Pakistan News

Federal Budget 2019-20: Budget focused on adopting austerity, cutting expenditures, Says govt

ISLAMABAD: Prime Minister’s Adviser on Finance Dr Abdul Hafeez Shaikh on Wednesday said the focus of the budget for financial year 2019-20 was to check fiscal and external deficits, adopt austerity measures, and reduce expenditures of the government.


Shaikh was addressing a post-budget press conference in the federal capital accompanied by Federal Minister for Planning, Development and Reforms Khusro Bakhtiar, Federal Minister for Power Omar Ayub, Federal Board of Revenue Chairman Syed Shabbar Zaidi and Minister of State for Revenue Hammad Azhar.


The PM’s adviser started off by highlighting the amount of debt handed over to the PTI-led government when it came into power.


“We inherited a total of Rs31,000 billion in debt. The total collection of revenue is Rs4,000 billion – half of which is spent on repaying debts.”


The adviser said it would be unfair to blame the current government for the debt since the loans were taken by previous governments under better circumstances.


“We are focusing on the management of external debt. The PTI-led government has allocated Rs2,900 billion to repay past debts. We cannot default on the loans acquired by Pakistan’s previous governments.”



Shaikh also spoke on the need to increase tax collection and said it was imperative to expand the tax net.


Shaikh insisted that “rich people in other countries pay higher taxes” as compared to the upper class in Pakistan.


“The average tax rate of Pakistan is 11-12 per cent, which is one of the lowest in the world and is not acceptable. Pakistan’s people, especially the rich, will have to be sincere with the country and will have to pay taxes.”


“We cannot allow businesses and industries to continue earning here and not pay taxes. If some people are offended by increased taxation, the government is willing to take that risk. We all must realise that this is our national and civic duty,” he said.


Responding to questions regarding the measures taken to ensure that the tax target is achieved, Shaikh said: “This is not an easy target for us. If there are people who think that this target is not achievable, they won’t be entirely wrong given FBR’s performance in the past. But this is a new regime and we will try [to achieve the target].The stakes for the country are so high that it cannot be business as usual.”



Shaikh also discussed the government’s austerity drive and efforts to boost exports.


“We are committed to reducing expenses in all sectors. We intend to lead by example, which is why the allocation for the civilian government’s expenses has been reduced.”


“The armed forces have also voluntarily accepted a budget freeze which sends a positive message to the world that the Pakistani nation is united.”


“Reducing the fiscal deficit is a paramount challenge. We have set a daunting revenue target to address this issue. The trade deficit was near $40 billion and our imports are increasing.”


“To counter this, we are offering subsidies to the private sector on gas and electricity tariffs, and they will also be given loans to promote economic activity in the country.”



The adviser highlighted the fact that the government had enhanced allocations for protection of vulnerable segments of the society and development projects.


“We have doubled allocations for the social safety net. As compared to Rs100 billion in the current fiscal year, we are allocating Rs190 billion rupees to protect weaker segments of our society.”


“Rs260 billion have been earmarked as subsidy for electricity consumers using less than 300 units per month. This subsidy is aimed at protecting poorer electricity consumers from rising electricity prices,” said Shaikh.


On the development budget, the adviser said the annual development plan for the next fiscal year envisages allocation of Rs950 billion as opposed to the Rs550 billion allocated for the current fiscal year.


“This amount will be spent on infrastructure development and creation of job opportunities for the youth. We have also announced separate packages for Karachi and Balochistan.”


Shaikh said the new budget also aims to develop poorer districts in Balochistan and erstwhile Federally Administered Tribal Areas (FATA).


“We have allocated Rs150 billion for the development of our tribal districts and we intend to develop them at an unprecedented pace.”



Shaikh revealed that the distinction between tax filers and non-filers will also be eliminated.


“If a person, who has been a non-filer in the past, buys a car or property, he will automatically have to become a filer. If he fails to become a filer within 45 days, he will receive a tax liability within half an hour after the 45-day limit has lapsed,” Shaikh warned.


“God willing [these measures] will produce good results and will also satisfy the people who wish for the tax base to be increased so that current tax-payers will not have to bear more burden.”


Shaikh further said that while businesses will not have to pay taxes over exported goods, they will be taxed over products they sell in the domestic market.



FBR Chairman Shabbar Zaidi, who was also present at the presser, said that the government has “moved from traditional system to sectoral analysis [to figure out] which of the industries or sectors are paying less taxes than they should”.


Zaidi admitted that there was a difference between the tax target and the amount of revenue announced in the budget and said that the FBR is identifying sectors that are paying less taxes than they should “without increasing inflation”. He added that high-income people will also be included in the tax base in order to remove the discrimination between the rich and poor.

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