Minister of State for Revenue Muhammad Hammad Azhar delivers the Budget Speech 2019-2020 in the National Assembly. ─ APP
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Budget 2020: Govt predicts 2.4pc growth, Rs7 trillion in expenditures

The Pakistan Tehreek-i-Insaf (PTI) government unveiled its first annual budget for fiscal year 2019-20 on Tuesday.

The budget projects the economy will grow at a rate of 2.4 per cent ─ a massive decline from last year’s projected growth rate of 6.2pc ─ and its revised growth rate of 3.3pc.

Read more: Indirect taxes in Budget 19-20: What you need to know

The last time Pakistan saw a GDP growth rate resembling this figure was amid a global financial crisis during the PPP era in FY2009-10, when the revised growth rate came to 2.6pc.

Inflation is estimated to remain between 11-13pc this fiscal. Pakistan last saw inflation touching 11.5pc in FY2011-12.

The size of the budget (total expenditure) has been estimated at Rs7,036.3 billion. The total outlay has been estimated at Rs 8,238.1bn.

Overall, current expenditure has increased substantially this year, while development expenditure has fallen. Current expenditure is estimated at Rs6,192.9bn in FY20 compared to last year’s estimate of Rs4,780bn ─ an increase of 75pc.

Over half this amount (Rs4.04 trillion) is dedicated to interest payments on past domestic and foreign debts and defence.

Read more: Take-home salary to take a hit thanks to new income tax brackets

Interest payments on domestic debt are projected to increase by Rs1.14tr in FY20, while interest payments on foreign debt are expected to increase by Rs130bn.

Interestingly, the defence budget did not see a cut this year as expected. In fact, it rose by Rs52bn from last year’s budgeted amount of Rs1,100bn to Rs1,152.54bn.

Other expenditures, which include pensions and running of the civil government, amount to Rs2,149bn.

Within current expenditures, budgeted foreign loan payments in FY20 saw an increase of nearly Rs494bn compared to last fiscal.

Total development expenditure this year is expected to amount to Rs949.89bn ─ a drop of 17.5pc compared to last year’s budget.

Of this amount, Rs701bn has been allocated to the federal Public Sector Development Programme (PSDP), while Rs912 has been allocated to the provincial PSDP.

Non-PSDP development expenditure, which includes expenditure heads such as Benazir Income Support Programme and Kamyab Jawan Programme, is estimated at Rs85.8 million.

With its finances stretched, the government has had to make difficult decisions about where to allocate development funds. Allocations this year reflect the leadership’s focus on social welfare projects.

Although a special provision for CPEC projects has been eliminated from the PSDP this year, projects like Kamyab Jawan and low-cost housing ─ announced by Prime Minister Imran Khan last year ─ have been allocated Rs450m and Rs5m this year.

The Clean Green Pakistan Movement/Tourism head under federal PSDP, which is new this year, has been allocated Rs2bn.

Sustainable Development Goals have been allocated Rs24m against last year’s Rs5m.

However, the budget for the Benazir Income Support Programme was reduced to zero this year. It is possible the allocation has been shifted elsewhere as per the government’s priorities under the wide-ranging Ehsas programme. Dr Sania Nishtar, the chairperson of BISP is also the architect of Ehsas.

The new Poverty Alleviation and Social Safety Division, which was set up to combat poverty under Ehsas in April 2019, has been allocated Rs200m.

Rs2bn ─ compared to last year’s Rs150m ─ has been allocated to a public financial management and accountability programme to support services delivery.

A 10-year plan for the development of the tribal areas has been allocated Rs48bn in FY20 compared to Rs10bn last year. Additionally, Rs8.3bn has been set as a provision for elections this year ─ ostensibly for the upcoming polls for tribal areas in the KP Assembly.

The government estimates net revenue will reach Rs3,462.1bn in FY20 ─ an increase of 11pc from last year’s budgeted net revenue.

The fiscal deficit, or the shortfall between the government’s revenues and its expenditures, amounts to Rs3,151.2bn or 7.2pc of GDP.

Total tax revenue has been budgeted at Rs5,822bn. The bulk of the revenue will be drawn from FBR taxes, which are projected to reach Rs5,555bn in the coming fiscal.

The government expects income tax revenue amounting to Rs2,073bn in FY20 compared to last year’s revised income tax revenue of Rs1,651bn.

Explore: Direct taxes in Budget 19-20: Expect a smaller pay cheque starting July

Indirect tax revenue projections have increased by Rs773bn.

What do you need to know about indirect taxes in this year’s budget? Find out here.

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