Budget 2020-21: Govt sets total size of budget at Rs7.14tr

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ISLAMABAD: All eyes are on the parliament as Federal Minister of Industries and Production Hammad Azhar presented the Rs7.14tr budget 2020-21 on Friday. 

The federal minister said that the government’s top two priorities have been battling corruption and ensuring accountability. He said that during the past five years, there had been no growth in exports.

“The reserves of the State Bank of Pakistan declined from $18bn to $10bn due to the failed policies of the past,” he said, adding that Pakistan had been placed on the FATF grey list due to the absence of concrete policies to keep terror financing and money laundering in check.

As the minister spoke, the opposition MNAs started waving protest banners in the parliament and shouted slogans against the government.

Opposition lawmakers wave banners during the federal minister’s budget speech. Photo:

Azhar said that the government had been successful — during the past nine months — before COVID-19 proved to be a setback for the country’s economy — in reducing the trade deficit from $21bn to $15bn and the budget deficit was brought down to 3.8% by the incumbent government’s policies.

The minister said that the PTI government had increased employment opportunities for Pakistanis abroad which led to remittances increasing to $17bn.

Azhar said that the incumbent government had introduced structural reforms in state institutions. He said that a dedicated government task force has presented its report in which eight defunct organisations have been highlighted and 33 will be merged with others.

Touching upon the government’s efforts in light of the COVID-19 pandemic, the minister said that the Centre is taking steps to ensure people’s lives are saved and economic activities go on.

“The coronavirus pandemic caused our GDP to shrink by Rs3,300bn,” he said, adding that the non-tax revenue declined by Rs102bn, adding to the country’s poverty and unemployment woes.

He said that to mitigate the damage done to various sectors by the coronavirus pandemic, the government provided Rs75bn for the health sector, Rs150bn was allocated for poor families and construction of Panah Gahs as well as Rs200bn for daily wage workers hit by the pandemic.

The minister noted that the government had provided relief worth Rs100bn in the form of electricity and gas bills whereas Short and Medium Enterprises were provided relief amounting to Rs50bn.

Azhar said that the prices of petrol and diesel by Rs32 per litre and Rs45 per litre. He said that the government had done away with the Fixed Tax Regime and provided WHT relief for the construction sector, all the while making the sector into an industry. 

Opposition members chanted slogans and banged desks to interrupt the federal minister as he presented the budget. 

Azhar said that the government had put the inflation target at 6.5% and said that the Foreign Direct Investment will be increased by 25%. He said that Rs1,324bn had been set aside for the development budget while the PSDP had been provided Rs650bn. 

He said that the government had set aside Rs70bn to stem the spread of the COVID-19 and allotted Rs80bn to reduce the circular debt and for the establishment of Special Economic Zones (SEZ) while Rs70bn have been kept for water resources. Azhar said that the government had allocated Rs24bn for the ML-1 project and Rs6bn for the Ministry of Climate Change. 

The minister said that it had been decided to increase the welfare fund for the country’s artists to Rs1bn.

Taxes

“Now, I would like to go into the second part of my speech that concerns taxes,” he said. “The tax to GDP ratio is 11%, which is less than what it has been in the past 20 years,” he added.

The minister said that the PTI government deserves credit for not imposing any new taxes on the people. Delving into the achievements of the government, he said that authorities had brought 6,616 retail outlets into the tax net which increased the limited tax base.

Azhar disclosed that POS sales tax had been reduced to 12% and the minimum tax for hotels had been set at 0.5% from April to September. He said that the government had noted a 27% increase in domestic taxes and in order to bring down the current account deficit, unnecessary imports had been scrapped.

The minister said that rebate schemes had been revised after a decade while the government had, in a bid to boost business activities, exempted raw materials from custom duty.

He said that the government, to make it easy for transactions to take place, has put in place the rule that a person does not need to show his/her NIC at a transaction not exceeding Rs100,000.  

He said that cancer diagnostic kits from custom duty and diet as well as supplementary food and ingredients have been exempted from duties and taxes.

Azhar said that in order to encourage tax filing, the government had decided to revise the 11th schedule. He said that tax on cigarettes, batteries, cigars had been increased from 25% to 100%.

He said that the federal excise duty on energy drinks had been increased from 13% to 25%. The minister said that the government has proposed reducing sales tax on mobile phones that are manufactured in Pakistan. 

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