In a recent announcement, the Pakistani government has decided to disburse the salary and pension payments for government employees ahead of Eid-ul-Fitr this month.
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Budget 2022/2023 to be presented in first week of June
ISLAMABAD: The government has scheduled the presentation of the budget for fiscal year 2022/2023 in the first week of June 2022, the finance ministry said on Thursday.
The finance ministry issued budget call circular 2022/2023. According to the circular, after completion of all budget documents and summaries by end of May 2022, the budget will be presented to the cabinet and the parliament in the first week of June 2022.
The ministry said that in compliance with the Articles of the Constitution of Pakistan, Public Finance Management Act, 2019 and Budget Manual 2020, Finance Division prepares budget for each financial year as a key policy document of the federal government.
READ MORE: MoC invites tariff proposals for budget 2022/2023
The budget call circular containing budget calendar, processes, instructions, forms for preparation and submission of detailed budget Actual (FY 2020-21), Revised Estimates (FY 2021-22) and Budget Estimates (FY 2022-23) relating to Receipts, Current and Development Expenditure of the Federal Government is attached herewith.
The Medium Term Indicative Budget Ceilings (IBCs) issued by Budget Wing, Finance Division in April, 2021, for Current and Development Budget for three years i.e. 2021-22, 2022-23 and 2023-24, may be considered as base line for submission of Budget Estimates.
READ MORE: FBR invites customs proposals for budget 2022/2023
Receipts, Current and Development Expenditure Estimates (Forms I – III) may be provided to Budget Wing, Finance Division before 15th March, 2022 by the respective Principal Accounting Officer (PAO). The remaining information may also be provided as per schedule given in Budget Calendar.
Foreign Exchange Budget Actual (FY 2020-21), Revised Estimates (FY 2021-22) and Budget Estimates (FY 2022-23) may also be provided as per attached FEB Forms (I-VI) in accordance with the specific instructions and general guidelines.
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Tax collection to reach at Rs5.83 trillion in FY22
ISLAMABAD: The finance ministry has estimated that the tax collection to reach Rs5.83 trillion during current fiscal year 2021/2022 (FY22).
In its monthly economic update – August 2021, the finance ministry said that in FY2021, tax revenue increased by 18.4 percent, whereas in July FY2022, tax collection climbed up by 42.5 percent, indicating a good start to the new fiscal year. For FY2022, the tax collection is expected to reach Rs. 5.83 trillion.
“To achieve the target, the government is pursuing a comprehensive tax policy that focuses on expanding the tax base by identifying new taxpayers, gradually eliminating exemptions and concessionary provisions, along with lowering tax rates.”
It said that during FY2021, the fiscal consolidation efforts remained on track. The successful consolidation achieved on the back of prudent expenditure management and revenue mobilization efforts.
For FY2022, the fiscal deficit is expected to reduce further.
These achievements in the fiscal sector are important, especially when Pakistan like the whole world is constantly battling the resurgence of COVID 19.
The persistence in consolidation efforts would pave the way to create fiscal space that would enable the government to withstand any untoward situation.
The Monthly Economic Indicator (MEI) is based on combining monthly data of indicators that are proven to be correlated with GDP at constant prices.
In July 2021, The MEI shows continued strong growth, mainly driven by several factors. First, an expected continued strong YoY growth of LSM in July. Furthermore, as observed in July continued cyclical uptrend in the main trading partners, continued strong growth in imports and deceleration of inflation.
According to Balance of Payments (BoP) data, imports of goods and services spiked in June 2021, but return to normal level in July 2021.
Usually, both June and July, but especially June, are characterized by positive seasonal effects. This positive seasonal impulse is expected to disappear in August.
On the other hand, other factors, such as the recent increases in international oil prices and the ongoing revival of economic growth, may stimulate imports. It is expected that imports of goods and services will settle at around $ 6 billion in August 2021.
Contrary to imports, exports of goods and services, according to BoP data, usually experience negative seasonality during June through September.
The moderation of this seasonal effect, together with the ongoing strong recovery in Pakistan’s main export markets, the momentum in domestic economic dynamism and specific Government policies to stimulate exports are expected to guide exports of goods and services towards the $ 3 billion in August and beyond in subsequent months.
It is expected that trade deficit in goods and services could stabilize to approximately $ 3 billion in August with expectations about remittances to be stabilized around $ 2.5 billion and taking into account the other secondary income and primary income flows, the current account would remain in deficit at moderate monthly levels of around $ 0.5 billion in the coming month.
These expectations depend on the absence of any unexpected negative shocks which may be generated by the potential slowdown of the economic revival abroad (due to loss of confidence, inflation fears, uncertainty for tapering of monetary accommodation and geopolitical risks, etc.). An international and domestic upsurge in COVID-19 infections remains an important risk factor.
