Budget 2020-21 — Pakistan allocates Rs64 billion for education
Web Desk
05:25 PM | 12 Jun, 2020
ISLAMABAD – The federal government has proposed allocation of Rs64 billion for the Higher Education Commission as the ruling PTI is unveiling its second annual budget 2020-21 amid coronavirus pandemic.
It has allocated Rs 4.5 billion under the Public Sector Development Programme (PSDP) for ongoing and new schemes under taken by the Federal Education and Professional Training ministry.
According to the budget documents, a total of Rs 4.1 billion has been earmarked allocated for ongoing schemes and Rs 355 million for the new schemes that the ministry hopes to take.
Federal Minister for Industries and Production Hammad Azhar is unveiling its second budget with a layout of Rs7,600 billion.
Budget FY21: Govt reduces subsidies despite Covid-19 impact
By
Ghulam Abbas
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June 13, 2020
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ISLAMABAD: The federal government on Friday announced the budget for the fiscal year 2020-21, revealing that subsidies have been reduced from Rs349.5 billion for the outgoing year to Rs209 billion for the upcoming year, despite the economic impact of the coronavirus outbreak on the masses.
According to the budget documents, the government has allocated 59.33 per cent subsidy for WAPDA/PEPCO, followed by 14.36 per cent for Naya Pakistan Housing Authority, 12.2 per cent for KESC and 3.35 per cent for PASSCO.
Rs124 billion have been allocated for WAPDA/PEPCO against Rs201 of the outgoing year. Federal Minister for Industries and Production Hammad Azhar told the National Assembly (NA) on Friday that Rs149 billion have been allocated for protecting those who use 300 or less units of electricity every month from power tariff hike.
A breakdown of this figure showed that Rs110 billion have been allocated for inter-Disco tariff differentials as compared to Rs162 billion of the outgoing year. The government has allocated Rs3 billion for tariff differentials for agriculture tube-wells in Balochistan, Rs10 billion for picking up WAPDA/PEPCO receivables from the merged districts of Khyber Pakhtunkhwa (KP) and Rs1 billion for WAPDA on account of tariff differential for Azad Jammu and Kashmir (AJK). Rs25 billion have been earmarked for KESC for the next fiscal year compared to Rs59.5 of the outgoing year.
The documents showed that the subsidies for the power sector have drastically been decreased for the upcoming fiscal year as compared to the previous years. Moreover, unlike the previous years, no subsidy has been given to the petroleum sector.
Interestingly, despite the impact of coronavirus, the government has reduced the subsidy on food items at the Utility Stores from Rs43.5 billion to Rs3 billion. During the outgoing fiscal year, the original subsidy estimate was Rs5.5 billion but the government gave Rs43.5 billion subsidy to the Utility Stores. However, for FY21, Rs3 billion have been allocated for the Ramzan package, while there would be no subsidy on other items for the rest of the year.
According to the documents, the government has decreased the subsidy given to PASSCO from Rs15.5 billion to Rs7 billion. It has allocated Rs2 billion for wheat operations, Rs5 billion for reserving wheat stock, Rs6 billion for giving subsidy on wheat to Gilgit-Baltistan, Rs2 billion on Metro Bus and Rs6 billion for fertilizer plants.
It is worth mentioning here that the government has not given any subsidy to the National Food Security and Research Division for the next fiscal year
Rs23.2bn earmarked for Pakistan Atomic Energy Commission under PSDP 2020-21
By
Staff Report
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June 12, 2020
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ISLAMABAD: The government has earmarked Rs23.29 billion for 18 ongoing and one new scheme of Pakistan Atomic Energy Commission (PAEC) under the Public Sector Development Programme (PSDP) 2020-21.
As per the details, the government has allocated Rs23 billion for the ongoing schemes and Rs200 million for one new scheme.
Among major ongoing schemes, Rs18 billion has been earmarked for Karachi Coastal Power Project (Unit 1 and 2), Rs1.5 billion for Pakistan Research Reactor-III (10MW upgradable to 20MW) and Rs1.23 billion for ‘Upgradation of Atomic Energy Cancer Hospital-NORI’ (AECH-NORI).
