The Federal Budget for the fiscal year 2021-2022 is a depiction of two keywords: Vision & Focus.
PM Imran Khan’s stance on development from the onset has been inclusive and bottom-up. His approach has been simple – invest in human capital for a sustainable and stronger economy. Budget 2021 reflects the same. It is pro-growth, inclusive and takes a bottom-up approach. The PKR 8 Trillion outlay has a smart, well thought-out nexus for expenditure. It reflects a methodical & focused take on reviving the economy post COVID-19.
A highlight has been a massive 40% increase in the Public Sector Development Programme (PSDP) to PKR 900 Billion. An unexpected decision but its effectiveness in actually spurring growth & human development alike truly depends on transparency & resource utilisation, a grey area in the past. The breakdown of the PSDP is of interest.
There’s been a noticeable Year-on-Year (YoY) increase in some key divisions outlining the government’s priority; for example, climate change (186%), Housing & Works (177%), Industries & Production (264.5%), Poverty Alleviation & Social Safety (353.7%). From another lens, of the total PKR 900 Billion, PKR 563 Billion has been diverted towards infrastructure whereas, PKR 281 Billion will be utilised for Social & Regional Equalisation Programs. This shows ‘balance’ of the structure & approach (Sen’s Capability vs Resource-based).
The budget addresses persistent challenges to various segments of the socioeconomic pyramid. These include the economically marginalized poor, SME sector & industry (e.g textile). Once worked on and reduced/resolved, it will lead to a multidimensional domestic economic catalyst. Overall, PKR 260 Billion has been allocated for poverty alleviation measures through Ehsaas, Pakistan’s globally acclaimed social welfare program. Since launch, it has set a mark for public sector effectiveness & impact through various initiatives.
Bold decisions have been taken as ‘Special Initiatives’ focusing on areas with long-term impact. These include youth, undoubtedly Pakistan’s asset, climate change, water security & COVID-19 mitigation. The results may not be evident at the end of the current fiscal year but are inevitable.
PKR 10 Billion (loan subsidy) marked for Kamyab Jawan Programme testify the government’s resolve to create economic opportunities for the youth via business loans, skills training & engagement. When 60% of the population is adding tangible value, it is bound to rise as effective & responsible agents.
In addition to the existing Skills Scholarship Programme & National Youth Council, Business Loan Programme’s scope has been revised & 5 new projects approved. The objective of these is simple: provide meaningful platforms to the youth for nurturing & directing their skills.
The new 4-tier loan programme offers collateral-free loans up to PKR 2 Million for micro-entrepreneurs, and higher token size of PKR 25 Million & PKR 50 Million for SMEs. With a well-structured push, the MSME sector will get a boost, have a positive social ripple effect & further contribute to the GDP.
From a macro lens, 4 Million households will be uplifted through entrepreneurial microloans, skills scholarship programme & low-cost housing scheme. That is approximately 40 Million individuals being impacted. Other special initiatives include Ten Billion Tree Tsunami (PKR 14 Billion (previously PKR 5 Billion)), Water Security Projects (PKR 91 Billion), relief measures for tourism (PKR 45 Billion) & COVID-19 impact mitigation (PKR 70 Billion).
Common Element? PM Imran Khan has stressed upon the need for these on global forums.
For the SME Sector in particular, comprising almost 9 of 10 enterprises in Pakistan, employing about 80% of the non-agricultural workforce, contributing 40% to exports and GDP each, facilitation has been announced under different schemes including SME Risk Sharing facility, COVID Tax Relief Guarantee Scheme, and Refinance & Credit Guarantee Scheme. This adds up to almost PKR 11 Billion. With removal of custom duties on textile & other industries’ raw materials, an export-led growth trajectory is planned.
To promote and facilitate the ICT sector, it has been given zero duty regime status, both Withholding Tax and Federal Excise Duty have been decreased and credit lines by the State Bank of Pakistan and other banks have been made accessible. Additionally Special Technology Zones (STZs) import of plant/machinery and raw material will have sales tax exemption. The allocated budget for Higher Education Commission of Pakistan (HEC) is PKR 108 Billion, Defence is PKR 1.3 Trillion and Health is PKR 21.72 Billion in the year 2021-22.
On the revenue side, resource mobilisation is planned through foreign remittance facilitation by introduction and expansion of innovative schemes such as Roshan Digital Account and Pakistan Remittances Initiatives. In addition, where on one hand the Self-Assessment Scheme has been reintroduced for a more business-friendly environment, the retail sector is being included in the net more deeply to increase the tax base. Drastic measures but necessary to revamp Pakistan’s economic outlook.
The budget targets 4.8% growth, limiting current account deficit to 0.7% and keeping the inflation at 8.2%; all while servicing the debt. Ambitious, yes, but not impossible.
A balanced, pro-growth yet inclusive plan has been set.
The government under the leadership of PM Imran Khan has taken risks with bold measures. The will to place Pakistan as a socio-economic strong country is out there. The effort to do so must not be compromised while ensuring transparency and accountability. Where the state fulfils its duty, the people must focus and dedicatedly work hard to realise our collective economic potential for Pakistan. I am certain they will.