The finance ministry said that recent developments in Pakistan’s macroeconomic indicators are positive.
In absence of any major unexpected negative shocks, the economy is moving on a balanced and sustainable growth path.
The challenge remains to elevate this sustainable growth path to a higher level. This requires extending Pakistan’s production capacity and ensuring that a sufficient proportion of this additional production is exported, besides satisfying the needs of domestic consumers.
Enhancing production capacity and increasing its efficiency is not possible without directing a larger proportion of the available and future income towards investments, instead of consumption.
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Pakistan’s budget deficit shrinks to 7.1% in FY21
KARACHI – Pakistan’s fiscal performance for the fiscal year 2020/2021 has shown encouraging signs as the budget deficit has reduced to 7.1 percent of the GDP compared to 8.1 percent in the preceding fiscal year.
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Finance ministry hopes achieving annual fiscal targets
ISLAMABAD: The finance ministry is hopeful of achieving annual fiscal targets as half year (July – December) 2020/2021 fiscal position indicates that it will remain on track in the remaining half.
The ministry of finance on Monday issued Mid-year Budget Review Report for Fiscal Year 2020/2021. The finance division said that the fiscal consolidation measures taken by the government had resulted in financial discipline, higher revenues and controlled expenditures.
“The same strategy will be followed during the remaining period of the current fiscal year to achieve the fiscal sustainability,” it added.
The continuity in fiscal consolidation, stable exchange rate, improved current account and better financial management, present a promising economic outlook, the finance division said.
It said that the borrowing operations remained quite successful and in-line with the Medium-Term Debt Management Strategy (MTDS FY20 — FY23) of the Government. Government is following the policy of zero borrowing from SBP since July 2019 and is maintaining a cash buffer with SBP for meeting the contingencies/ obligations.
Following are the key highlights:
Similar to last year, domestic borrowing was made entirely from the financial markets during first half of current fiscal year. No borrowing was made from SBP. In fact, an amount of Rs. 285 billion was repaid to SBP during first half of ongoing fiscal year.
All borrowings needed to finance the fiscal deficit were made through longer-term debt while Government retired a portion of short-term debt (T-Bills) by around Rs. 579 billion during this period.
The government introduced various new instruments during first half of the current fiscal year to further develop the government securities market, attract more diversified investor base and to provide more flexibility and options to the investors as well as to the government.
— 3, 5 and 10-year floating rate PIBs with quarterly coupon payment frequency are being issued since October 2020.
— the government has started issuance of 5-year Sukuk with fixed rate rental payments since July 2020.
— The government also introduced 2-year floating rate PIBs in November 2020 with quarterly coupon payment frequency and fortnightly interest rate resetting. Existing Floating Rate PIBs carry interest rate reset of 6-month while interest rate reset in this instrument in only two weeks.
Similar to conventional bond, the government introduced re-opening mechanism in Sukuk auctions in July 2020 to increase liquidity of the Sukuk issue and lower costs for the government.
Considering the encouraging participation and demand from the market in the recent auctions of 15 and 20-year PIBs, the government has decided to issue 30-year PIBs with effect from January 2021.
In order to enhance participation and competition in primary and secondary markets for government debt, the government banned all institutional investors in National Savings Schemes from July 2020; and
Most of the external debt was raised from multilateral and bilateral sources on concessional terms (low cost and longer tenor).
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Ms. Sethi appointed as chief pay, pension commission
ISLAMABAD: The government has appointed M.s Nargis Sethi as chairperson of the pay and pension commission with immediate effect.
A notification issued dated October 15, 2020 by the Finance Division stated that the Prime Minister had appointed Ms. Nargis Sethi, former federal secretary, as chairperson of the pay and pension commission with immediate effect.
Abdul Wajid Rana has regretted to continue as the chairman of the pay and pension commission, it added.
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Tax to GDP ratio slips to 11.4 percent in FY20
ISLAMABAD: Tax to GDP ratio has slipped to 11.4 percent in fiscal year FY20 (2019/2020) when compared with 11.6 percent in the preceding fiscal year, according to statistics released by the finance ministry.
The size of Gross Domestic Product (GDP) has been measured at Rs41,727 billion in fiscal year 2019/2020 as compared with Rs38,559 billion in the preceding fiscal year.
The total tax collection was recorded at Rs4,747 billion during the fiscal year under review as compared with Rs4,473 billion in the preceding fiscal year.
The tax contribution of the federal government was recorded at Rs4,334 billion and contribution of the provincial government was Rs413 billion during fiscal year 2019/2020.
Whereas, the tax contribution of the federal government was at Rs4,061.62 billion and the contribution of the provincial governments was Rs402 billion in the fiscal year 2018/2019.
