Govt to prepare budget amidst uncertainty caused by COVID-19

The FBR is unlikely to achieve the revised target of Rs5.27 trillion keeping in view the massive shortfall in tax collection

ISLAMABAD - The government might struggle to prepare budget for next fiscal year primarily due to uncertain economic situation caused by the prevailing coronavirus pandemic in the country.

The government had earlier planned to announce the budget 2020-21 in the last week of May and had started preparations in this regard. However, the ministry of finance recently suspended the budget preparation activities as it was mainly focusing on issues related to coronavirus in the country. The government was still estimating the economic data after adverse impact of the coronavirus on the economic situation. Economic data of ongoing fiscal year would be based for the budget of next year.

Discussions with officials of ministry of finance and Federal Board of Revenue (FBR) revealed that government was still unclear about tax collection during current fiscal year, which normally provided the basis for the preparation of budget. Tax collection shortfall was widening with the passage of every month. The FBR had missed tax revenue targets by Rs470 billion during nine months (July-March) as total collections during the period reached Rs3.05 trillion against the revised target of Rs3.520 trillion. The FBR is unlikely to achieve the revised target of Rs5.27 trillion keeping in view the massive shortfall in tax collection and uncertain economic situation.

On the other hand, the government may also struggle to achieve non-tax collection targets. The government had projected to collect Rs1.6 trillion from non-tax collection in current fiscal year. The government is unlikely to complete the privatization programme during ongoing fiscal year due to the prevailing situation. The government had projected to generate around Rs400 billion by privatizing the public sector entities before June 30, 2020. The government in medium term budget strategy paper has projected to restrict the budget deficit at 5.8 percent of the GDP for next fiscal year on the basis of deficit of 7.3 percent of the GDP for the current fiscal year. Under the medium term budget strategy paper, the government had proposed Rs700 billion to Rs900 billion for Public Sector Development Programme, around Rs300 billion for Ehsaas Programme, and Rs970 billion for civil government & pensions. In addition, they had also allocated around Rs3.3 trillion for interest payments and Rs1.25 to Rs1.75 trillion for defence expenditure. Moreover, an allocation of around Rs1 trillion was proposed for grants, Rs270 billion for subsidies, Rs150 billion for support to merged districts of KP and Rs80 billion for disasters. 

The initial estimates showed that losses of pandemic COVID-19 virus on national economy stood at whopping Rs2.5 trillion. Pakistan’s exports might tumble by up to $2.67 billion in next few months. According to the estimates, exports could either tumble by 25 percent ($1.336 billion) in the best case scenario and at worst by 50 percent (2.672 billion) during the period of March-June 2019-20.

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