The federal government will present annual budget for fiscal year 2021-22 in parliament which will the first test for Finance Minister Shaukat Tarin and will lay ground for the future of the PTI government.
The budget has been prepared considering the impact of the pandemic on the people and businesses after the notable pick in economic activities after the easing of restrictions. There has been encouraging growth and the government has set GDP growth target of 3.9 percent and Rs4,170bn revenue collection.
The government claims no new taxes will be imposed in the people-friendly budget. However, it cannot escape the pressures of the IMF and a flurry of new taxes are expected to achieve the ambitious target of Rs5.829 trillion. The finance minister wants to raise revenue by enforcements measure which yield no results in the past and set him on a possible collision course with the financial institution.
The economic stabilization efforts have helped mitigate the economic fallout from the pandemic and laid the foundation for a V-shaped recovery, while Pakistan external debts recorded its slowest buildup in the last five years. The agriculture sector recorded a growth of 2.8 percent which was slower than last year but above expectations as Pakistan had bumper harvest of all major crops except cotton. Yet the government is expected to raise taxes on fertilizers which can increase food prices.
The market exchange rate touched a new low in August last year as the rupee appreciated by 9.5 percent by April 2021. Experts believe this was due to the cash injection due to fiscal stimulus but the economic effects are visible. However, inflation remained high and the government failed to reign in surging food prices. Manufacturing sector recorded a high-growth of 8.7 percent as the government kept factoring running despite the pandemic. The services sector also revived to almost pre-pandemic levels.
A recent survey shows that an overwhelming 94 percent of people are unaware of economic indicators such as GDP growth, current account deficit and foreign exchange reserves. The masses are more concerned about inflation, unemployment, poverty, electricity prices, and the burden of taxes rather than flashy economic terms even though they have been heralded by the prime minister in his recent speeches. This implies that people are seeking relief which can impact their lives.
It is imperative that the government does not take any measures which question people’s confidence in the economy and their opinion about the current situation. There are also doubts if the economy is heading in the right direction. The budget will determine how people view the financial situation and the achievements of the PTI government.