Budget in Brief 2021-22

FEDERAL BUDGET 2021-22

BUDGET IN BRIEF

Government of Pakistan Finance Division Islamabad

PREFACE

Budget in Brief is a synopsis of the Federal Budget 2021-22 and is published to provide concise and simple information for clear understanding.

It highlights the key areas of focus and broad priorities of the Federal Government, the measures taken by the Government during the last ten months of Current Financial Year (CFY) for recovery and stabilization, the challenge of Covid-19 and Government response to combat it. Furthermore, the budget approach is also briefly explained.

'Budget at a Glance' offers a quick overview of the Federal Budget Estimates for FY 2021-22. The Budget Estimates for FY 2021-22 have been given along with comparison of outgoing FY 2020-21. The information on fiscal deficit and financing has also been tabulated.

This document offers a quick view on revenues and expenditures, budgeted for FY 2021-22 as well as budget estimates for CFY 2020-21. The details of subsidies, grants and transfers along with break-up of current / development / investments for ensuing fiscal year has also been given. Further, the detail of provincial share in Federal taxes are also available.

Detailed information is available in the relevant budget documents i.e Annual Budget Statement and Explanatory Memorandum on Federal Receipts.

Revised Estimates for FY 2020-21 included in Demands for Grants and Appropriations (Part-I) were based on the data extracted from the SAP System as on 3rd May, 2021. While the revised estimates included in this 'Budget in Brief' have been prepared on the basis of information collected as on 06th June, 2021, in an effort to provide latest information to the readers. The actual reconciled data will be finalized and made available on the web site of Finance Division by September, 2021. After the annual Budget presentation in the National Assembly, budget books, including the Budget in Brief, are uploaded on the website of Finance Division: www.finance.gov.pk.

I hope that this document will be useful for all those who seek a clear understanding of Budget for FY 2021-22.

Yusuf Khan

Secretary to Government of Pakistan

Finance Division Islamabad, the 11th June, 2021

CONTENTS

CONTENTS

PART - I

Key Priorities of the Federal Government for FY 2021-22

During the last three years of the present Government, it has faced numerous economic challenges, aggravated by the Covid 19 Pandemic. The Government has successfully progressed from recovery and stabilization to sustainable growth. The Government's priorities are as follows:

• a) Inclusive and sustainable economic growth

• b) Pro-poor initiatives and social safety net through the Ehsaas Programme's vertical and horizontal expansion

• c) Reduction in inflation and price control and monitoring

• d) Increased development spending for more job creation

• e) PM’s initiatives including Kamyab Jawan and Kissan Programmes

• f) Impact mitigation of Covid-19, and the continuation of the Stimulus Package

• g) Circular debt financing and power subsidies

• h) Revenue mobilization without new taxes

• i) Support of the Housing Sector and the Construction Industry through Naya Pakistan Housing Scheme and SME support programs

• j) Facilitating expatriates remittances and savings through Roshan Digital Account

• k) Pakistan Remittances Initiatives and other schemes

Ten months (July-April) performance for FY 2020-21

While approving the budget estimates for the FY 2020-21, it was imperative to control the adverse economic impacts of Covid 19 Pandemic, manage twin deficits, recover and stabilize the economy, and provide relief to the vulnerable segments of the society. With these objectives, the achievements of the first ten months of FY 2020-21 are as under:

• a) Pakistan’s economy has witnessed a V-shaped recovery after contracting by 0.47% in FY 2020-21.

• b) The provisional GDP growth rate for FY 2021 is estimated to be 3.94% against the targeted growth of 2.1% through the policy initiatives undertaken during FY 2020-21.

• c) The nominal GDP for FY 2021 is projected to increase from Rs45,567 billion to Rs47,709 billion.

• d) The Economic Stimulous of Rs1.24 trillion announced in March 2020 has been extended for the FY 2021 and an amount of Rs155 billion has been released to mitigate the socio economic impacts of Covid 19 pandemic.

• e) The Current account balance during Jul-Apr, FY 2020-21 posted a surplus of $0.8 bn (0.3 % of GDP) against a deficit of $4.7 bn (-2.1 % of GDP) last year.

