Economy of Pakistan; Highlights of Federal Budget (2021-22)

What is budget?
An estimate of income and expenditure for a set period of time.

When does fiscal year start?
The fiscal year starts from 1 July through 30 June.

Who and when presented budget in National Assembly?
Finance Minister Shaukat Tarin on June 11, 2021 (Friday) presented in the National Assembly.

What’s the total budget layout?
Rs8.48 trillion (Rs8,487 billion) is the total layout for the federal budget for the fiscal year 2021-22 (FY22).

Total expenditures are almost 19pc higher than the last year’s budget size of Rs7,136 billion.

The budget allocation for different sectors


Defense Services
• Rs1,370 billion will be spent on Defense Services
• Expenses on defense increased 6.2pc from last year.
• Expenditure on Defense Services makes up around 16pc of the total expenditure budgeted for FY22. These expenses were down from 18pc last year.

 

Agriculture sector
Rs12 billion was allocated for the agriculture sector.

Higher Education
• According to the budgetary documents, for the fiscal year 2021-22, the government has earmarked Rs108 billion.
• Out of this total allocation, 42.4b is for development and 66.25b for the non-development expenditure of the HEC.
• The Higher Education Commission (HEC)’s budget saw an increase of around Rs15 billion compared to the outgoing year’s allocation.

Education
• The PTI govt. announced Rs. 91.97 billion for education and related services in the federal budget for 2021-2022.
• The increase in corporate and educational services is 4 percent.
• Public spending on education in the country as a percentage of GDP is estimated at 1.5% in the 2020-21 budget year, making it the lowest in the region.

Health
• The federal government has proposed an allocation of Rs21.72 billion for the health sector under PSDP for the fiscal year 2021-22 for 20 ongoing schemes and 26 new schemes.
• The federal budget 2021-22 has seen an increase of 11pc relative to the previous year.
• The health budget has gone up from around Rs25.5 billion to Rs28.3bn though it is still a mere 0.4pc of the total budget as per Dawn newspaper report.
National Finance Commission
Government sets the NFC distribution target at Rs3,412 billion.

Development fund
Rs44 billion under the development fund.

Power sector
Rs118 billion for power distribution.

Climate mitigation
Rs14 billion for Climate Change mitigation projects.

Vaccine procurement
$1.1 billion for vaccines procurement. (for import of vaccine)

COVID-19 Emergency Fund
Rs100 billion for Covid-19 Emergency Fund.

Special grant for Sindh
Rs12 billion special grant for Sindh.

PSDP Allocation
• Rs2,135 billion allocated under the Public Sector Development Programme (PSDP).
• Allocation for PSDP has been increased up to 37 percent from last year’s development allocations.
• federal PSDP makes up Rs900 billion, up 27.7pc from last year’s allocation
• provincial PSDP makes up Rs1,235 billion, a rise of 45pc from last year’s budget.
Allocation for interest payments (debt repayment)
• Rs3,060 billion will be spent on interest payments.

Fiscal deficit
• The fiscal deficit for FY22 has been Rs3,420 billion.
• This fiscal deficit is around 6.3pc of the GDP and down from 7pc last year.
GDP growth target
The government had set the GDP growth target at 4.8pc.

Water Resource Division
The government has proposed an allocation of Rs103.472 billion for the Water Resource Division.

Aviation Division
Rs3.55 billion for the Aviation Division.
Board of Investment and Cabinet
Rs80 million for the Board of Investment, Rs46.155 billion for the Cabinet Division.

Commerce Division
Rs1.613 billion for the Commerce Division.

Communication Division
Rs 451.32m for the Communication Division (other than NHA).

Establishment Division
Rs800m has been allocated for the Establishment Division.

Federal Education and Professional Training
Rs9.7 billion for the Federal Education and Professional Training Division.

Finance division
Rs123.13 billion for the Finance Division.

HEC
Rs44 billion for the Higher Education Commission.

Housing and Works
Rs24.2 billion for the Housing and Works Division.

Human Rights Division
Rs279m for the Human Rights Division.
Industries and Production Division
Rs2.9 billion for the Industries and Production Division.

Information and Broadcasting
Rs1.899 billion for the Information and Broadcasting Division.

Information Technology
Rs9.36 billion for the Information Technology and Telecom Division.

Pakistan Nuclear Regulatory Authority
The government has also earmarked Rs200m for the Pakistan Nuclear Regulatory Authority.

Planning, Development
Rs19.245 billion for the Planning, Development, and Reforms Division.

Poverty Alleviation
Rs590m for the Poverty Alleviation and Social Safety Division.

Railways Division
Rs30.025 billion for the Railways Division.

Interfaith Harmony Division
Rs493m for the Religious Affairs and Interfaith Harmony Division.

Revenue Division
Rs4.025 billion for the Revenue Division.

Science and Technological Research Division
Rs8.3 billion for the Science and Technological Research Division.

FBR tax target
Rs5,829 billion for FY22, which is 17.4pc higher than last year’s Rs4,963 billion.

Some other key features of the budget

• GDP growth target has been set at 4.8%
• Large-scale manufacturing to grow by 6.0%
• FBR’s tax collection target is set at Rs5.8 trillion for FY22 compared to PKR 4.7 trillion in FY21.
• An amount of Rs12 billion was set aside for an emergency agriculture program to ensure food security.
• Total subsidy expenditure for FY22 stands at Rs682 billion.
• No new tax implied on salaried class.
• Minimum wage to be increased to Rs20,000.
• Interest-free loans up to Rs500,000 to be provided to help alleviate poverty concerns.
• Foreign auditors to be selected for the E-audit system.
• Federal government employees’ salaries and pensions would be increased by 10%
• Federal excise duty proposed on internet data usage at Rs5 per GB.
• Tax on the so-called ón’ money on vehicles, if sold without registration, is to be retained.
• Reduction in tax liability by 25% for women entrepreneurs.
• The fiscal deficit is expected to be around Rs2.9tr in FY22 which could be 5.6pc of the GDP.
• The current account deficit for FY22 is projected to be around $2.3bn which would be less than 1pc of the GDP.

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