Pakistan has been one of the worst suffering country from COVID-19, with the

economic disruption as a result of the pandemic make worse an already present

disaster. The coronavirus seems to have a catching financial effect on Pakistan.
Both federal and provincial government sit down together on one page for
reporting conditions of their sectors, lots large than previously estimated
financial losses are coming to the fore and counting.
Government of Pakistan on Friday 12th of June announced budget for the fiscal
year 2020-21. We can say that “Budget of Pakistan was the COVID-19 Budget.
More than building the future, authorities attempt to consciousness on how long
to remain in the rescue section and the way to make various sectors and
segments of society stand on their feet. These are uncommon instances for the
economy, which is projected to grow by negative 1.5 percent, the worst in
nearly 70 years, particularly due to a intense contraction within the last quarter
of 2019-20 in nearly all sectors, except agriculture. This pandemic shakes the
foundations of globally strong economy’s like USA, UK.
The budget arrangements may also be surprising. As of now, schedules of
budget-associated activities at various levels of presidency are undefined. From
exports to revenues, from industry to buying and selling, from tourism to
entertainment and from transport to commercial activities, everything has been
collapsed.
The poor common humans and authorities personnel had great hopes from
budget, however it delivered displeasures instead of providing any mitigation.
Revealing that subsidies have been reduced from Rs349.5 billion for the
outgoing year to Rs209 billion for the subsequent 12 months, no matter the
monetary impact of the coronavirus outburst at the masses. This will also have
an effect on coming year income targets. In the given situations, in all
opportunity, the budget strategy paper’s estimate for about a thousand billion
rupees extra revenue for the following year will remain a far cry. A major non
tax revenue around Rs300bn targeted via privatization profits in the current
fiscal yar has already become ambiguous given the weakening investor self
belief. The falling rate of inflation because of fall in oil costs and the ensuing
reduce inside the key coverage rate is also probably to negatively affect to
central bank earnings — another essential source of non-tax revenue.
Different media reports that government had dropped its present day year’s
GDP growth rate plans under the budget strategy paper; the Ministry of Finance
had constructed its current year budget strategy on a growth target of 2.4
percent and an inflation rate of 11-13%. The finance ministry has claimed the
growth rate for the current year at 2.6% and inflation at 11.7% — nearly
unchanged from the finances announced in June 2019. The Covid-19 have a
considerable effect on the growth rate this 12 months.
The government also took adjustments in its monetary policy to be higher
prepared to defeat the virus. The State Bank of Pakistan reduce its policy rate
via 5.25% decreasing it from 13.25% to 8%. Businesses had been provided
employees loans worth Rs96bn for a three-month tenure at subsidized fee of
4%. To assist importers and exporters, the government prolonged the time
period to satisfy their overall performance requirement. Goods supply for
exporters has been allowed from 6am to 12am. As an introduced degree of
alleviation, conditions for long-term loans have also been softened. Foreign
exchange receipts through exports can be receivable for as much as 270 days.
Exporters will be able to supply transport documents and boundaries for
advance payments had been enhance to facilitate imports.
All most all industries and groups were impacted. A loss of almost Rs3.3 trillion
to the GDP was experienced, which ended in a 0.4% contraction in the GDP.
Meanwhile, the budget deficit from 7.1% of the GDP to 9.1%. The Federal
Board of Revenue (FBR), which had an decided target of round Rs4,900bn lost
Rs900bn in potential revenue because of the coronavirus shutdown.
According to the budget, the government has to be paid 59.33 percent subsidy
for WAPDA/PEPCO, observed through 14.36 % for Naya Pakistan Housing
Authority, 12.2% for KESC and 3.35% for PASSCO. Federal Minister for
Industries and Production Hammad Azhar told the National Assembly (NA) on
Friday that Rs149 billion had been allotted for protective people who use 300 or
much less units of energy each month from power tariff hike. A breakdown of
this discern confirmed that Rs110 billion have been allocated for tariff
differentials compared to Rs162 billion of the outgoing year. The government
has allotted Rs3 billion for tariff variations for agriculture tube-wells in
Baluchistan, Rs10 billion for selecting up WAPDA/PEPCO receivables from
the merged districts of Khyber Pakhtunkhwa (KP) and Rs1 billion for WAPDA
due to tariff differential for Azad Jammu and Kashmir (AJK). Rs25 billion had
been reserved for KESC for the subsequent year compared to Rs59.5 of the
outgoing 12 months.
The budget showed that the subsidies for the power sector have harshly been
decreased for the upcoming fiscal year as compared to the previous years.
Moreover, no guide has been given to the petroleum sector.
According to the budget document, the government has decreased the subsidy
given to PASSCO from Rs15.5 billion to Rs7 billion. It has allocated Rs2
billion for wheat operations, Rs5 billion for booking wheat stock, Rs6 billion
for giving subsidy on wheat to Gilgit-Baltistan, Rs2 billion on Metro Bus and
Rs6 billion for fertilizer plants.
It is worth mentioning here that the authorities has now not given any subsidy to
the National Food Security, Research Division for the next financial 12 months.
The government has increased income tax rate from 25% to 35%. Government
set their goal to get Rs258 billion from income tax.
The government has imposed 17% GST on export businesses as it's far looking
forward to raise 250bn revenue from sales taxes. The government has no longer
given comfort to the salaried-class, instead, the government has nevertheless no
longer announced any package for the farmers.
Government has given handiest 25 billion to health sector on the federal level
and basic, it is only 1.3% of the share. There was no sharing for water
management, for farmers, for education sector and even now not for aviation
sector. There was no plan for environmental programs and self-employment.
Finance minister Hafeez Shaikh — declared that there was nothing revered
about the numbers projected inside the annual financial statement. According to
Shaikh, the budget was “an evolving report that can be adjusted around the
clock in line with ground realities.” In other words, he admitting that most
numbers within the budget have been hopeful and therefore not likely.
The tax collection target set for the FBR is PKR 4.96 trillion that is round 27%
higher than the PKR 3.91 trillion taxes collected in FY20. With a projected
GDP growth of 2.1%, inflation of 6.5% and a few extra efforts to collect taxes,
the minimum increase in tax collection that can be predicted is round 10-12%.
This means approximately PKR 4.25 trillion which is PKR 700 billion much
less than the targeted collection. And this is assuming that the economy will
grow by 2.1% which only Pakistanis expect too happen.
While there's a lot fate and melancholy, the budget does have some positive
points. It is we can say tax free budget. It seems that the newly set-up National
Tariff Policy Board, has become functional. The budget consists of a range of
sanctions for clarification of customs duties, especially on industrial raw
material and smuggling-susceptible items.
The decision to introduce the system of advance ruling and authorized
economic operators by means of the Customs Department could significantly
allow trade and decrease the fee of trade across borders. This decision may also
improve Pakistan’s position within the World Bank’s Doing Business rankings.
Government also reform the withholding income tax regime, including the
changes in collection of advance tax on imports from person-specific to goods-
specific. This reform will help small and medium corporations. Another
initiative is charitable trust, educational institutions and hospitals are tax free.
It is a cruciall time period for government, it will take time to combat and stable
their economical as well as financial conditions. But government has taken
many good steps. Without decreasing expenditure Pakistan can't stable their
economy neither financial crises.