Budget 2020-21: IMF to be asked to slash FBR target from Rs5,103 bn to Rs4,800 bn

ISLAMABAD: While directing preparation of combating corona budget for 2020-21, Prime Minister Imran Khan has assigned Adviser to PM on Finance Dr Abdul Hafeez Shaikh for convincing the IMF for slashing down the FBR’s tax collection target from Rs5,103 billion to Rs4,800 billion for next fiscal year.

The non-tax revenue collection target will be jacked up substantially so the additional resources of Rs200 to Rs300 billion will be diverted towards combating COVID-19 pandemic without increasing the envisaged budget deficit target for the next fiscal year. It is the wish of the Centre to restrict the budget deficit at 6.6 percent of GDP in the next budget against revised target of 9.6 percent for outgoing fiscal year 2019-20. However, independent economists are projecting the fiscal deficit at over 10 percent of GDP for outgoing fiscal year and they were fearing that it might escalate to range of 8 to 9 percent of GDP in the next financial year. The PIDE had estimated range of budget deficit from 8 to 17 percent of GDP depending upon the tenure of lingering COVID-19 crisis.

“The government will have to increase its reliance on external loans in the next budget because the non debt creating inflows such as remittances and exports are going to face dip in the next budget keeping in view lingering COVID-19 scenario” said one top official of government after attending high-level meeting chaired by PM Imran Khan here on Monday. If exports and remittances could not increase then Islamabad will be left with no other option but to seek foreign loans to meet its obligations,” said the official.

On domestic front, the fixation of FBR target is the crucial thing as the IMF envisaged annual target of Rs5,103 billion. The Ministry of Finance wants to pitch the target at Rs4,800 billion but so far the Fund staff is no willing to reduce the target so consensus might be achieved at Rs4,900 billion target for the next fiscal year. On non tax revenue side, the government wants to keep the target on higher side but there are risks attached to it as the SBP profits might decline keeping in view the possibility of reduced interest rates. The privatization proceeds might fetch substantial amount but the slowdown of economic activities around the globe might hamper their efforts to lure the potential buyer. The privatization of two RLNG based power plants might fetch over $2 billion in the next fiscal year.

According to official press statement issued stating that a meeting was held on Monday with Prime Minister Imran Khan in chair, to discuss the objectives and considerations for the forthcoming budget (FY 2020-21).

The meeting was attended by Foreign Minister Shah Mehmood Qureshi, Minister for Industries & Production Muhammad Hammad Azhar, Planning Minister Mr. Asad Umar, Finance Adviser Dr Abdul Hafeez Sheikh, Adviser Commerce Abdur Razzaq Dawood, Adviser Institutional Reform Dr. Ishrat Hussain and senior officials.

Finance Adviser Dr Abdul Hafeez Sheikh apprised the meeting about the overall state of economy and the philosophy, objectives and considerations for the next budget, FY2020-21.

Dr Hafeez Sheikh also dilated upon various constraints of economy, especially in wake of corona pandemic, that has obliged the government to further focus on providing incentives to the industry for its revival and growth, cutting unnecessary government expenditure, rationalise subsidies and expedite reform process in critical sectors.

Various proposals were discussed in detail to stimulate corona-affected economy, especially ensuring greater participation of the private sector in the development process and promoting public-private partnership to complement public sector development programme.

In his remarks, the Prime Minister stated that the corona pandemic has severely affected upward trajectory of economy towards stabilization and strengthening. He said that the government, despite its financial constraints, provided unprecedented stimulus economic package to support businesses and industry and to minimise the impact of corona.

Discussing priorities for the forthcoming budget, the Prime Minister said that every effort should be made to provide all possible incentives to the industry, create jobs for the youth and moving the wheels of economy. He said that the most affected sectors be identified so as to provide them with maximum possible support in the forthcoming budget.

The prime minister directed that the process of cutting unnecessary government expenditure should be expedited at all levels including the federal government as well as provincial governments.

The prime minister stressed upon the need for reviewing the existing system of provision of subsidies to make them target-oriented and ensuring their optimum utilisation. He said that the present situation calls for expediting reform process in critical sectors so as to reduce burden on national exchequer and provide relief to the masses.

The prime minister also directed Adviser Finance to apprise the people of Pakistan about the current economic situation and the strategy being followed by the government to cope with the challenges.