In anticipation of the successful persistence of the International Monetary Fund (IMF) programme, the government is aiming at rebounding the national economy with growth of four percent to 4.5% over the next three years and overall revenues of 3% of gross domestic product production.
The fiscal deficit would be almost halved over the same period to 4.8% of GDP and current expenditure dropped from 23.5% of GDP to 22% of GDP for the outgoing fiscal year.
It is part of the Medium-Term Budgetary Framework negotiated in conjunction with the IMF by the Ministry of Finance and submitted to Parliament in compliance with the Fiscal Responsibility and Debt Limitation Act, 2005.
The economic growth forecast decreased from around 3% to -0.38% of GDP while the total budget deficit is revised up from 7.1% to 9.1% of GDP. FBR revenue loss at Rs 900bn was estimated, exports and remittances were adversely affected, and non-tax revenue was reduced.
It stated that the FY2020-21 GDP growth rate is now targeted at 2.1%, followed by 4% in FY2021-22 and 4.5% in FY2022-23. The finance ministry said it had predicted an inflation rate at 11-13% for the outgoing fiscal year which remained in the same 11-12% band.
The inflation rate was projected at 6.5pc for next year followed by 6.2pc for FY2021-22 and 6pc for FY2022-23. The ministry said the overall revenue target for the current fiscal year was set at 16.7pc of GDP but was missed by a broad margin to 14.3pc of GDP. The target is set at 15.9pc of GDP for the next fiscal year, going up to 16.6pc in FY2021-22 and 17.3pc in FY2022-23.
The finance ministry said the 14.4pc tax income target for the outgoing fiscal was missed by 3.4 percentage point to 11pc while the 12.6pc FBR revenue target also faced a similar fall to 9.4pc. However, non-tax revenue did well as collection amounted to 3.3pc of GDP against a target of 2.3pc-almost Rs835bn higher.
Based on that revenue output, overall tax revenue growth in FY2020-21 was estimated at 13.2pc of GDP, followed by 13.9pc in FY2021-22 and 14.5pc in FY2022-23. The FBR revenue is also forecast to increase to 10.9pc of GDP next year, followed by 11.8pc in FY2021-22 and 12.6pc in 2022-23, respectively. In the next three years, non-tax revenue is projected to remain almost unchanged at 2.8 pc of GDP.
Economic expenditure exceeded the 20.2pc of GDP target for the economic year and amounted to 20.9pc. Again, this is aimed at 20pc in the coming fiscal year, and then slowly to 18.8pc of GDP by 2022-23. Expenditure on development, which stood at 2.6pc of GDP this year, is targeted to recover next year to 2.9pc of GDP and then to 3.3pc in FY2022-23.