What Federal Budget would look like for the next year – FY 2021?


The Federal Government is going to announce its Budget in the last week of May this year probably after Eid or it may shift it to the first week of June 2020.
The outlay of 2021 budget would be around Rs 7-8 trillion.
the size of economy in shape of Gross Domestic Product (GDP) standing at Rs 44,265 billion in would go up to Rs 49,533 billion in next fiscal year 2020-21. GDP growth target has already been set as 2.6 percent in line with the IMF projections.
Gross federal receipts are projected to go up to Rs 7,798 billion in FY 2020-21. But that is not likely to be realized why because during last 70 years we have not developed any legislation for recovery of Taxes from Services/agriculture/Industrial/Whole sale/Retail sectors, so tax recovery has not remained to cover the expenditure ever and this would remain in the case of 2020-21. To meet this expenditure revenue and capital receipts are projected as Rs 5.8 trillion with remaining through aid and external/domestic debt i.e. around Rs 1.4 trillion.
In budget of FY 2021 the total expenditure would remain near to Rs 7-8 trillion including payment of interest on domestic and external debt as 2.8-3 trillion + pension Rs 421 billion ( Rs327 billion to military and Rs 94 billion to Civil) + Defense affairs Rs 1.2 trillion + Running government Rs 431 billion + provinces share.
It is being indicated that the Public Sector Development Program (PSDP) may fall between Rs 700 billion to Rs 900 billion over next three years. Allocations of social safety nets such as “Ehsas” and Benazir Income Support Program (BISP) would now become part of overall development budget in FY 2021 budget. Earlier, these allocations were treated as part of the current budget.
The government has also brought changes in CPI based headline inflation as the target of inflation was brought down to 11.7 percent for the outgoing fiscal year. The inflation target envisaged for the next budget 2020-21 is projected at 8.4 percent, 6.3 percent in FY 2021-22 and 5.3 percent in FY 2022-23.
overall budget deficit was targeted at 7.1 percent of GDP for the outgoing fiscal year 2019-20 while it would be brought down to 5.8 percent of GDP in FY 2020-21, 4.3 percent of GDP in 2021-22 and 3 percent in FY 2022-23. But most likely these targets cannot be achieved in the given circumstances. Our dependence would remain on borrowings through domestic and external sectors. In this regard still no legislation has been developed for government borrowings and still we are following British law of 1944. Who would do this? Neither political governments nor Military governments have ever tried to cover this area.
The current account deficit (CAD) is projected at $5.1 billion for the outgoing fiscal year 2019-20 because of import compression, $4.6 billion in FY 2020-21, $4 billion in FY 2021-22 and $4.1 billion in FY 2022-23. The foreign currency reserves which piled by over $10 billion so far will be able to meet import requirements of 2.5 months in FY 2019-20, 3.3 months in FY 2020-21, 4.3 months for FY 2021-22 and 4.8 months imports for FY 2022-23.
Now we come to health and education side. In terms of HDI, Pakistan’ position is 150 out of 189 countries in 2017. Cumulative health expenditures by federal and provincial governments during 2018-19 were increased to Rs 203.74 billion. Whereas spending on education in Pakistan has remained under 2% of GDP ever.
But requirements of FY 2021 are very different and due to corona virus experience where we had no hospitals, medical equipments and medical staff to meet emerged requirements, the health and education sector needs very high uplift. Against 22% of GDP incurred by us on Defense we need to enhance at least 5% of GDP each on health and education sectors from now on.
Dr Hafeez Pasha an economist says that the unemployment rate might increase from 5.8 percent in accordance with Labor Force Survey (LFS) for 2017-18 to 8.1 percent by next fiscal year 2020-21. It means that the number of total unemployed force might increase by 2.6 million. This is also a touching point. So instead of bringing any corona virus tax in the next budget we should try to bound all industrialists and business entities, not to lay off any employee and continue their salaries.
This is high time for the country but we are following old procedures i.e. creating different funds but this is the time to create only one Pakistan relief fund at government level and merge all previous and current funds in to it. This would make it easy to make accountable and access the public with less infrastructure expenditure.
So let us see what appears in the federal Budget for FY 2021 and whether it stands in favor of public of Pakistan or not.