Federal Budget 2019-20: Government, Facing Multiple Economic Related Challenges
The government led by the Pakistan Tehreek-e-Insaf (PTI) presented its first federal budget for the fiscal year 2019-20 in the Parliament on June 11, this year, setting ambitious tax collection targets to stabilise a faltering economy.
In this regard, Minister of State for Finance Hammad Azhar presented the budgetary proposals in the National Assembly. In his speech, in the beginning, he said, “It is now time to improve the lives of citizens, to remove corruption from public life, to inject merit in our institutions, and to lead the economy, to remember the forgotten and to fulfill the destiny of our people.”
Pointing out economic related challenges which were the result of previous governments, Hammad Azhar stated; “Our total debt and liabilities were about Rs.31, 000 billion…Foreign debt and liabilities were around $97 billion-Foreign exchange reserves with the State Bank of Pakistan had fallen from $18 billion to less than $10 billion in the last two years-Current account deficit had increased to a historic high of $20 billion, and trade deficit $32 billion..Exports growth over the last five years was zero-Fiscal deficit…government’s revenues less expenditures, was a threatening Rs.2, 260 billion. Reckless disregard for financial discipline in an election year had contributed towards this high deficit…expensive policy proved disastrous for exports, subsidized imports and hurt the economy. It could not be sustained, and the Rupee began to adjust itself from late 2017…Pressures on commodity price increase were fast building with inflation was touching 6 percent. An agreement has been reached with the IMF for a $6 billion programme. Generate additional international assistance of $2…$3 billion from the World Bank and Asian Development Bank at relatively lower interest rates”.
He further said, “these loans will “Signal government resolve for fiscal discipline and reforms leading to favourable response from international capital and investors…Achieve stabilisation of the economy and build a sustainable platform for growth..A deferred payment of $3.2 billion for purchase of oil and gas products from Saudi Arabia acquired to reduce pressures on foreign reserves. The government operationalised Islamic Development Bank for deferred payment facility of $1.1 billion…With these measures, it is expected that the current account deficit for the year will reduce by $7 billion this year”.
Despite the fact that the current government is facing serious economic challenges, he also announced many relief measures for the people, including those for federal government employees and pensioners—“Ad-hoc Relief Allowance @10% on running Basic Pay of BPS 2017 to civil government employees in BPS grade 1 to 16, and employees of Armed Forces-Civil employees BPS 17–20 will be given ad-hoc Relief Allowance @5%- Civil employees in BPS 21 and 22 will receive no increase in pay as they have decided to sacrifice for the sake of improvement in economic situation of the country- Increase in net pension @10% will be given to all civil and armed forces pensioners of federal government”.
Minister of State for Finance Hammad Azhar added: “In addition to the stabilisation effort, the government took other measures: “An Asset Declaration Scheme is being implemented to enhance the tax base and bring benami [Unknown] and other unregistered assets in the formal economy…Accountability, institutional strengthening and strengthening of governance…The monetary policy is used for controlling inflation…Provision of support and relief to vulnerable segments of our society through a combined set of programmes”.
On the same day, in his address to the nation, Prime Minister Imran Khan vowed to nab the “thieves who plunged the country in debt badly”, and announced to make “high-powered commission to investigate loans taken in last ten years.”
Khan disclosed that the commission would comprise of the high-profile representatives from the ISI (the Inter-services Intelligence), FIA (Federal Investigation Agency), IB (Intelligence Bureau), FBR (Federal Board of Revenue) and SECP (Securities and Exchange Commission of Pakistan).
Prime Minister Imran Khan added that after putting to rest the initial focus of the government to stabilise the economy, his attention would be more targeted towards bringing the ones to task who had caused the country to fall into such dire straits.
In fact, the previous governments led by Ex-Prime Minister Nawaz Sharif, leader of the Muslim League-Nawaz (PML-N) and President Asif Ali Zardari, leader of the Pakistan People’s Party (PPP), including some of their other leaders are undergoing different investigations regarding corruption charges. Both the previous governments obtained unprecedented amount of loan. When the then President Gen. Pervez Musharraf had taken over in October 1999, the country’s foreign debts stood at $37.9 billion. At the end of June 2007, when Gen. Musharraf was still in power, the loans rose to $40.5 billion. In 2008, PPP came into government, External Debt & Liabilities (EDL) increased from US $40.5 billion at end-June 2008, to $55.9 billion by the end of June 2010, and stood at $59.5 at end-March, 2011. The PPP government borrowed almost $20 billion in just three years.
Former Prime Minister Nawaz Sharif’s government obtained around $35 billion in new loans during his four-year tenure. About $17 billion or nearly half of the total loans obtained from July 2013 to June 2017 were utilized to repay the previous debt. The maximum number of loans– amounting to $10.1 billion, the highest taken out in any single year during the country’s 70-year history–was obtained during the last year of Nawaz’s government (his government left a debt trap for the new government). The prevailing economic situation is outcome of both the previous governments.
It was owing to the corruption-practice of the previous regimes that at this juncture, Pakistan is facing multi-faceted crises and challenges like corruption, soaring prices, energy-shortage, unemployment, crimes, lack of health facilities, and dependence upon the US-led developed countries, IMF and World Bank for financial aid.
The government’s main focus in the budget would be on fiscal consolidation and revenue mobilization. On revenue side, the government is likely to introduce measures for bringing improvements in the system of tax collection, broadening the tax base and facilitation to tax payers, including documentation of the economy.
On the other hand, the military’s media wing’s DG ISPR Major General Asif Ghafoor said on June 5, this year that Chief of Army Staff General Qamar Javed Bajwa stated: “The military has voluntarily agreed to cut its expenditures due to critical financial situation. Pakistan’s armed forces have decided not to receive an increased share under defence budget for the betterment of national economy”.
However, in spite of the fact that the government was facing multiple economic related challenges, but, in a move to provide relief to the public to the maximum, in the federal budget 2019-20, the government has introduced many programmes like easy loan for the unemployed youth etc. This budget shows friendly policies for the people and will result into the socio economic prosperity of the country.