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These Are the Salient Features of Budget 2020-21

The government has presented the next fiscal year budget with a total outlay of Rs. 7.29 trillion.

Minister for Industries and Production Hammad Azhar presented the budgetary proposals in the National Assembly on Friday. The Minister said that the gross revenue receipts have been estimated at Rs. 6573 billion.

The FBR tax collection target has been set at Rs. 4963 billion while the non-tax revenue is estimated to be about Rs. 1610 billion.

Under the NFC Award, 2874 billion rupees will be transferred to the provinces. The provincial share in federal taxes is estimated at Rs. 2873.7 billion. The net revenue receipts have been estimated at Rs. 3699.5 billion indicating an increase of 6.7 percent over the budget estimates of the outgoing fiscal year.

The net capital receipts have been estimated at Rs. 1463.2 billion, which are 75.93 percent higher than the outgoing fiscal year.

The Minister said that the external receipts for the next year are estimated at Rs. 2222.9 billion. The development expenditure outside PSDP has been estimated at Rs. 70 billion in the budget.

The total federal expenditures are estimated at Rs. 7,137 billion with a budget deficit of Rs. 3437 billion, which is seven percent of the GDP. The primary balance will remain -0.5 percent.

The size of the Public Sector Development Program for 2020-21 is Rs. 1324 billion. Out of this, Rs. 676 billion have been allocated to provinces.

Federal PSDP has been estimated at Rs. 650 billion, out of which Rs. 418.7 billion for federal ministries and divisions, Rs. 100.4 billion for corporations, Rs. 3 billion rupees for Earthquake Reconstruction and Rehabilitation Authority and seven billion rupees for COVID response and other natural calamities program.

The Minister said that the allocation for defense affairs and services is Rs. 1289 billion.

Giving salient features of the new budget strategy, the Minister said that no new tax has been levied in the new budget in order to provide relief to the people.

He added that the proposed tax incentives will help spur the economic activities in the country.

Hammad Azhar said that the new budget aims at striking a balance between corona expenditures and fiscal deficit. It also aims to achieve primary balance.

The Minister said that it seeks to continue social expenditures for the assistance of vulnerable and weaker segments of society under the Ehsaas program, besides continuing assistance of people during the next financial year to cope with the coronavirus.

Hammad Azhar said that the budget document also attempts to keep the development budget on an appropriate level so that objectives of economic growth are achieved as well as jobs are created.

He said that significant attention has been given on defense and external security of the country. The budget aims to achieve improvement in revenues without unnecessary changes in taxes.

Giving the targets set for the next fiscal year, Minister for Industries Hammad Azhar said that GDP growth target has been set at 2.1 percent, which remained negative four percent in the outgoing fiscal year.

He said that the current account deficit will be confined to 4.4 percent. The inflation will be brought down from 9.1 percent to 6.5 percent. Foreign direct investment will be enhanced by 25 percent.

The Minister said that 73 percent of the PSDP has been allocated for the ongoing schemes and 27 percent for the next projects. He said special emphasis has been given to the social sector.

For this, allocations have been enhanced to Rs. 249 billion from Rs. 206 billion. He said the government has formulated a special development program worth Rs. 70 billion to offset the negative impact of Coronavirus pandemic and other calamities and improve the living standard of the people.

Hammad Azhar said the government is focused to improve the power transmission system and reduce the circular debt.

He said sufficient resources have been allocated for the provision of electricity to the special economic zones and the projects to be executed with foreign funding. For this purpose, the government has earmarked Rs. 80 billion. These funds will especially be used to reduce the gap between electricity demand and supply.

The Minister pointed out that Pakistan faces severe water shortage. He said that the government this year will give special emphasis to the water-related projects and in this relation, Rs. 69 billion have been allocated.

Ample resources have been allocated for big projects such as Diamer Bhasha dam, Mohmand and Dasu dams.

The Minister said that these projects will not only help increase water storage capacity and power generation but will also provide thirty thousand additional job opportunities.

In particular, sufficient resources have been earmarked for the CPEC-related projects including its western route. For this purpose, 118 billion rupees have been allocated.

Similarly, Rs. 24 billion have been earmarked for ML-1 and other projects of Pakistan Railways and additional funds of thirty-seven billion rupees for other projects of the communication sector.

Referring to the challenge posed by COVID-19 for the health sector, Hammad Azhar said Rs. 20 billion have been allocated to improve the capacity of health institutions and the production of health equipment with the aim to provide better health services and check diseases in the country.

He expressed the confidence that the provincial governments will also play their part in the fight against COVID-19.

