1 billion for vaccines procurement
- Rs 100 billion for COVID-19 Emergency Fund
- Rs 20 billion and Rs 16 billion reserved for PIA and PSM
- Rs 98 billion for Karachi Transformation Plan
- Minimum wage increased to Rs 20,000
GDP
The government has set a target of 4.8 GDP growth rate for FY2021-22. Addressing the issue of GDP growth, Shaukat Tarin highlighted that the new budget focuses on poverty alleviation via an inclusive approach towards all segments of the society who will benefit from the trickle-down effect of the economic repercussions of the federal budget.
This budget’s 4.8% GDP growth rate will ultimately contribute to achieve 6-7% GDP growth rate in coming years, said Shaukat Tarin.
Expenditure And Fiscal Deficit
Pakistan’s expenditure for FY2021-22 has been fixed at Rs 7.5 trillion as compared to Rs 6.3 trillion of previous budget.
Rs 3 trillion have been allocated for interest payments.
Meanwhile, fiscal deficit for this year’s federal budget has been fixed at 6.3% of the total GDP in contrast of 7% to that of the previous budget.
Tax
Tax collection target for FY2021-22 has been set at Rs 5.8 trillion. However, the government has imposed ‘no new taxes’ on the salaried class of society.
In order to support and encourage small businesses, the annual turnover tax limit has been increased to Rs 100 million from the previous Rs 10 million.
Sales tax has also been reduced. Meanwhile, 850 cc vehicles will now be exempted from value-added tax. The sales tax 850 cc cars along with locally manufactured vehicles have been decreased to 12.5% from the previous 17%. The step is primarily aimed to cater to middle and lower-middle class.
Tax exemption has been introduced for ‘Auto Disable Syringes’, whereas federal excise duty (FED) has also been reduced on telecommunication from 17% to 16%.
Withholding tax on cellphones has also been slashed to 10% which will be further reduced to 8% later on.
Salaries And Pensions
Salaries of government employees have been increased by 10%, whereas Rs 480 billion have been allocated for pension of both civilian and military retirees.
Minimum wage has been fixed at Rs 20,000.
Provinces And Developmental Grants
FY2021-22 budget incorporates an increase of 36.6% in development grants. Public Sector Development Programme (PSDP) has been increased to Rs 900 billion from the previous Rs 630 billion to counter the adverse impact of the coronavirus pandemic.
A total of Rs 1,1 trillion have been allocated in terms of development and non-development grants for provinces.
Province-wise distribution of development grants is as follows;
- Punjab – Rs 500 billion
- Sindh – Rs 321 billion
- Balochistan – Rs 601 billion
- Khyber Pakhtunkhwa – Rs 248 billion
- Gilgit Baltistan – Rs 40 billion
Health And Education Sectors
Rs 30 billion have been allocated for the health sector in the federal budget this year. Meanwhile, Rs 66 billion grant has been fixed for higher education sector.
Defence
The federal budget has allocated Rs 1.37 trillion. Defence Services’ expenditure makes up around 16% of total expenditure budgeted for FY22, down from 18% last year.
Agriculture
A grant of Rs 12 billion has been allocated for the agriculture sector. Every agriculture-based household will benefit from interest-free loans worth Rs 150,000. While Rs 2 million would be given in low-interest loans for low-cost housing.
Climate Change
Rs 14 billion have been reserved to address climate change issues. The grant will primarily be used for government’s plantation and re-forestation drives.
More to follow.
