PM defers decision on new belt-tightening budget.

Byline: Shahbaz Rana

ISLAMABAD -- Prime Minister Imran Khan on Friday deferred a decision on a new budget framework after key economic ministries could not develop a consensus on presenting a belt-tightening budget due to its adverse implications for the people and the economy during the economic recession.

The Ministry of Finance presented before Premier Imran the International Monetary Fund-guided economic stabilisation framework that seeks Rs1.2 trillion fiscal consolidation in economic recession, highly placed sources told The Express Tribune.

The proposed plan also includes Rs5.1 trillion tax collection target for the Federal Board of Revenue (FBR) that will require imposition of record additional taxes of nearly Rs780 billion in the next fiscal year 2020-21. The FBR did not present the taxation measures, as in the first stage it will need the prime minister's endorsement for the new tax target of Rs5.1 trillion.

The Ministry of Finance has also proposed two dates to present next fiscal year's budget - June 5 or June 12 - leaving the decision to the prime minister. It also sought directions from the PM on whether to increase pay and pensions in the next budget.

The finance ministry made the first formal presentation to Imran on broader contours of the next year's budget. It will be the third budget of the PTI government, as the PM scrambles on how to strike a balance between providing relief to the Covid-19 struck businesses and reviving the IMF programme.

The Ministry of Finance proposed Rs600 billion for development budget but the planning ministry demanded that it may be given at least Rs700 billion or else key mega projects would be affected in the next fiscal year, the sources said.

The finance ministry proposed a primary budget deficit target of Rs192 billion or 0.4% of Gross Domestic Product, as suggested By: the IMF. The primary deficit is calculated By: excluding interest payments from the total revenues.

The Ministry of Finance told the PM that if the government wanted to get the IMF programme back on track and bring the soaring public debt-to-GDP ratio down, it would have to present the economic stabilisation budget, the sources said. The IMF has projected the public debt-to-GDP ratio at 90% of GDP.

But the participants of the meeting questioned the finance ministry's rationale of proposing nearly Rs3.1 trillion for debt servicing in the next budget despite a 4.2% cut in the discount rate.

The reduction in interest rates...

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