Turning to the education sector, Hammad Azhar said Rs. 5 billion have been allocated for reforms in this sector. He said steps will be taken to introduce a uniform curricula and quality examination system as well as establish smart schools and bring the seminaries into the national mainstream.

He said higher education is one of the top priorities of the government. He said Rs. 30 billion have been allocated to bring innovation in the higher education sector with the aim to improve research and development in subjects such as artificial intelligence, automation, and space technology.

He said the government has increased budgetary allocations for Higher Education Commission from the existing 59 billion rupees to Rs. 64 billion.

Minister for Industries and Production Hammad Azhar said assistance to poor and vulnerable segments of society is the top priority of the government and for this purpose, an integrated system has been devised under which all relevant institutions have been merged into newly constituted Poverty Alleviation and Social Security Division.

He said the budget for Ehsaas Programme has been increased to Rs. 208 billion from the existing Rs. 187 billion. The amount will be spent on vulnerable segments of society in a transparent way.

A sum of Rs. 179 billion has been allocated to provide different subsidies in energy, food, and other sectors.

The Minister said the government has provided Naya Pakistan Housing Authority a sum of Rs. 30 billion to provide low-cost housing to the people.

In addition, through Qarze-e-Hassan Scheme Rs. 1.5 billion will be dispersed through Akhuwat Foundation for low-cost housing.

Hammad Azhar said Rs. 55 billion have been allocated for Azad Kashmir and Rs. 32 billion for Gilgit-Baltistan.

A sum of Rs. 56 billion has been allocated for merged districts of Khyber Pakhtunkhwa.

Moreover, Sindh has been provided a special grant of nine billion rupees and Balochistan ten billion rupees, which is in addition to their share in NFC.

The Minister said under the steps to improve remittances, a sum of Rs. 25 billion has been set aside for receipts through banks.

He said in order to provide affordable transportation services to the people of Pakistan, a sum of Rs. 40 billion has been specified for Pakistan Railways.

Regarding empowering youth, the Minister said two billion rupees have been allocated for Kamyab Jawan Programme for capacity building of the youth. He said a sum of Rs. 13 billion has been reserved for federally administered hospitals in Lahore and Karachi. He said over one billion rupees have been earmarked for e-governance to improve public service delivery.

The Minister said on the suggestion of President Dr. Arif Alvi, sum for Artists Welfare fund has been increased from existing Rs. 250 million to Rs.1 billion.

Minister for Industries and Production Hammad Azhar stressed the need for enhancing the capacity of research institutions in order to achieve the goal of the knowledge economy.

He said initiating e-governance, IT-based services and 5-G services will remain the focus of the government. An amount of Rs. 20 billion has been allocated for projects in these sectors.

The Minister said Rs. 6 billion rupees have been allocated to deal with the impacts of climate change.

He said the government has earmarked Rs. 40 billion for the execution of different projects in Azad Kashmir and Gilgit-Baltistan.

He said Rs. 20 billion rupees have been set aside for the TDPs.

Rs. 2 billion have been allocated to support Afghanistan’s rehabilitation.

To achieve sustainable development goals, an amount of Rs. 24 billion has been set aside while Rs. 12 billion will be spent on development projects in the agriculture sector to ensure food security.

The Minister said the government is pursuing the policy of austerity in these difficult times.

He said we are thankful to the armed forces of Pakistan for extending cooperation in the government’s austerity drive.

Submitting tax proposals, Hammad Azhar said it has been suggested to reduce the sales tax ratio from existing 14 percent to 12 percent on point of sale to provide relief to common people and shopkeepers in wake of COVID-19.

He said the minimum tax on the hotel industry has been reduced from 1.5 percent to 0.5 percent during the months for six months with effect from April. He said a mobile application has been introduced to facilitate salaried class to submit their tax returns, which resulted in an increase of 37 percent.

He said an automatic system has been introduced for filing of tax returns. He said seizures, as a result of the anti-smuggling campaign seen a rise of Rs. 19 to 30 billion.

Elaborating relief measures, the Minister said the upper limit for shopping without showing identity card has been increased from Rs. 50,000 to 100,000 rupees.

He said the import of dietetic food for medical purposes will be exempted from sales tax, while exemption on import of medical equipment has been increased for further three months.

The Minister said Federal Excise Duty on imported cigarettes and tobacco is being increased from 65 percent to 100 percent, while e-cigarettes and other substitutes of tobacco have also been included in this list.

To discourage consumption of caffeine-based energy drinks, FED is being increased from 13 percent to 25 percent.

He said it has also been proposed to impose a tax on double cabin pick-up vehicles as wealthy people use these pick-ups as status symbols.

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