The collection of the Federal Board of Revenue (FBR) was at Rs3,998 billion in the fiscal year 2019/2020 as against Rs3,829 billion in the preceding fiscal year.
However, the FBR’s revenue collection to the GDP fell to Rs9.58 percent in fiscal year 2019/2020 as against 9.93 percent in the preceding fiscal year.
The collection of direct taxes was recorded at Rs1,524 billion in fiscal year 2019/2020 as compared with Rs1,445.6 billion in the preceding fiscal year.
Out of the total direct taxes, the collection of property tax was at Rs9.65 billion as compared with Rs7.02 billion.
The collection of tax on goods and services increased to Rs1,855 billion in fiscal year 2019/2020 as compared with Rs1707 billion in the preceding fiscal year.
The collection of other taxes recorded increase to Rs732.58 billion in fiscal year 2019/2020 as compared with Rs627.65 billion in the preceding fiscal year.
The duty/tax collection on the international trade recorded decline to Rs626.38 billion in fiscal year 2019/2020 as compared with Rs685 billion in the preceding fiscal year.
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Suitable increase in salaries to be proposed in upcoming budget: finance ministry
ISLAMABAD: The government to propose suitable increase in salaries of government employees in the upcoming budget 2020/2021, said a statement issued by the Finance Division on Thursday.
In response to the strike call by the Secretariat employees for raising their salaries the ministry of finance has held meetings with the federal government employees to assure them that their proposals will be duly considered and proposed to the government in the next budget.
In a statement issued here Thursday, the Finance Division has said that on the instructions of Adviser to the Prime Minister on Finance & Revenue Dr Abdul Hafeez Shaikh, separate meetings of Secretary Finance as well as Special Secretary Finance had been held with the protesting employees to get a full understanding and awareness of the financial constraints and problems of the government employees due to the inflation.
The statement said that the government understood and acknowledged the difficulties and economic constraints faced by the federal government employees and in view of their inputs obtained in the meetings held, proposal for a suitable raise in their salaries would be prepared by factoring in the overall economic situation, and available fiscal space and incorporated in the upcoming Federal Budget 2020-21.
In another statement, the ministry of finance denied a news report published in a section of the press suggesting and insinuating a Rs 100 billion cut in the Public Sector Development Programme (PSDP) for the current fiscal year as per briefing by the Finance Secretary to the National Assembly’s Standing Committee on Finance and Revenue the other day.
The Finance Division strongly denies and rebuts this news report as the Secretary Finance never stated at any point during his presentation to the National Assembly’s Standing Committee on Finance and Revenue that there could be cut in the federal development programme this year, said an official statement issued by the Finance Division today.
The statement asserted that the Finance Division has actually facilitated maximum and speedy disbursements for the year and there is no cut planned or suggested in the development spending for the current fiscal year. The Finance Division has always provided full support to Planning Division to ensure timely expenditure, said the statement.
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Finance ministry issues 10-year treasury single account policy
ISLAMABAD: The ministry of finance on Wednesday issued 10-year Cash Management & Treasury Single Account Policy with aim to bring every penny into government’s nominated agency.
The policy has been issued with the objective of timely availability of cash to meet obligations, economizing on cash within the government so as to save interest costs and management of government’s cash flows efficiently in a way that benefits debt management, and monitory policy.
“Every penny of the public money shall be reverted to the TSA, within the framework of different authorized accounts of Government in the State Bank of Pakistan (SBP) or its nominated agency and cash therein shall be zero balanced,” the ministry said.
Besides, all the money collected by the public entities as their own revenue and kept in the accounts opened and maintained in the scheduled banks, after specific authorization by the Federal Government, shall be reconciled and reported to the Finance Division by the SBP through its RTGS on daily basis.
The SBP shall devise a regime for availability of this cash for use by the Federal Government and need based disbursement to the relevant public entities. “If any account is opened in a scheduled bank without a specific authorization by the Federal Government, disciplinary proceedings shall be initiated against head of the organization and Principal Accounting Officer concerned under the relevant laws/rules,” the ministry said.
Federal Government shall, however, be empowered to give exception to any organization from the TSA after recommendation by a Committee, which shall be constituted and notified in light of this policy.
This committee shall also propose legal amendments for removal of already granted exceptions and inclusion of new exceptions from the TSA, after due deliberation, for approval of the Federal Government.
The key objectives of the policy are:
1. To ensure availability of cash when it is required
2. To manage cash balance in the government bank accounts effectively by:
a. Borrowing to cover expected cash short falls, and avoid “idle” balances
b. Investing during periods of surplus
c. Minimizing borrowing costs
3. To neutralize impact of the government’s cash flows on the domestic banking sector ensuring that:
a. Therearenolargeandun-expectedchangesinliquidityinthebankingsystem,
b. Overall monetary policy (incl. monetary growth and inflation targets etc.) is not under-mined.
