The budget for the Fiscal year 2021-22 will be tabled on June 11. It will be the biggest test for the new Finance Minister Shaukat Tarin, who has already started preparations for the budget to bring out-of-the-box solutions this year to shore up the economy, reduce inflation, and ensure price stability.
It will certainly be a huge challenge to finalise budgetary allocations and also ensure that the tough conditions of the IMF are met. The prime minister has claimed that maximum relief will be provided in the budget and emphasis will be given to development. The government has also set a lofty growth rate of 3.94% and is setting even higher economic targets. The finance minister has said no new taxes will be imposed on lower segments while they are trying to broaden tax collection for a stable economy.
Every government levies taxes to finance expenditure. It must decide how much to spend, what to spend on and how to finance it. The main instrument of the fiscal policy is the budget presented annually which outlines the anticipated revenues (income tax, sales tax, corporation tax, import duties, etc) and the expected spending (health, education, defence, roads, and state benefits). Budgets are classified into three categories – balanced, surplus, and deficit budgets. Pakistan has historically presented a deficit budget and filled the required amount by borrowing or external loans.
A budget must be well-planned, flexible, realistic and clearly communicated. A people-friendly budget should be focused on savings, investments and debt payments. It should also focus on minimum loan payments to build strategic reserves for essential commodities such as housing, basic utilities, groceries, transportation, insurance, childcare, and personal spending. It should also achieve the main objectives of the government’s policy to gain employment, ensure price stability, achieve sustainable economic growth and have a favourable balance of payments.
To maintain a strong economy, the government should have three policy goals – stable prices, full employment and economic growth.
The finance minister also has hinted at similar goals to provide targeted subsidies to power sectors and other industries, direct credit access and loans to farmers, and building food reserves to prevent hoarding. In addition to these goals, the government has other objectives to maintain a sound economic policy.
The most important objective of budget is re-allocating resources across the nation, reduce inequalities in earning and wealth, paving the way for economic stability, manage public enterprises, and eventually contribute to economic growth to address regional disproportions. The government should focus on tax concessions and subsidies to encourage investments. It will be eagerly seen whether the government will present a budget that is acceptable for all stakeholders and the public.