• f) Exports during Jul-Apr FY 2020-21 increased by 6.5% to $21.0 bn ($ 19.7 bn last year). On YoY basis, exports increased by 61.3 % to $2.3 bn in Apr, 2021 ($ 1.4 bn in Apr, 2020).

• g) Remittances grew significantly by 29.0% to $24.2 bn and surpassed the target of $21.5 bn as compared to $18.8 bn during Jul-Apr, FY 2020-21 during same period last year.

• h) LSM posted a growth of 8.99% during Jul-Mar FY 2020-21 against a negative growth of 5.10% for last year.

• i) The inflation based on Consumer Price Index (CPI) during Jul-Apr, FY 2020-21 is down to 8.6% as against 11.2% during the same period last year.

• j) FBR tax collection grew by 14.4% to Rs.3,780 bn during Jul-Apr FY 2020-21 against Rs.3,303 bn last year.

• k) Fiscal consolidation helped in containing the fiscal deficit to 4.2% of GDP during JulApr, FY 2020-21, against 5.3% of GDP last year.

• l) Primary balance posted a surplus of Rs.159 billion during Jul-Apr FY 2020-21, against the deficit of Rs.205 billion last year.

• m) Refund of Rs.253 billion was issued by FBR to the business community during JulApril, FY 2020-21, which are 66.5% higher than previous year's Rs.151.8 billion issued during the same period last year.

• n) Private Sector has borrowed Rs.454.5 bn during Jul-Apr FY 2020-21, compared to Rs.318.5 bn during the same period last year, a growth of 43%.

• o) Fixed investment loans disbursement increased to Rs140.4 billion during Jul-Apr FY 2020-21, as compared to Rs 0.4 billion during the corresponding period last year, thus registered a significant growth.

• p) Pakistan has entered the international capital market after a gap of over three years by successfully raising USD 2.5 billion.

• q) World Bank recognized Ehsaas Emergency Cash Programme as amongst the top four social protection interventions in the world in terms of numbers of people covered.

• r) The IMF and Pakistan have resumed the $6bn Extended Fund Facility and completed second to fifth review under the program. The IMF has appreciated that the Government policies have been crucial in supporting the economy and saving lives and livelihoods in the Covid 19 Pandemic .

• s) Inflows of foreign exchange through the Roshan Digital Account (RDA) crossed the $1 billion mark in a short span of time after the launch of the scheme.

• t) Moody’s rating agency upgraded Pakistan's outlook to ‘Stable’ from ‘under review for downgrade’ (in August, 2020). Fitch affirmed Pakistan's rating at B- with stable outlook.

The Budget Strategy for FY 2021-22

The Budget 2021-22 is a growth budget it is based on a well thought out strategy to boost the economic growth earlier outlined in the Medium Term Budgetary Strategy Paper for FY 2021-22 to FY 2023-24, which gave a clear roadmap of the strategic priorities, revenue and spending policies of the Government, and was approved by the Federal Cabinet in April, 2021. The main priorities of the Federal Government for FY 2021-22 are:

• 1. Sustainable economic growth
• 2. The Prime Minister Special Initiatives
• 3. Optimal mobilization of revenue
• 4. Increased Development Funding by M/o PD&SI
• 5. Expeditious disposal of refund claims

Main Objectives of Budget 2021-22

• a) Striking a balance between fiscal deficits due to Covid 19 and boosting growth of the economy

• b) Keeping primary balance at a sustainable level

• c) Protection of social spending under the Ehsaas Program to support vulnerable segments of the society

• d) Resource mobilization with required changes in tax structure

• e) Successful continuation of the IMF program

• f) Carrying forward of Stimulus Package

• g) Keeping development budget at an adequate level to stimulate sustainable economic growth coupled with policy support

• h) Funding of crucial Housing initiatives including Naya Pakistan Housing project to boost the construction sector

• i) Funding for special areas i.e erstwhile FATA, Azad Jammu & Kashmir and Gilgit Baltistan to ensure their development

• j) Continuation of special initiatives led by the Prime Minister like Kamyab Jawan, Sehat Card, Billion tree Tsunami, etc.

