Pakistan looks to external finance instead of new taxes in budget

16 Jun 20

No new taxes have been levied to deal with the public finance toll of Covid-19 in Pakistan’s new budget, in which the government outlined a huge stimulus package and a sizeable hike in defence spending.


The 2020-21 budget, which comes into effect at the start of Pakistan’s fiscal year on 1 July, stands at 7.13trn rupees (£34.4bn), and entails a deficit of 3.4bn rupees (£14.4m).

Industries and production minister Hammad Azhar presented the budget to Pakistan’s National Assembly, and opposition lawmakers walked out during his speech.

The economy has been hit hard by the pandemic. Azhar said the total loss so far has been 3.3trn rupees (£15.9bn), with the government losing about 1trn rupees in revenue.

“Coronavirus engulfed the whole world, posing grave socio-economic challenges, especially for developing countries,” he told parliament.

Pakistan was no exception and [Covid-19] drastically changed the whole scenario, and results of our hard work were swept away.”

The government has so far spent more than 1.2trn rupees on fighting the virus, with 875bn rupees coming from the federal budget, including for purchasing medical equipment, paying health workers, cash transfers to workers and vulnerable families and subsidising some essential goods and utilities.

Looking to the new budget, Azhar said no new taxes would be levied, in order to “provide relief to the people”, but the government also hoped to “strike a balance” between stimulus spending and the deficit.

Instead of new taxes, Pakistan will seek to access 2.2trn rupees in external finance, including aid, as well as the continuing support of the IMF, with which it entered a $6bn bailout deal last year.

But, amid political tensions with neighbouring India over the disputed Kashmir region, Azhar said defence and security “has been given due importance” in the coming fiscal year, despite the crunch.

The budget includes nearly 1.3trn rupees (£6.25bn) of defence spending – nearly one-fifth of the total budget and 12% higher than the previous year.

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