ISLAMABAD: The country’s upcoming budget is expected to include a 12 per cent rise in defence spending and will target growth of 2.3 per cent in the fiscal year 2020-21 as Pakistan battles the coronavirus pandemic.
The government is set to present its 2020-21 budget on Friday, in a parliamentary session that only 25 per cent of lawmakers will attend due to the COVID-19 safety precautions.
“The GDP growth for 2020-21 is targeted at 2.3 per cent with contributions from agriculture (2.9per cent), industry (0.1 per cent) and services (2.8 per cent),” a planning commission working paper seen by Reuters said.
That forecast is much rosier than the 0.2 per cent contraction in 2020-21 projected by the World Bank earlier in June. The multilateral lender sees growth of -2.6 per cent this fiscal year, ending June 30, while the government expects a 0.4 per cent contraction.
A recent surge in COVID-19 cases has made economists sceptical about a quick recovery in the South Asian nation. PM Imran said on Monday that the outbreak was not expected to hit its peak until July or August.
The planning commission paper projects an average inflation rate of 6.5 per cent in 2020-21, a trade deficit of 7.1 per cent of GDP and a current account deficit of 1.6% of GDP. Exports and imports are projected to grow at 1.5% and 1.1 per cent, respectively.
Inflation hit a decade-high of 14.56 per cent in January.
A budget strategy paper in March, just before the pandemic hit, had projected a growth rate of 3 per cent in 2020-21.
The paper, seen by Reuters, foresaw spending of 7.6 trillion Pakistani rupees ($46.76 billion) and a fiscal deficit of 6.9 per cent of GDP — much lower than a current finance ministry projection of over 9% for 2019-20.
Of that, Rs3.235 trillion ($19.90 billion) was earmarked for debt servicing and Rs1.402 trillion ($8.63 billion) for defence — a rise of over 12 per cent from last year.
The March paper projected public sector development spending of 700-900 billion rupees, compared with 650 billion rupees ($4 billion) in the newer planning commission paper.
Officials say the numbers from March’s strategy paper could be tweaked slightly, although the total outlay is likely to be similar.
The National Economic Council (NEC), the top finance body, is meeting Wednesday ahead of Friday’s budget to revise the growth target downward to likely 2.1 per cent, officials said.
Hit hard by the coronavirus and with about $10 billion in debt service costs in the coming financial year, Pakistan needs funds to stave off a balance of payments crisis, officials said.
“We have plans to mobilise around $14 billion in inflows,” one of the high-ranking officials said — more than Pakistan has borrowed in a single-year before, Geo News Report
That includes $6 billion from multilateral banks, $2 billion from last year’s International Monetary Fund (IMF) bailout package, $3 billion in Chinese commercial loan rollovers, $1.5 billion from Eurobonds, and the rest in bilateral aid and Saudi oil repayment facilitation. The IMF money is subject to a successful review, he said.
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