Similarly, an amount of Rs600 million has been allocated for the National Electronics Complex of Pakistan, Rs500 million for Gujranwala Institute of Nuclear Medicine and Radiotherapy (Phase-II), Rs280 million for Gilgit Institute of Nuclear Medicine, Oncology and Radiotherapy and Rs140 million each for Reconnaissance Survey of Mineral Resources and Detailed Exploration of Uranium (Phase IX) Dera Ghazi Khan.
Furthermore, one new project titled ‘Detailed Exploration of Uranium Resources in Bannu Basin and Kohat Plateau (Phase-IV)’ received an allocation of Rs200 million.
BUDGET 2020-21: GOVT TRIES TO APPEASE ALL STAKEHOLDERS
Budget sets a daunting task for FBR to collect Rs4.963 trillion revenue
Shahbaz Rana
ISLAMABAD
Industries Minister Hammad Azhar on Friday announced a Rs7.1 trillion budget in a bid to revive the stalled International Monetary Fund (IMF) programme, which both the opposition and experts termed unrealistic and full of internal contradictions.
The government proposed primary deficit target – the total revenues excluding interest payments –at only 0.5% of gross domestic product (GDP) or Rs249 billion under the IMF pressure. However, its internal working showed that the primary deficit would not be less than 1.2% of the GDP or Rs546 billion at least.
The proposed overall budget deficit target is 7% of the GDP or Rs3.2 trillion despite the government knows that the deficit cannot be less than 8.5% of the GDP in the next fiscal year.
“The Federal Board of Revenue’s (FBR) tax collection target will be Rs4.963 trillion,” said Azhar, while delivering his second budget speech in the National Assembly. Sources inside the FBR, however, told The Express Tribune that the FBR it can collect Rs4.5 trillion at the best.
“In my view, the FBR’s tax collection cannot be more than Rs4.2 trillion in the next fiscal year, excluding the impact of tax advances, said Ashfaq Tola, the renowned tax expert.
The proposed budget is only Rs307 billion or 4.4% higher than the revised budget estimates of Rs6.8 trillion in the outgoing fiscal year amid the government’s attempt not to antagonise the IMF.
In a rare move, the government could not announce increase in salaries and pensions of the federal government employees and pensioners after the IMF clearly warned about its consequences.
Due to the inability to introduce fiscal expansionary policies, the economic growth is expected to remain low at only 2.1% in next fiscal year 2020-21, while the inflation will ease to 6.5%.
Hammad Azhar emphasised the need for expansionary fiscal policies in the midst of coronavirus but in the same breath said that the government would adopt austerity.
The proposed size of the new budget is Rs101 billion or 1.4% higher than the original budget of the outgoing fiscal year. About 60% of the proposed budget will be consumed on paying interest on loans (41.2%) and on defence spending (18%), leaving very little for other expenditures. Another 13.3% of the proposed budget will be consumed in running the civil government and paying pensions.
But the real challenge will be the implementation of the budget, as its success hinges upon the FBR’s ability to achieve a challenging Rs4.963 trillion tax collection target, which is 27% higher than the estimated collection in the outgoing fiscal year.
The opposition parties raised loud slogans against Prime Minister Imran Khan who attended the budget session. They also thumped desks, while criticizing the government for its failure to crackdown against mafias and those, what they claimed, stealing the elections. Later, the opposition walked out of the House in protest.
However, there was big if on whether the government will be able to achieve its targets, particularly the budget deficit, the primary deficit and the FBR’s revenue collection.
There are internal contradictions in the budget documents and the budget is irrelevant from day one, said Saqib Sherani, former principal adviser to the finance ministry, while speaking during Express News’ primetime show, The Review.
Sherani said that the government would neither be able to revive economic growth and the IMF programme nor will it be able to manage taxes. The IMF may also adopt a wait-and-see policy for couple of months, he added.
The failure in achieving the proposed targets would mean reversing the first step that the government has taken towards addressing the core issue of high indebtedness.
Where did the government concede ground?
The government has proposed Rs1.29 trillion for defence spending, which is equal to 18% of the budget. However, the sources said that the military had demanded Rs1.493 trillion and the finance ministry had issued Rs1.340 trillion indicative budget ceiling. Subsequently, the government has proposed Rs51 billion less budget than the issued ceiling.
