Budget 2021-22: Strategic allocations & dimensions
FEDERAL Budget 2021-2022 has been presented in the national assembly.
It is indeed a pro-growth, pro-investment and people & business friendly budget which is even endorsed by most of the Chambers of Commerce of the country.
Lots of new incentives, schemes, policies and plans have been incorporated in the financial statement 2021-2022 which would hopefully gear-up growth momentum in the country and control inflationary trends, reduce poverty and generate new employment.
The federal budget estimated total outlay of over Rs8.5 trillion aiming to move towards graduating from stabilization to growth trajectory by ensuring direct interventions for providing relief to 4 to 6 million poor people.
The budget compensates 3Ds orientation comprising of the debt servicing, defence and development.
Budgetary expectations, estimations and targets carry mixed baggage. Fiscal deficit is 5.5 per cent to 6pc of GDP for FY22 compared to an estimated deficit of 6pc of GDP during FY21. The revenue collection target for FBR has been set at Rs 5.8tr for FY22, which will be lower than IMF’s target of Rs 6tr. Still, the target seems to be ambitious, as it is likely to be 23pc higher compared to the estimated collection of Rs 4.7tr in FY20-21.
For FY22, the government allocated Rs 900bn for federal PSDP, an increase of 38pc from the previous budget.
Government fixed mark-up interest and defence expenditure targets at Rs 3.1tr and Rs 1.4tr, up 4pc and 9pc from last year’s budget, respectively.
Common people and salaried class have also received peanut increase of 10 percent in salaries and pensions which is still mismatched with the ongoing spells of inflation and price hike in the country.
Ironically, most of the federal as well as provincial departments have not been increasing pensions on a regular basis which needs to be ratified otherwise it is feared that social fabric of the society would have been further discriminated.
The fiscal deficit is expected to be around Rs 2.9tr in FY22 which could be 5.6pc of the GDP.
Budgetary calculation estimated current account deficit for FY22 at $2.3bn which would be less than 1pc of the GDP. The government targeted a GDP growth of 4.8pc for FY22, compared to 3.9pc achieved in FY21; and if achieved, this will be the highest GDP growth since FY18.
Stimulus measures following the onset of Covid-19 have already put Pakistan on a growth path.
Going forward, a growth-friendly budget with an expansionary fiscal policy coupled with a low-interest rate regime is likely to keep economic activity upbeat.
Federal Budget 2021-21022 has also numerous strategic dimensions, aspects, commitments and utilities for which substantial funds have been allocated.
But some strategic projects have also been badly ignored. Strategic allocations for the completion of Turkmenistan Afghanistan Pakistan and India (TAPI) Gas pipeline have been again shelved.
Even no fund was allocated in fiscal statement of the government In the last year which shows shifting of strategic priorities in the country.
Nevertheless, for achieving the massive industrialization with minimum carbon footnotes TAPI is still very much useful and beneficial for the country.
Moreover, recent energy surplus does not justify discarding a mega trans-regional project of TAPI.
Thus, policy makers must reconsider it because putting all eggs in one basket is not an appropriate measure.
The Federal Budget mentioned various plans to focus on the China-Pakistan Economic Corridor (CPEC) and sustainable development goals (SDGs) for the country’s economic development, creation of employment opportunities and poverty alleviation.
Finance Minister Shaukat Tarin, said that the government will focus on the CPEC projects, including the Gwadar port and special economic zones (SEZs) to create jobs and push the growth wheel for the country. Further tax relaxations will be given to investors interested in the SEZs under the CPEC.
Sharing the details of strategic allocations for the CPEC the Finance Minister said that the government has proposed 9.3 billion rupees (about 59.653 million U.S. dollars) for the development of the CPEC railway project Main Line-1 in the next fiscal year to improve the North-South communication of the country and to facilitate commuters and traders.
Moreover, the government has allocated special funds for hydropower projects, anti-carbon emission projects, tourism, special technology zones, public housing loans, agriculture development and power distribution.
According to the proposed budget, Pakistan’s defense service budget in the next fiscal year will be 1,370 billion rupees, 16 per cent of the total budget, a drop from the 18 per cent allocation in the previous budget which is self-evident of untrue and false propaganda against defence forces of Pakistan.
CPEC is the guarantor of Pakistan’s socio-economic stability, suitability, geopolitical manoeuvring and geostrategic comparative advantage due to which Federal Minister for Planning Asad Umar said the government has allocated Rs87 billion for the Public Sector Development Program (PSDP) for the next budget 2021-22 for execution of CPEC projects.
In this context, the National Economic Council (NEC) approved an allocation of Rs 42 billion for Western Alignment and Rs6.2 billion for Mainline (ML-1).
The government allocated Rs7 billion for provision of basic necessities such as utilities and other infrastructure into the Special Economic Zones (SEZs) at Rashakai, Dhabeji, Faisalabad and Bostan.
The chairman CPEC Authority said that the Industrial Cooperation Framework was under consideration, which was part of deliverables for the next Joint Cooperation Committee (JCC) under CPEC.
The agriculture transformation package announced by the government was shared with the Chinese side, so partnership and match-making between Pakistani and Chinese companies would be done, he added.
He said the government allocated Rs 244 billion for motorways, highways, inter-provincial/districts roads, airport, railway projects and 3,261 kilometre length of new roads will be added to the network.
Some major projects including Khyber Pass Economic Corridor Project (Rs 8.5 bn), Sukkur-Hyderabad Motorway Land (Rs 4.6 bn), Eastbay Expressway Gwadar (Rs 2.1 bn), Dualization & Improvement of Existing N-50-Yarik-Sagu-Zhob-210 km (Rs 1.6 bn), construction of M-8 Hoshab-Awaran-Khuzdar (section-2) 168 kms (Rs 1.5 bn), improvement and widening of Chitral-Booni-Mastuj-Shandur Road (Rs 2 bn), roads linking motorways in Punjab, Main Line I (ML-I) (Rs 6.2 bn) and Gwadar Airport (Rs 1.1 bn) would be constructed.
The HEC allocation increased to Rs44 billion and 105 universities would get benefit from 120 projects.
The scholarships schemes of around 5 billion will benefit more than 6,000 scholars/faculty members.
Pakistan’s strategic assets are its vibrant youth which needs millions of new jobs. Education may be another strategic asset which needs more and more allocations of funds.
However, educational paradigm shift may be diverted towards Artificial Intelligence, cyber security, digitalization, ICT and, of course, technical education to generate more and more new jobs.
—The writer is Director, Geopolitics/Economics Member Board of Experts, CGSS.