The ministry of finance said that the cash management policy will focus on efficient cash management with ability to forecast daily cash flows across the TSA. “It shall result into smooth cash flows with lower average cash balances, reduced borrowing costs, lower interest on cash balances than interest on marginal borrowing and less pressure on monetary policy operations.”
In spite of this clearly stipulated legal regime, a huge amount of cash is held outside the TSA structure on the arguments including:
I. Statutory Requirement: Different statutes conceive independent funds for the entities created under them consisting of a portion of money from public fund and the rest from other sources;
II. Strategic Requirement: Most of the defence organization and strategic entities transfer the public money into private commercial accounts on the argument of strategic secrecy;
III. Functional Independence: Some public entities take out public money into their private accounts on the argument of functional independence;
IV. Operational Requirement: some public money is transferred into private accounts on the basis of geo-graphical reasons and in-accessibility or remoteness of the treasury and banking facility; and
V. Commercial Operation: Public money invested in to the commercial operations is taken out of the TSA most of the times and treated under a different cash and accounts management regimes governed under special laws/rules.
The ministry highlighted common issues stating that cash held outside TSA is kept in multiple bank accounts with no cash consolidation as the public money.
As a result, the cash position in the public money is affected negatively and most of the times, the cash manager/s of the government is/are forced to raise money, to meet the cash requirements, from the same scheduled banks which are holding its money, most of the times larger the debt raised, into the accounts opened on the above mentioned arguments.
“The government suffers, thus, on two counts, it is unable to utilize its cash and pays interest on the cash which is actually its own lay idle and re-munerated. Moreover, it becomes difficult to establish exact and full cash position of the government, hence it becomes impossible to prioritize and control expenditure disbursements.”
In addition, there are serious issues of accounting, reconciliation, performance monitoring and evaluation.
On the other hands, an effective TSA gives a complete, real time information on government cash resources, enables efficient cash management, helps in preparation of accurate and reliable cash flow forecasts, optimizes the cost of government operations (includes minimizing the volume and cost of government borrowing and lowering liquidity reserve needs) increases the return on excess cash, facilitates efficient collection and payment mechanisms, improves operational and appropriation control during budget execution, enhances efficiency and timeliness of bank reconciliation, facilitates timely and more complete accounting statements/reports, including sources and uses of cash.
The principles under this policy are:
I. Government shall put in place a framework and timeline to ensure unified structure of the TSA as per law and expand it into the major areas of legal exceptions through amendments in the relevant law/rules. It shall ensure maximum fungibility of cash resources in real time;
II. Government shall put in place a legal and institution regime to give exceptions from the TSA;
III. Government shall bring all the public entities into the budgetary, accounting and cash management framework;
IV. Government shall empower the cash manager/s to oversee the cash management operations across the spectrum of budget and its operations;
V. Cash balance in the TSA shall be maintained at a level sufficient to meet daily operational requirements and a linkage between cash management and debt management shall be institutionalized; and
VI. Government shall ensure full consolidation of cash balances of all government entities (budgetary and extra-budgetary) and devise a mechanism daily zero balancing of the TSA and monthly reporting of complete cash balance of the government within and outside the TSA.
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Govt plans issuance of Eurobond, Sukuk in international capital markets; intends to hire consortia
ISLAMABAD: The government has planned to set up a Medium Term Note (MTN) Program for issuance of US Dollar denominated Eurobonds and Sukuk in the international capital markets.
The program shall initially cover a period of one year, said ministry of finance on Friday.
For the purpose, finance division plans to engaged two consortia, each consisting of five financial institutions, for issuance of Eurobonds and Sukuk under the program. “The selected consortia are expected to guide, advise, manage, coordinate and execute the whole range of activities associated with the program,” the ministry said.
It further said that Consortium – 1 shall consist of five conventional financial institutions and shall assist in issuance of Eurobonds. Consortium-2 shall consist of five financial institutions, including at least two Islamic financial institutions, and shall assist in issuance of international Sukuk.
Explaining the selection criteria for Consortium-1, the ministry said that the financial institution ranked first shall be selected. The financial institutional ranked second shall be given the option to match the lowest evaluated financial proposal. “If it chooses so, it shall be selected as part of the consortium, otherwise it shall be rejected.”
The process shall continue in this manner till five consortium members are selected. In case of a tie, the financial institution having secured higher technical score shall be given the option to become part of the consortium.
Regarding selection of members of Consortium-2, the ministry said that the same process as in case of Consortium – 1 shall be followed except that at least two Islamic financial institutions shall be selected as members of Consortium-2.
The ministry invited proposals for the program to be submitted by October 14, 2019.