For running the civil government, the government had estimated the cost at Rs654 billion. The finance ministry had issued Rs501 billion ceiling and the proposed budget for running the civilian government is Rs476 billion.
For subsidies, there was a demand of Rs485 billion but the finance ministry issued Rs279 billion indicative budget ceiling. Subsequently, the proposed budget for subsidies is only Rs210 billion, according to the budget documents.
For pensions, the government had estimated the cost at Rs501 billion for next fiscal year and the finance ministry had given Rs489 billion ceiling. But the budget documents showed that Rs470 billion have been allocated for pensions for the next fiscal year.
For the Public Sector Development Programme, the finance ministry issued Rs530 billion ceiling against the demand of Rs750 billion. But it has proposed Rs650 billion for the next fiscal year.
The debt-servicing cost that has been estimated at Rs2.946 trillion for 2020-21 against the revised estimate of Rs2.7 trillion for the outgoing year. The debt-servicing would eat up 41% of the budget.
The budget does not immediately address the issues such as economic slowdown, growing unemployment rate and even the high budget deficit in the next year. However, the government has kept its focus on addressing the issue of debt trap by focusing on primary deficit.
The budget deficit is projected at a record 7% of GDP or Rs3.2 trillion. It is the second largest black hole in the federal budget after the outgoing year’s estimates of Rs3.8 trillion or 9.1% of the GDP.
The hole will be filled by taking Rs810 billion net foreign loans, Rs2.4 trillion domestic loans and Rs242 billion provincial cash surplus. The privatisation proceeds are estimated at only Rs100 billion that shows that the government does not have a plan to go for any major privatisation transaction.
After including the provincial cash surplus, the overall budget deficit has been projected at Rs3.2 trillion or 7% of the GDP, which is higher than the level left behind by the previous Pakistan Muslim League-Nawaz (PML-N) government.
Azhar claimed in his budget speech that no new tax has been imposed. But according to the Finance Bill-2020, the government has introduced Rs100,000 to Rs200,000 luxury tax on residential homes of more than two Kanals in Islamabad Capital Territory and also introduced luxury tax on farm houses from Rs25 per square foot to Rs80 per square foot.
But in technical briefing, the FBR’s Member Inland Revenue Policy said that the government gave net benefit of Rs49.5 billion to the taxpayers. This included Rs24.5 billion negative revenue impact of inland revenue measures and Rs25 billion net customs relief, he added.
The government has proposed Rs4.963 trillion tax collection target for the FBR which is 27% higher than anticipated and four-time downwardly revised collection of Rs3.908 trillion. The Rs3.9 trillion collection will be equal to 9.4% of the GDP, while for the next fiscal year the government has set the target at 10.9% of the GDP. It has proposed additional revenue measures for achieving this goal.
Some punitive measures have been proposed to discourage informal economy and forcing the manufacturers and registered persons to sell their products predominantly to only registered sales tax persons.
The permanent business establishments of foreign companies have been brought under the scope of tax law, which will bring all the Chinese companies in the tax ambit. The non-resident and resident companies now both will be subject to minimum 1.5% income tax, which will directly hit all foreign companies, including the Chinese.
Budget outlay
Azhar announced that the size of the budget will be Rs7.137 trillion – higher by Rs101 billion or 1.4% over the Rs7.036 trillion original size of the budget for the outgoing fiscal year. About 60% of the budget has been allocated for defence and debt servicing.
The development budget is Rs650 billion and Rs72 billion is allocated for other development expenditures. The government has proposed Rs1.290 trillion for regular defence budget, which is higher by Rs137 billion or 11.9% over the original budget of Rs1.152 trillion.
A sum of Rs323 billion has been given for the Armed Forces Development Programme and another Rs369 billion for military pensions. A sum of Rs93 billion has been proposed for other security packages.
The budget documents showed that the total defence budget is proposed at Rs2 trillion or 29% of the proposed Rs7.137 trillion total budget. Another amount of Rs2.946 trillion or 41% of the proposed budget has been earmarked for the debt serving.
