ISLAMABAD                  -          The government has targeted to keep country’s economic growth at over 5 percent, inflation in the range of 5 – 7 percent, and reserves to cover 5 months of import cover by the end of June 2023.

“Medium-term economic policies shall focus on growth, reduced inflation, and building up of foreign reserves. By June 2023, economic growth of over 5 percent, inflation in the range of 5 – 7 percent, and reserves to cover 5 months of import cover shall be targeted. These will be achieved through combination of economic growth strategy measures, fiscal, monetary and exchange rate policies,” the ministry of finance stated in medium term budget strategy paper 2020-2023.

In addition, structural policies to improve government efficiency, revitalisation of public enterprises and energy sector reform focusing on circular debt reduction and balancing finances between federal and provincial governments shall be undertaken. With these policies in place, public debt is expected to reduce to around 77 percent of gross-domestic-product as compared to 84.8 percent achieved by June 2019.

Pakistan’s GDP growth would remain at 2.6 percent in ongoing fiscal year, 3 percent in next fiscal year 2020-21, 4.5 percent in 2021-22 and 5.1 percent in 2022-23. Meanwhile inflation is projected at 11.7 percent in current financial year, which would be reduced to 8.4 percent in next fiscal year and 6.3 percent in 2021-22 and 5.3 percent in 2022-23. The budget deficit is estimated at 7.1 percent of the GDP in present fiscal year that would decline to 5.8 percent of the GDP in next financial year. Similarly, it would be reduced to 4.3 percent in 2021-22 and 3 percent in 2022-23.

According to the paper, the public debt to GDP is expected at 83 percent in ongoing fiscal year that would decline to 81 percent of the GDP in next financial year. The public debt to GDP would decline to 4.1 percent of the GDP in the year 2022-23. Meanwhile, the current account deficit would remain at 5.1 percent of the GDP in current financial year, 4.6 percent in 2020-21, 4 percent in 2021-22 and 4.1 percent of the GDP in year 2022-23.

Interest payment would consume Rs2.8 trillion in current fiscal year, which would swell to Rs3.24 trillion in next fiscal year and Rs3.23 trillion in 2021-22 and Rs3.295 trillion in 2022-23. Defense spending would record at Rs1.25 trillion in ongoing fiscal year, which would enhance to Rs1.402 trillion in 2020-21, Rs1.58 trillion in 2021-22 and Rs1.752 trillion in 2022-23. Similarly, pension spending would consume Rs435 billion in 2019-20, Rs475 billion in 2020-21, Rs494 billion in 2021-22 and Rs525 billion in 2022-23. The amount of subsidies would reduce to Rs250 billion in year 2022-23 from Rs273 billion in current financial year.

The budget strategy paper showed that by June 2023, the government intends to reduce budget deficit from around 7 percent of GDP (expected to be achieved in 2019-20) to around 3 percent of GDP. Fundamental adjustment will be made by policy and administration reforms in taxation system. Pertinently, the government intends to remove tax exemptions, preferential treatments and concessions that are likely to result in added tax collection of around 2 percent of GDP. On the expenditure side, non-development expenses will be kept at the level of existing expenditure in real terms. Austerity measures are likely to continue; structural changes will be made to improve efficiency in public expenditure and focus on outputs will be enhanced.

The government will increase the share of direct taxes in revenues by enforcing real-income based income tax, to be achieved by broadening of tax base. Documentation of the economy to increase taxation in wholesale and retail, real estate and speculation businesses is also a priority. Amnesty schemes will no longer be offered, and exemptions will be curtailed. Income tax slabs will be rationalised, and thresholds will be lowered to broaden tax base. Gradual phasing out of Final Tax Regime will help in taxing real income. Through amendments in tax law, simplification of laws and regulations, and improvement in tax administration, a legal basis will be provided to risk-based audit system.

“To foster competition in various sectors of the economy, the government will pursue a well thought out privatisation plan. Privatisation/divestment of 18 public entities from energy, banking, insurance and other sectors have been identified on which implementation is currently underway. Furthermore, there are 28 additional entities that will be pursued in phase-II of privatisation programme over the medium-term,” the budget strategy paper stated.