The federal government will pass the budget for the next financial year tomorrow. The budget comes amid tough times and expectations are already low during the adverse economic condition and the onslaught of the coronavirus pandemic.
Not much is known about the budget which is being guarded with secrecy by the Finance Division. The only relief that we have received so far is that no additional taxes will be imposed. The government is considering relief measures for industries along with providing legal cover to the financial stimulus package given to various sectors.
The government also seems to have reach consensus with the IMF to increase salaries and pensions, while also delaying loan repayments till at least October. This remains a major stumbling block in the provision of relief as the government has earmarked a massive Rs3.2 trillion for debt servicing.
The government has forecast GDP growth target of 2.3% for this year. This is highly ambitious as the World Bank was predicting a grim growth rate of negative 2.6%. We were expecting growth rate of 3% before the pandemic hit the nation. The trade deficit has shrunk as imports remained suspended for much of the year but even exports remain low, while the inflation rate remained exceptionally high.
Pakistan needs funds to avoid a balance of payment crisis for debt servicing costs which requires increasing revenue in the upcoming year. The government has vowed to take strict action against tax evasion and smuggling. The FBR is expected to receive special powers allowing it to conduct raids and inspections and could take action against the informal economy.
The government needs to come with solutions as it gradually moves towards a post COVID-19 situation as prices could rise further. The nation is also facing a petrol crisis and reports have emerged that the Ministry of Energy placed a ban on oil imports leading to declining fuel stocks. These are the most pressing issues which must be addressed in the budget.
Another issue that must be addressed relates to unemployment. More than three million people have lost their jobs during the lockdown and the state will need to provide some support or many more risk being pushed further down in poverty. Even though expectations are low during these testing times, the government will have to keep the damage to the minimum.
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