• k) Austerity and control of non-productive expenditure

• l) Rationalization of subsidy regime to provide targeted subsidy to the deserving segments of the society

• m) Revisiting of the NFC award. Moreover, persuading the provinces to fulfill their funding commitments made at the time of the merger of erstwhile FATA

PART - II

Table - 1 Budget 2021-22 at a Glance

Table-1 presents position of overall Resources and Expenditure for the FY 2021-22.

Table - 2

Fiscal Deficit & Financing of Budget 2021-22

Table-2 shows Fiscal Deficit and Financing for FY 2021-22.

Table - 3

Budget Estimates of FY 2021-22

Table-3 presents important percentages for the FY 2021-22.

(Rs. in Billion)

PART - III COMPARISON OF BUDGET ESTIMATES FY 2020-21 - FY 2021-22

TABLE - 4 TAX RECEIPTS

Table-4 provides details of total Tax Revenues as given in Table-1, Part-II.

(Rs in Million)

TABLE - 5

NON TAX REVENUE RECEIPTS

Table-5 provides details of Non Tax Revenues as given in Table-1, Part-II.

Contd…

(Rs in Million)

TABLE - 6 DETAILS OF DIVISIBLE POOL TAXES

Table-6 provides part (Pool) of Taxes that are transferred to provinces as per NFC, other transfers / grants after excluding refunds and province wise share.

(Rs in Million)

TABLE - 7 CAPITAL RECEIPTS (NET)

Table-7 explains Capital Receipts (Net) and their sources. It comprises of Net Lending of PSEs, (Table-1) which is the difference between disbursement minus recovery of loans by PSEs (Others).

The second part shown at Sr. No.II of this table relates to the Non Bank Borrowing as indicated at Sr. No.II of Table-1 of Part-II.

(Rs in Million)

TABLE - 8 PUBLIC ACCOUNT (NET)

Table-8 indicates the position of Public Account (Net):

(Rsin Million)

TABLE - 9 EXTERNAL RESOURCES

Table-9 contains receipts from External Resources. Net External Receipts shows details of inflow minus repayments. The details of Net External Receipts is indicated in Table-1 of Part-II.

(Rs in Million)

TABLE - 10 CURRENT EXPENDITURE

Table-10 contains Current Expenditure, already given at A in Table-1, PartII, in summarized form.

(Rs in Million)

(Rs in Million)

TABLE - 11

FUNCTION-WISE EXPENDITURE

Table-11 contains function wise expenditure, i.e. how much is utilized for various functions of the Government.

(Rs in Million)

• An amount of Rs: 100 billion has been allocated for COVID related expenditure during FY 2021-22

TABLE - 12 SUBSIDIES

Table-12 gives the details of subsidies for which a single figure is given in Table-1, Part-II.

TABLE - 13 GRANTS AND TRANSFERS

Table-13 gives the details of Grants and Transfers, for which a single figure is given in Table-1, Part-II.

(Rsin Million)

Contd….

(Rs in Million)

TABLE - 14

CURRENT LOANS & ADVANCES

Table-14 explains the Current Loans and Advances to various PSEs, States and Friendly Countries.

TABLE - 15 CURRENT INVESTMENTS

Table-15 explains Current Investments through equity, etc. in various entities.

TABLE - 16 DEVELOPMENT LOANS AND ADVANCES

Table-16 explains Domestic and External Development Loans and Advances.

Development Loans and Advances are part of project aid disbursed by foreign donors and are used to Finance PSDP. The loans are re-lent by the Federal Government to Provincial Governments and PSEs.

(Rsin Million)

TABLE - 17 DISTRIBUTION OF PSDP

The Table-17 explains the Division wise distribution of PSDP, explaining the figures of PSDP given in Table-1, Part-I.

