The government will present the federal budget for the fiscal year 2020-21 in parliament on June 12. This budget will be different this year as it is being prepared under the shadow of a global pandemic that has wrecked the economy.
The budget-making process will be accelerated after Eid holidays as important meetings such as Annual Plan Coordination Committee (APCC) and National Economic Council (NEC) will be held in early days of June. It would certainly be a busy few weeks for Finance Adviser Hafeez Shaikh who has promised the budget will aim to provide maximum relief during the ongoing crisis.
The finance adviser said the government would devise smart budgeting in order to cushion the economy from the crisis. There is some good news as the government will not impose any new taxes in the next budget. In fact, the duties on several products will be reduced to zero in order to boost local industries.
The government will also decide in the upcoming weeks on hedging of oil from the international market to gain maximum benefit. The oil market has been highly volatile and has seen negative prices this year as the pandemic shuttered economies and brought oil guzzling industries to a standstill. The petroleum division has been evaluating the possibilities of hedging some portion for import of petroleum products.
The coronavirus pandemic has taken a toll on the economy and all economic indicators have been pushed aside. The economy has contracted for the first time in six decades and the government has shown a provisional GDP growth rate of 0.4 percent for the outgoing fiscal year.
The finance adviser has given the usual statement that the budget will provide relief to the masses and the industries. The truth remains that the government is cash-starved and is depending on debt relief measures from G20 countries while financial institutions have offered support.
The current account deficit may have shrunk due to lack of trading and the interest rate may have been slashed but remittances and foreign investments are dwindling. The economy remains in a precarious situation and needs to be revived. The government has unveiled a massive financial stimulus to help various sectors affected by the pandemic.
With a dismal performance in the post COVID-19 scenario, it would indeed a huge challenge for the government to revive the shrinking economy toward an upward trajectory in the next fiscal year. The finance adviser needs to reconsider the fallout as the budget will set course for the incumbent government this year.