Budget 2020-2021, The Fiscal Division

Budget 2020-2021, the Fiscal Division

The budget is always an awaited fiscal event every year in June. It judges the strength of an economy and the strategic power of the ruling-government. 

We all know that the budget always brings controversies along, opposition blames the government for many loopholes, but it is practical to expect loopholes in the budget because of the poor economic condition of the country. Budget is an estimate of income and expenditure for a set period, now the considerable thought that comes in mind while looking deep into it, is how the government will be able to manage the funds that have been allocated to different sectors. Here I am going to discuss the overall budget with a bird's eye view, how much the budget costs and how would it be spent in an easy and comprehensible way. 

This year government will spend 7 thousand and 132 Billion rupees in the whole year to run the proper function of the county. This amount seems big to many, but originally this amount is half the worth of Facebook founder Mark Zuckerberg, whose net worth is $ 83B. This amount is just double the amount that has shown in our budget. 

Now the important question is, how the government will spend this amount of money! For the understanding let us suppose that this budget amount is equivalent to 100 Rs.

• Out of this 100, the Rs government would use 41 Rs for debt return which was taken from the IMF and other countries. 
• 18 Rs will be given to Pak Army. 
• 6.50 Rs will be spent on pension and if this amount is divided by 10 then 8 out of 10 parts are for military pension and 2 parts will be for the civilian pension. 
• 3 Rs will be used in subsidiary to give relief to the general public, where more than half will be paid to Wapda, 14% will be allocated for the ‘ Naya Pakistan Housing Society’ and 12% will be given to K-Electric. 
• 6.50 Rs will be saved for government expenditures and expenses. 
• Around 13 Rs will be given in grants and transfers. If we further divide these 13 Rs into 10 parts then 3 parts will be allocated to debts, 1 part will be given to provinces for grants, 0.5 part will be given to railway for its function and compensation of deficit. 

• 12 Rs will be allocated to the developmental projects and for the relief for the general public. The major amount of this part will be given to big projects like NHA (National Highway Authority), but the 10th part of this amount is allocated for health and fight against COVID-19. The education would have 5 % of this amount, Federal organization will be given 11 % of this amount for the functional purposes. 

This was the segregation of 100 Rs, but now the question arises how the government will earn this 100 Rs. In actual practice, the government will be able to earn 77Rs in total. 

Deficit 

You must be thinking that how on earth the government will spend 100 Rs out of 77 Rs. The 23Rs are Budget deficit, and this deficit will be overcome with just the new debts we shall take from the IMF, etc. The reason for this deficit is more expenditures and less income. 

When we deal with the income let us discuss how this income brings us to the deficits. The government’s income that comes from its organizations like State bank, NADRA and Passport office, etc. is too less, but the big amount that fills the house of income comes from taxes.

Taxes 

Let’s discuss the taxes a bit, there are majorly two types of taxes, direct and indirect. 

Direct Taxes are income tax that is directly charged to the employees and businesses for their income, the good news here I would like to quote is that in the present budget there isn't any increase in it, it’s the same as the previous year. The indirect taxes are GST, FED, MVT and Petrol Tax, etc. the money you spend has a handsome amount allocated for taxes. These indirect taxes do not segregate the rich or poor i.e. the rich person will buy petrol with the same amount as the poor one. This time as petrol is cheap in the foreign market, the local government is relying on its tax and increased it to 73%. 

In this budget, more taxes are imposed on mobile phone and it may lead to them being more expensive than ever. The luxurious locally assembled cars like double cabin are getting more expensive with 7.5% FED. Their prices are likely to go up by 5 lac Rs. 

It happens every year to have a tax deficit because of tax larceny happens across the country, moreover, the expenditures of government do not leave it to just 23 Rs deficit rather more of it. If we just go into the deficit history after Mr. Pervaiz Musharaf, every ruling government shuddered the state with doubled debts then before. In the present Government, the debt is increased by 40 % till now. 

This time the government is relying on Petrol Tax for the generation of revenue, but if the prices will be increased next year globally, then it will again bring back the distress to the government. The economy is already suffering due to Corona Virus Pandemic and Economic lockdown, it will not be able to bear any other quake. If this happens we have to raise our begging bowl again in front of foreign economically strong powers.