(Rsin Million)

Contd…

(Rs in Million)

PART - IV

DETAILED BUDGET ESTIMATES

TABLE - 18

REVENUE RECEIPTS

Table-18 presents the detail of Revenues collected by FBR, Summary already given in Table-4 (Part-II):

(Rs in Million)

TABLE - 19 NON TAX REVENUE RECEIPTS

Table-19 shows the Non Tax Revenues details realized by the other government functionaries.

Contd…

(Rs in Million)

Distribution of Resources Among Federation and Provinces

1. Pakistan is a Federal democracy. In order to maintain inter-governmental fiscal relationship, Article 160 of the Constitution provides for setting up of a National Finance Commission (NFC) with intervals not exceeding five years. The mandate of NFC is to make recommendations to the President for the distribution of resources between the Federal and Provincial Governments. The recommendations of the NFC are given legal cover through a Presiden's Order. The relevant provisions of President's Order No. 5 of 2010 as amended vide No. 6 of 2015 are as under:

(i) Distribution of Revenues.- (1) The divisible pool taxes in each year shall consist of the following taxes levied and collected by the Federal Government in that year, namely:─

• (a) taxes on income; (b) wealth tax; (c) capital value tax;

• (d) taxes on the sales and purchases of goods imported, exported, produced, manufactured or consumed;

• (e) export duties on cotton; (f) customs duties; (g) federal excise duties excluding the excise duty on gas charged at well-head; and

• (h) any other tax which may be levied by the Federal Government.

• (2) One percent of the net proceeds of divisible pool taxes shall be assigned to Government of Khyber Pakhtunkhwa to meet the expenses on war on terror.

(3) After deducting the amounts as prescribed in clause (2), of the balance amount of the net proceeds of divisible pool taxes, fifty-six percent shall be assigned to provinces during the financial year 2010-11 and fifty-seven and half percent from the financial year 2011-12 onwards. The share of the Federal Government in the net proceeds of divisible pool shall be forty-four percent during the financial year 2010-11 and forty-two and half percent from the financial year 2011-12 onwards.

(ii) Allocation of shares to the Provincial Governments.- (1) The Province-wise ratios given in clause (2) are based on multiple indicators. The indicators and their respective weights as agreed upon are:-

(2) The sum assigned to the Provincial Governments under Article 3 shall be

distributed amongst the Provinces on the basis of the percentage specified against each:─

(3) The Federal Government shall guarantee that Balochistan province shall receive the projected sum of eighty-three billion rupees from the provincial share in the net proceeds of divisible pool taxes in the first year of the Award. Any shortfall in this amount shall be made up by the Federal Government from its own resources. This arrangement for Balochistan shall remain protected throughout the remaining four years of the Award based on annual budgetary projections.

(iii) Payment of net proceeds of royalty on crude oil. ─Each of the provinces shall be paid in each financial year as a share in the net proceeds of the total royalties on crude oil an amount which bears to the total net proceeds the same proportion as the production of crude oil in the Province in that year bears to the total production of crude oil.

(iv) Payment of net proceeds of development surcharge on natural gas to the Provinces.─ (1) Each of the Provinces shall be paid in each financial year as a share in the net proceeds to be worked out based on average rate per MMBTU of the respective province. The average rate per MMBTU shall be derived by notionally clubbing both the royalty on natural gas and development surcharge on Gas. Royalty on natural gas shall be distributed in accordance with clause (1) of Article 161 of the Constitution whereas the development surcharge on natural gas would be distributed by making adjustments based on this average rate.

(2) The development surcharge on natural gas for Balochistan with effect from 1st July 2002, shall be re-worked out hypothetically on the basis of the formula given in clause (1) and the amount, subject to maximum of ten billion rupees, shall be paid in five years in five equal installments by the Federal Government as grants to be charged on the Federal Consolidated Fund.

(v) Grants-in-Aid to the Provinces.- There shall be charged upon the Federal Consolidated Fund each year, as grants-in-aid of the revenues of the province of Sindh an amount equivalent to 0.66% of the provincial share in the net proceeds of divisible pool as a compensation for the losses on account of abolition of octroi and zilla tax.

(vi) Sales tax on services.- NFC recognizes that sales tax on services is a Provincial subject under the Constitution of the Islamic Republic of Pakistan, and may be collected by respective Provinces, if they so desired.

