Industries Minister Hammad Azhar on Friday, 12-06-2020 announced a Rs7.1 trillion. The Federal Budget 2020-21 has been presented in the backdrop of a complex and unprecedented economic situation. The Minister of Industries and Production has reiterated in this budget that Pakistan must strive for fiscal stability, measured as stabilization of the debt-to GDP ratio, by moderating spending as a share of GDP and reducing of the overall spending. However, the budget numbers laid down by the minister seems like a
far cry from striving for economic stability, nor does it outline any significant measure to stimulate growth.
The total outlay of budget 2020-21 is Rs 7,294.9 billion. This size is 11% lower than the size of
budget estimates 2019-20. The government has targeted an unrealistic economic growth of 2.1% growth in FY 21 which seems to be a distant dream given the negative growth of -0.38% for FY 20 and the uncertainty surrounding the country due to the coronavirus pandemic.
To meet the expenditures, the government has not made any satisfactory commitments to
increase in revenue. While it is some economic relief to introduce a Rs. 1 trillion stimulus package and the fact that no new taxes have been introduced for the upcoming year, it is also concerning how the government will be able to meet its targets. The Budget does not reflect any concrete plans made by the government to overcome or even combat the economic pressures mounting the country. Even though the government has targeted to reduce its expenditure and increase its revenue, the budget does not reflect any innovative strategies to do so.
In the incoming year, debt servicing and the defense budget comprise around 60% of the
government’s expenditure. This means the government has to revisit its spending policy. In the last decade, Pakistan spent more than 2.5% of the GDP (3% in the last two years) on defence, slightly above the world average for the same period. It’s spending on health as a percentage of the GDP was less than 1% for most of the same period, much below the international average of
9%.