ISLAMABAD – Pakistan released on Friday its 2020-21 national budget worth $44 billion, increasing military spending by 12 percent a day after the country posted its first negative GDP growth (-0.4 percent) in nearly seven decades.
Pakistan, which has the seven-biggest armed forces in the world in terms of troops – with around 650,000 soldiers – is set to spend around $7.9 billion on defense, 12 percent more than the previous year and amounting to 18 percent of the total budget allocation.
Industries Minister Hammad Azhar presented the $44 billion budget, a figure 11 percent lower than last year, in the National Assembly – the lower house of the parliament – with a fiscal deficit target of 7 percent.
Just 86 of the total 342 lawmakers of the house were present in the National Assembly due to obligatory social distancing norms necessitated by the coronavirus epidemic, with all attendees sporting face masks.
The budget has to be approved through a vote in the parliament within the next few days.
Azhar said that this was a “relief budget” for the people, with a tax collection target of around $30 billion – lower than 2019 – and no new taxes.
The government has put the GDP growth target for the new financial year, which is set to begin on July 1, at 2.1 percent, while expecting to reduce inflation from 9.1 percent to 6.5 percent.
It also announced several austerity measures including salary cuts for public officials.
On Thursday, the government of Pakistan had estimated that the national GDP was set to contract by 0.4 percent in the financial year 2019-20, ending on June 30, its first negative growth in 68 years mainly due to the COVID-19 crisis.
Prime Minister Imran Khan’s financial advisor, Abdul Hafeez Shaikh, had said that the recession caused by the epidemic has resulted in economic losses worth 3-3.5 percent of the GDP, as previous estimates has predicted the economy to grow at 3 percent.
The country has also been hit by devastating locust swarms this year, which could cause economic losses worth 817 billion rupees (around $5 billion).
Pakistan has been facing economic troubles for many years now and received a bailout package worth $6 billion from the International Monetary Fund in May 2019.