Government aims to increase economic growth to 5.1% by fiscal year 2023-24
ISLAMABAD – The PTI-led coalition government aims to create up to 1.9 million jobs, limit the budget deficit to 4.4% of GDP and increase the country’s economic growth to 5, 1% by fiscal year 2023-24.
“In the medium term (FY2021-22 to FY2023-24), fiscal policy will focus on sustainable, inclusive and equitable growth; job creation (1.2-1.9 million in the medium term); protection of vulnerable segments of the population; control inflation and increase development spending, ”the Ministry of Finance said in the Medium-Term Budget Strategy Paper (MTBSP) 2021-22-2023-24.
The government envisioned economic growth of 5.1% by fiscal year 2023-24, which would be driven by a sustained increase in aggregate supply supported by a strong foreign exchange reserve position. GDP growth is projected at 2.9% for the current fiscal year, which is expected to rise to 4.2% in the next fiscal year and 4.6% in 2022-2023. The MTBSP has shown that the inflation rate will be reduced to 6.5% by 2023-24. The inflation rate would remain at 8.7% in the current fiscal year, which would drop to 8% next year and 6.8% in 2022-23.
The medium-term fiscal framework foresees a gradual reduction of the overall budget deficit from 7.4% of GDP in fiscal year 2020-2021 to 4.4% in fiscal year 2023-24. However, this reduction would require revenue mobilization with a higher growth trajectory, streamlining of current spending and better financial management in accordance with the 2019 Public Financial Management Law. The MTBSP showed that the government estimated to reduce the country’s debt-to-GDP ratio. . The debt-to-GDP ratio would be reduced to 79.6% in fiscal year 2023-24, from 86% in the current fiscal year. The debt-to-GDP ratio would remain at 84.3% in 2021-22 and 81.8% in 2022-23.
The documents showed that paying interest would consume a significant portion of the annual budget. Interest payments are projected at Rs 2,920 billion for the current fiscal year, which would increase to Rs 3,105 billion in 2021-2022, Rs 3,330 billion in 2022-2023 and Rs.3,585 billion by fiscal 2023 -24. Meanwhile, the defense budget would also increase in the medium term. Pakistan’s defense budget is estimated at 1295 billion rupees for the current fiscal year, which is expected to increase to 1330 billion rupees in the next fiscal year, to 1495 billion rupees in 2022-23 and to 1.588 billion rupees in the next fiscal year. during the 2023-24 financial year.
Pension payments are also expected to rise to 510 billion rupees by fiscal year 2023-24, compared to 470 billion rupees for the current fiscal year. However, the amount of the subsidy would be reduced to 410 billion rupees by fiscal year 2023-24, compared to 459 billion rupees for the year 2020-2021. The development budget – Public Sector Development Program – is projected at Rs 1,090 billion by fiscal year 2023-24, compared to Rs 660 billion for the current year.
Pakistan’s exports and imports are estimated to increase in the medium term. Exports are forecast to increase to $ 30.6 billion by 2023-24, from $ 23.9 billion for the current year. Exports are expected to reach $ 25.7 billion next year and $ 27.7 billion in 2022-2023. Meanwhile, imports are also set to increase to $ 59.5 billion by 2023-24, from $ 47.1 billion in the current fiscal year. The current account deficit (CAD) is expected to widen in the coming years. CAD is estimated at 1.5% of GDP for fiscal years 2020-2021, 4.7% for fiscal years 2021-22, 5.5% for fiscal years 2022-23 and 6.1% of GDP for fiscal years 2023 -24. The country’s GDP is projected at Rs46.675 billion in FY2020-21, Rs52.462 billion in 2021-22, Rs58.810 billion in FT2022-23 and Rs65.765 billion by 2023-24.
With the increase in gross federal revenues, the provincial share of the federal government would also increase in the medium term. The Ministry of Finance has planned to transfer Rs2,721 billion to the four provinces as part of the allocation of the National Finance Commission (NFC) during the current fiscal year. However, it is estimated that the provincial share will increase to Rs 3.527 billion in 2021-2022, Rs 3.3796 billion in 2022-23 and Rs 4.344 billion by fiscal year 2023-24.
The main medium-term federal spending priorities would be: (a) sustainable growth (b) protection of vulnerable segments – Eshaas (c) control of inflation and prices (d) increase in development spending – creation jobs (e) minimal increase in current expenditure (f) PM initiatives – Housing and Kamyab Jawan (g) mitigation of the impact of Covid-19 (h) circular debt financing and electricity subsidies ( j) harmonization of remuneration and allowances (j) reduction of twin deficits (k) building forex reserves.
“In the medium term, the government will focus on various policy measures to achieve sustainable inclusive growth. These policy measures include broadening the tax base, widening the tax net, streamlining and more precise targeting of subsidies, reducing the budget deficit, maintaining a flexible market-determined exchange rate, structural reforms in public sector enterprises, reforms in the energy sector, strengthening of energy transport and distribution systems, implementation of the national tariff policy, increase in public investment in the management of energy ‘water, implementation of projects under CPEC, establishment of special economic zones and special technological zones, implementation of the national agricultural emergency program and expansion of the construction package, in particular for low-cost housing ”, said the Ministry of Finance.