Annual Budget 2020-21: Government Targets Ambitious Growth, Revenue Despite COVID-19 Conditions

Economists termed the targets as unrealistic, projecting that the government would need to introduce a mid-year additional budget given the financial disruptions

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annual budget

The government on Friday announced the annual budget for the financial year 2020-21, setting ambitious targets of 2.1 percent GDP growth, a 7 percent fiscal deficit and an increase in tax revenues.

The GDP target is much higher than the recent World Bank projection. According to the International Bank, the country will have another year of negative growth at -0.2 percent.

Economists termed the targets as unrealistic, projecting that the government would need to introduce a mid-year additional budget given the financial disruptions caused by the COVID-19 pandemic.

The next fiscal year’s total expenditures will be PKR 7.136 trillion, said the Minister for Industries and Production Hammad Azhar, as he presented the budget in the parliament session.

In his speech, the Minister said the outbreak has caused Pakistan’s nearly $300 billion economy a loss of PKR 3.3 trillion.

annual budget

“The extended lockdown, a countrywide shutdown of business, travel restrictions, and social distancing have declined economic activities, which have harmed growth rate and investment,” Azhar added.

Regarding expenditure, debt servicing will take up PKR 2.946 trillion – 41 percent of the country’s spending.

The government plans to collect PKR 4.96 in tax through its revenue board – which is around a trillion rupees, or 25 percent, more than the last year’s collection.

“We believe the tax collection target looks profoundly over-optimistic in prevailing economic situations,” said analyst Mohammed Sohail of Topline Securities.

To plug the spending and revenue gap, the government planned to access PKR 2.2 trillion in gross external finances, including loans, aid, and grants. However, much of the revenue will be used for the repayment of massive foreign debt.

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