(vii) Recently, the President has consituted 10th NFC Award for consideration on distribution of resources afresh.

(viii) Detail of Provincial share of Federal Taxes for budget estimates and revised estimates of 2020-21 and bdget estimates of 2021-22 are given below:-

TABLE - 20

DETAILS OF DIVISIBLE POOL TAXES (TRANSFERS TO PROVINCES)

TABLE - 21

CAPITAL RECEIPTS (NET)

Table-21 indicates the position of Capital Receipts (Net):

(Rs in Million)

TABLE - 22 PUBLIC ACCOUNT (NET)

Table-22 indicates the position of Public Account (Net):

(Rsin Million)

TABLE - 23 EXTERNAL RESOURCES

Table-23 indicates the position of External Resources as below:

(Rs in Million)

(Rs in Million)

TABLE - 25

FUNCTION WISE CURRENT EXPENDITURE

Table-25 shows details of Current expenditure which is divided into ten (10) functional items as per Charts of Accounts.

The detail of Expenditure under above Ten Functions (10 Tables) are as under:-

(1) GENERAL PUBLIC SERVICE

(Rsin Million)

(2) DEFENCE AFFAIRS AND SERVICES

(Rs in Million)

(3) PUBLIC ORDER AND SAFETY AFFAIRS

(Rsin Million)

(4) ECONOMIC AFFAIRS

(5) ENVIRONMENT PROTECTION

(Rsin Million)

(6) HOUSING AND COMMUNITY AMENITIES

(Rs in Million)

(7) HEALTH AFFAIRS AND SERVICES

(Rsin Million)

• An amount of Rs: 100 billion has been allocated for COVID related expenditure during FY 2021-22

(8) RECREATION, CULTURE AND RELIGION

(Rsin Million)

(9) EDUCATION AFFAIRS AND SERVICES

(10) SOCIAL PROTECTION

(Rsin Million)

In addition to the above allocations under the Current Budget as per ten classification heads, the Federal Govts provides funds for various purposes.

In order to alleviate the impact of inflation on citizens, especially the poor segments of society, the Federal Government spends a fairly large sum on providing power and food subsidies.

TABLE - 26 SUBSIDIES

Table-26 shows detail of subsidies:

(Rs in Million)

Contd…..

(Rs in Million)

TABLE - 27

GRANTS AND TRANSFERS

Table - 27 gives details of Grants and Transfer to provinces and other entities as provided by the Federal Government.

(Rs in Million)

Contd…..

(Rs in Million)

(Rsin Million)

TABLE - 28 CURRENT LOANS & ADVANCES

Table - 28 shows Current Loans & Advances as provided by Federal Government to Govts. of AJK, GB and various institutions as well as Govt. Servants to enable them to meet their financial requirements. The details are as under:

Contd…

TABLE - 29 CURRENT INVESTMENTS

Table-29 shows detail of Current Investments. The Federal Government invests funds in various Companies, Banks etc, to earn Dividends which results an increase in Government's Revenues:

Contd…

TABLE - 30

DEVELOPMENT LOANS AND ADVANCES

Table-30 shows Development Loans and Adcances as made by Federal Government to Provinces, AJK & GB, PSEs, Financial / Non-Financial Institutions, District Governments / TMAs and others to assist them in carrying out their Development Programmes:

(Rsin Million)

Public Sector Development Programme (PSDP)

The Public Sector Development Programme (PSDP) is the main instrument for improving the socio-economic conditions in the country and achieving the macroeconomic & development objectives and targets set by the government, which yield maximum benefits for the society in the shortest possible time.

TABLE - 31

PSDP 2021-22

Table - 31 shows the details of PSDP size for FY 2021-22 in respect of Ministries / Divisions / Departments / Corporations and for Special Packeges / Relief are given below:-

Contd….

(Rs in Million)

TABLE - 32

* EXPENDITURE OUTSIDE PSDP

• The Budget Allocation for the above table projects have been tranferred into Grant & Transfers (Table-27)