Image source: South Asia Center
Pakistan announces fiscal year budget for next fiscal year, setting an additional income target of 1.4 trillion rupees.
The Pakistani cabinet decided on May 28 that it will announce its upcoming fiscal year budget on June 11 and set an additional income target of 1.4 trillion rupees.
It is reported that Pakistan has recently signed a Memorandum of Understanding (MoU) on sharing legal aid with the United Kingdom to share information on assets owned by Pakistanis in the UK.
Dr. Firdous Ashiq Awan, Special Assistant to the Prime Minister’s Information, said at the press conference that the Cabinet had a two-and-a-half-hour detailed discussion of the 2019-2020 budget.
She said that according to the tax reform, the cabinet approved an additional income target of 1.4 trillion rupees. According to reports, with an additional income of Rs 1.4 trillion, the country’s additional taxes will exceed Rs 7,000 crore.
Awang explained that only a few hundreds of thousands of the 55.5 million bank account holders in the country have paid taxes. Similarly, of the more than 100,000 companies have registered with the Securities and Exchange Commission of Pakistan (SECP), only 300 have shown tax.
Awang said that financial adviser Hafeez Shaikh and his team at the meeting proposed the budget strategy expected by the Justice Movement Party (PTI) government, and the budget is ready to lead the economy on a stable path.
Image source: Pakistan Chinese business special issue
Awang added: “Reducing public debt is our top priority. Secondly, we will stabilize the economy, reduce imports for managing external deficits, reduce fiscal deficits through income mobilization and expenditure control, and the government will try to protect vulnerable groups in the budget.
”She said that the government’s goal is to create a platform for economic growth. Only economic growth will increase employment opportunities.
She added that most of the budget will flow to the provinces and the federal government will have less room to operate.
She also said that the design and implementation of the economic team stabilized the value of the rupee. Positive signals have begun to take shape, and the stock exchange has made positive contributions to this and created new records.
Pakistan’s economic situation in the 2017-2018 fiscal year
Image source: baidu.com
The GDP growth rate hit a new high. According to the data released by the Central Bank of Pakistan, the constant price calculation based on the 2005-06 fiscal year, the GDP growth rate of the 2017-18 financial year hit a 13-year high of 5.8%, an increase of 0.4 percentage points over the previous fiscal year. At the current price, the total GDP reached Rs 34.4 trillion, but due to the depreciation of the Rupee against the US dollar in excess of 15% in the 2017-2018 fiscal year, if the current US$ is converted to the exchange rate of Rs 124, the dollar-denominated GDP. The total amount is about 277.4 billion US dollars, which is lower than the previous fiscal year. From the 2past five fiscal years, the GDP growth rate of Pakistan has shown a good trend of rising year by year.
The growth rate of the three major industries has increased. In the 2017-2018 fiscal year, the growth rate of the three major industries of the Pakistani national economy has increased. With the strong support of government policies, the cost of fertilizers and pesticides has decreased, the support for credit and cash subsidies has increased, farmers’ enthusiasm has increased, and the output of major crops such as cotton, rice and sugar cane has increased.
The agricultural output value has increased by 3.8%, which is a high growth rate in 18 years. The high point, accounting for about 24% of GDP. Thanks to improved energy supply, long-term loose monetary environment and infrastructure investment, industrial output increased by 5.8% to a 10-year high, accounting for about 19% of GDP. Among them, steel, automobile, cement and food industries grew more significantly. The service industry has contributed the most to the three major industries of the Pakistani national economy. It continues to rely on major sub-sectors such as wholesale and retail, transportation and communications. The output value has increased by 6.4%, reaching a 10-year high, accounting for 57% of GDP.
Consumption is still the main engine of the national economy. From the perspective of demand structure, consumption is still the main engine of Pakistan’s national economic growth. The total demand is measured by “final consumption + capital formation + export”. The final consumption in 2017-18 is 32.5 trillion rupees, accounting for 79% of total demand. Capital formation and exports accounted for 14% and 7% respectively, while net exports remained negative. Compared with the previous fiscal year, final consumption increased by 9%, capital formation increased by 9.8%, and exports increased by 11.4%. From the perspective of Pakistan’s demand structure, if we want to maintain long-term economic growth and enhance competitiveness, we still need to focus on promoting investment and expanding exports.
Attracting foreign investment has steadily increased the proportion of Chinese capital by more than half. In the 2017-18 fiscal year, foreign direct investment (FDI) inflows reached US$3.43 billion, with an outflow of US$670 million and a net inflow of US$2.76 billion, up 0.8% year-on-year, achieving a third consecutive fiscal year growth. Among them, the net inflow of FDI from China reached 1.58 billion U.S. dollars, accounting for 57% of the total FDI in Pakistan. It maintained the status of foreign capital in the first big country for five consecutive fiscal years. Britain, Hong Kong, Malaysia, and Switzerland are ranked two to five.
Exports have improved but the trade deficit continues to expand. In the 2017-18 fiscal year, the export of goods reached US$24.77 billion, a year-on-year increase of 12.6%. Compared with the year-on-year growth of less than 1% in the previous fiscal year, there was a significant improvement. However, as the import of goods also reached a high growth rate of 15% year-on-year at 15%, the trade deficit continued to expand to 31 billion US dollars. According to country data released by the Central Bank of Pakistan, imports from China in the 2017-18 fiscal year were US$ 11.46 billion, accounting for 18.8% of the total imports of Pakistan, which is nearly double that of the United Arab Emirates, the second largest source of imports. At the same time, China is the third largest export destination after the United States and the United Kingdom. In the 2017-18 fiscal year, Pakistan exported 1.74 billion US dollars to China. In total, China is still Pakistan’s largest trading partner.
The fiscal and current account “double deficit” continues to increase the debt burden. In the 2017-18 fiscal year, the Federal Taxation Bureau (FBR) taxed 3.75 trillion rupees, an increase of 11.4% year-on-year, but still did not reach the target of 3.93 trillion rupees. The poor tax collection and government fiscal slack, the expansion of expenditures The fiscal deficit, according to preliminary estimates, Pakistan’s fiscal deficit will reach a record 2.4 trillion rupees, accounting for about 7% of GDP. At the same time, due to the expansion of the trade deficit and the lack of growth in remittances, the current account deficit for the 2017-18 fiscal year reached $18 billion, a year-on-year increase of 44.7%. The fiscal and current account “double deficit”worsened the debt burden of Pakistan. As of the end of the fiscal year of 2018, the government’s debt accounted for 74.3% of GDP, of which internal debt accounted for 47.7% and foreign debt accounted for 26.6%. Debt, the total debt level of Pakistan reached 28.4 trillion rupees, accounting for 82.6% of GDP. At the same time, Pakistan’s current foreign exchange reserves can barely maintain a level of about 10 billion US dollars, making the balance of payments problem the short-term biggest risk and challenge.