Shaukat Tarin presents the annual fiscal budget at the National Assembly in Islamabad on Friday. Agence France-Presse

Pakistan announced Rs8.4 trillion ($54 billion) budget on Friday for the next fiscal year, basing it on an ambitious growth target of 4.5 per cent and tripling spending on public sector development with an election just two years away.

Finance Minister Shaukat Tarin’s presentation to the National Assembly drew jeers from opposition lawmakers

Tarin said the budget earmarked some Rs3 trillion  to retire or service current debt.

“We were on the verge of default because of past governments’ bad governance but now we have overcome that crisis,” Tarin said.

The budget earmarks Rs2.135 trillion on public development, including job-creating infrastructure projects, a huge increase from this year’s Rs1.532 billion.

“The weaker segment of society has been yearning for prosperity for many years and now sustainable growth is needed,” Tarin told legislators, saying the budget would be nearly four billion rupees in deficit.

“We expect trickle-down effects with our budgetary measures,” he said.

Spending on the military will rise six per cent to Rs1.4 trillion.

Tarin said Pakistan’s current account was in surplus for the first time in years on the back of unprecedented remittances and rising exports.

To fund the budget, the government has set a tax revenue collection target of nearly Rs6 trillion, compared with Rs4.5 trillion this year. The finance minister said some Rs140 billion had been set aside to vaccinate the 220 million-strong population against COVID-19.

The finance minister announced a 10% raise in the salaries and pensions of government employees, who had camped outside the parliament building demanding heavy raises.

The internet packages and mobile calls will become dearer. Minimum monthly salary was fixed at Rs20,000. All duties on imported 850CC cars were dispensed with. Similarly, duties on electric cars were waived for one year.

Other key features of the budget included allocation of Rs900 billion for public sector development programme (PDSP) with a 40% increase from last year; Rs12 billion for agriculture sector; Rs118 billion for power distribution; Rs61 billion for Viability Gap Fund; Rs14 billion for Climate Change mitigation projects; $1.1 billion for vaccines procurement; Rs100 billion for COVID-19 Emergency Fund and Rs12 billion special grant for Sindh.

Tarin said that the current account deficit was at a historic high of $20 billion but the government through its prudent policies managed to drag the economy out of trouble. He said that the budget deficit was at a high of 6.6% and the foreign exchange reserves were at a critical level of $10 billion at the end of the previous government’s tenure. However, the situation has now improved.

He said that the responsibility to fix the economy fell to the present government as the previous government had hampered the economy by taking loans and artificially was fixing the dollar at Rs104 for five years.

Tarin said the biggest challenge to the government was to avoid a financial default. Highlighting the success of the government, he said they had managed to bring the current account deficit to a surplus of $800 million. He said that the economy was on the road to stabilisation and growth.

About agriculture, the minister said that the agriculture sector witnessed historic growth. He claimed that Pakistan has now entered the growth club. “Economy is on the way to growth. Pakistan faced two faceted problems, however, the country managed to remain protected from default.”

During the outgoing fiscal year, he said, Pakistan witnessed historic growth in the agriculture sector. The large-scale manufacturing sector recorded growth after many years and posted 9% growth during FY21, he added. All crops showed growth. And the services sector including transport, banking, insurance recorded significant growth compared to previous years.

Tarin highlighted that poverty was reduced and jobs were created. “We succeeded in fighting grave consequences of Covid-19, despite the severe third wave which created more havoc compared to the first two waves. During these tough times, we enhanced hospital resources. The low-income segment was benefited through the Ehsaas program which provided relief to 12 million households - covering 40% of the total population. In the next fiscal year, the government expects $29 billion in remittances.”

With a record-high production in agriculture, the sector contributes Rs3.1 trillion to the national exchequer. Growth in the large-scale manufacturing sector helped create jobs accommodating people who were laid off during the pandemic.

Sharing more details, the finance minister said that the e-commerce and fintech industry is expected to steer the online job ecosystem. During the fiscal year 2020-21, tax revenue increased and showed 18% growth as tax receipts crossed Rs4 trillion. Exports increased by a significant 14% as a rebate, duty drawback helped the sector flourish, he added.

“It should be accepted that inflation is rising due to rise in food prices. Reserves of $16 billion  are enough for imports for three months. Sufficient reserves are fuelling rupee stability. Pakistan is a food deficit country because the sector was neglected for past 15-20 years,” he said.