A three-year medium-term budget strategy, as well as a forecast up to the fiscal year 2023 (FY23), has been announced by the finance ministry.
The Budget Strategy Paper (BSP) is a standard policy document of the government to set out the budget strategy, keeping in view the macroeconomic picture of the country. This paper presents medium-term forecasts on a rolling basis.
The first year of those forecasts will form the basis of the budget 2020-21, while the other two years are provided for predictability of resources.
In its statement, the finance ministry has aimed for the economic growth rate to be 3% next year, 4.5% in 2022, and 5.1% in 2023. Inflation targets, on the other hand, were set progressively lower, at 8.4%, 6.3%, and 5.1% for 2021, 2022, and 2023, respectively.
It further added that the government guarantees inflation will be brought down by FY23 and the budget deficit will cut to 3%.
The finance ministry will work on bringing down the fiscal deficit as well, aiming for it to be 5.8% for 2021, 4.3% for 2022, and 3.0% for 2023. In addition, the target for the current account deficit was set at $4.6 billion for next year, $4 billion for the year after, and $4.1 billion for 2023.
Giving a breakdown of the government’s expenditures, the report stated that Rs. 3,235 billion would be spent on interest payments.
According to the report, the defense budget targets have been set at Rs. 1.402 billion for 2021, Rs. 1.580 billion for 2022, and Rs. 1.752 billion for 2023.
In light of the geopolitical situation, security needs will be higher, while provinces will be encouraged to invest in human capital development as well with a view to improving quality of life for the common man stated the report
During the upcoming years, government budgeting particularly spending shall be performance-based and well-planned expenditures. These numbers may vary based on changes in economic circumstances and further interactions with the line Ministries/Divisions/Departments.
Rs. 495 billion, Rs. 509 billion, and Rs. 520 billion respectively were set as targets for the government’s operational expenditure for the upcoming three years, the ministry noted.
The finance ministry said its targets for foreign exchange reserves over the next three years were equal to 100 days, 130 days, and five months’ worth of imports, respectively.
The tax-to-GDP ratio is to be increased by two percentage points, it said, adding that the targeted total government revenue for 2021, 2022, and 2023 was Rs. 7.798 billion, Rs. 9.068 billion, and Rs. 10.354 billion, respectively.
The finance ministry underlined that no tax amnesty scheme will be announced next year.
The global economy is at risk of slow-down due to the outbreak of COVID-19 virus and trade tensions that will impact Pakistan, noted the report. It is also projected by global financial institutions that spreading of COVID-19 virus will have a negative impact on trade and emerging markets.
These projections are impacting majorly global stock exchanges and oil prices. If the trend in reduced oil prices and supply disruptions continue, Pakistan’s import bill will reduce.
The paper is attached below.