Trade Chronicle May - June 2020

TRADE CHRONICLE
The PTI gover nment
presented a tax-free budget
with a wide fiscal deficit for
2020/21, proposing no
increase in salaries of its
employees and pensioners,
rise in levies on luxury
products, and tax relief for
cement sector, sanitary
w e a r s a n d l o c a l l y -
manufactured mobile
phones.
Hammad Azhar presents
a tax-free budget in the Parliament
The government presented
the federal budget 2020/21
with a total outlay of Rs7.136 trillion, a
little expansionary for economic recovery
as the economy has contracted in the
outgoing fiscal year for the first time since
1952 due to COVID-19.
Tax revenues have been targeted at
Rs5.464 trillion against the revised
estimates of Rs4.208 trillion for the
outgoing fiscal, depicting an increase of
29.8 percent. The FBR’s collections
target has been increased by 27 percent
to Rs4.963 trillion against the revised
estimates of Rs3.91 trillion.
Increase in tax will put more burden on
existing taxpayers. Besides, the
development budget has been reduced
during the last year.
percent.
Minister for Industries and
Production Hammad Azhar,
while presenting the budget
in the National Assembly,
termed it as crisis budget
due to coronavirus that is
adversely affecting the
economy.
Azhar said that current
account deficit will be
contained at $ 4.4 billion for
fiscal year 2020/21, while
foreign direct investment
will be increased by 25
Non-tax revenues have been targeted at
Rs1.109 trillion against the revised
estimates of Rs1.296 trillion in the current
fiscal year. The provinces will get a share
of Rs2.874 trillion in the next fiscal year.
External receipts (project loans, program
loans, grants) have been targeted at
Rs810 billion against the revised
estimates of Rs2.27 trillion. Besides,
provincial surplus has been estimated at
Rs242 billion, bank borrowing at Rs889
billion and privatisation proceeds at
Rs100 billion.
Current expenditures (spending on
interest payments on loans, pension,
defence affairs and services, grants and
transfers, subsidies and running civil
government) will be Rs6.344 trillion in
Fy2021. The interest payment on local
and foreign loans will be the biggest
expenditure head of the total amount as it
alone will consume Rs2.946 trillion.
Defence expenditure is the second
biggest head, for which Rs1.1289 trillion
have been earmarked against the revised
estimates of Rs1.227 trillion in the
outgoing fiscal year.
For running civil government, Rs475.7
billion and for grants and transfers
Rs843.4 billion have been allocated. The
government also reduced the spending
on subsidies to Water and Power
Development Authority, K-Electric, Utility
Stores Corporation, Pakistan Agricultural
Storage and Services Corporation by
40.2 percent to Rs209 billion. Federal
PSDP has been earmarked at Rs650
billion against last year’s allocation of
Rs701 billion.
The discouraging fact regarding the
budget for the public sector employees is
that the government has not increased
salaries and pensions and has also frozen
the minimum wage.
Besides, the government has not
changed the taxable income slabs of the
salaried class.
To mitigate its negative impacts,
government approved stimulus package
Pakistan Economic Survey
FY20 - Key Highlights
Provisional GDP growth rate clocks in at -
0.38% for FY20. GDP growth for FY19
was revised down to 1.9% from 3.3%
earlier.
Pakistan's GDP is now worth USD 264bn
(PKR 41,727bn)§ Key growth sectors:
Services -0.59%, Industrial -2.64% and
Agriculture 2.67%. § Major crops (wheat,
rice, maize, sugarcane, cotton) witnessed
a rise of 2.90%.
Wheat production increased by 2.5% to
settle at 24.9mn tonnes while rice
production increased by 2.9% to clock in
at 7.4mn tonnes. Maize output is up 6% to
reach 7.2mn tonnes.
The cotton output dropped by 6.9% YoY
to 9.2mn bales while sugarcane
production declined by 0.4% to 66.9mn
tonnes.
Agriculture credit as at 9MFY20 stood at
PKR 912bn, 13.3% higher than SPLY. The
federal government launched the “Prime
Minister Agriculture Emergency
Programme” worth PKR 277bn to support
and uplift agriculture and livestock.
As per 9MFY20, Investment to GDP ratio
clocked in at 15.4% vis-à-vis 15.6% last
year. National Savings to GDP stands at
13.9% for 9MFY20 compared to 10.8%
last year.
Average National Consumer Price Index
(CPI) clocked in at 10.94% (as per
11MFY20 PBS data). FY20 average
inflation is expected to settle at 10.7%.
Fiscal deficit for FY20 is expected to clock
in at 9.2% of GDP (PKR 3,850bn).
Remittances have clocked in at USD
18.8bn as per 10MFY20 SBP data, up
5.5% YoY.
Foreign Direct Investment (FDI) clocked in
at USD 2.3bn during 10MFY20, up 127%
YoY.
Current Account Deficit has clocked in at
USD 3.3bn (1.5% of GDP) as per
10MFY20 as per SBP data, down 71%
YoY. During 10MFY20, imports have
clocked in at USD 43.4bn while exports
have clocked in at USD 24.3bn.
Trade deficit during 11MFY20 stands at
USD 21.1bn vis-à-vis USD 29.2bn SPLY.
FOREX reserves stand at USD 16.9bn (as
of 29-May-19, up 16.8% (FYTD).
Provisional Income per capita during FY20
stands at USD 1,355 (down by 7% YoY),
compared to USD 1,455 last year.
TRADE CHRONICLE - May.~ June. 2020 - Page # 07