ISLAMABAD: Expecting successful continuation of the International Monetary Fund (IMF) programme, the government is targeting the national economy to rebound with four per cent to 4.5pc growth over the next three years and total revenues posting a growth rate of 3pc of gross domestic product.

Over the same period, the fiscal deficit would be almost halved to 4.8pc of GDP and current expenditure going down to 22pc of GDP from 23.5pc for outgoing fiscal year.

This is part of the Medium-Term Budgetary Framework finalised by the Ministry of Finance in consultation with the IMF and presented to the parliament in compliance with the Fiscal Responsibility and Debt Limitation Act, 2005. The finance ministry reiterated its stance that the structural adjustment process had picked up momentum with the initiation of the IMF’s $6 billion facility when the “economic canvas changed drastically in the latter four to six months with increasing effects of the Covid-19 outbreak on economy”.

As a result, the projection of economic growth reduced from around 3pc to -0.38pc of GDP, while the overall budget deficit is revised upwards from 7.1pc to 9.1pc of GDP. FBR revenue loss was projected at Rs900bn, exports and remittances were adversely affected, and non-tax revenue was decreased.

It said the GDP growth rate for FY2020-21 has now been targeted at 2.1pc, followed by 4pc in FY2021-22 and 4.5pc in FY2022-23. The finance ministry said it had projected rate of inflation for the outgoing fiscal year at 11-13pc which remained in the same band 11-12pc.

For next year, the rate of inflation has been targeted at 6.5pc followed by 6.2pc in FY2021-22 and 6pc in FY2022-23. The ministry said the target for total revenue was set at 16.7pc of GDP for the current fiscal year but was missed by a wide margin to 14.3pc of GDP. For next fiscal year, this target is set at 15.9pc of GDP, moving up to 16.6pc in FY2021-22 and 17.3pc in FY2022-23.

The finance ministry said the tax revenue target of 14.4pc for outgoing fiscal was missed by 3.4 percentage point to 11pc while FBR revenue target of 12.6pc also faced a similar slippage to 9.4pc. The non-tax revenue, however, fared well as collection amounted to 3.3pc of GDP against a target of 2.3pc – higher by almost Rs835bn.

Based on this revenue performance, the total tax revenue growth has been targetted at 13.2pc of GDP in FY2020-21, followed by 13.9pc in FY2021-22 and 14.5pc in FY2022-23. Likewise, the FBR revenue is projected to improve to 10.9pc of GDP next year, followed by 11.8pc in FY2021-22 and 12.6pc in 2022-23. Non-tax revenue is projected to stay almost unchanged at 2.8pc of GDP over the next three years.

On the other hand, the finance ministry is targeting to continuously reduce total expenditure in next three fiscal years from current year’s 23.5pc of GDP, mainly because of a declining current expenditure. It said the total expenditure was targeted to come down to 22.9pc next year and then to 22.1pc by FY2022-23.

The current expenditure missed the current year’s 20.2pc of GDP target and amounted to 20.9pc. This is again targeted to be contained at 20pc in the upcoming fiscal year and then gradually to 18.8pc of GDP by 2022-23. Development expenditure that stood at 2.6pc of GDP this year is targeted to recover to 2.9pc of GDP next year and then to 3.3pc in FY2022-23.

Published in Dawn, June 24th, 2020