Investor Presentaiton

EXECUTIVE SUMMARY Economic and Financial Management have assumed the most complex dimension of late. Among these, the most glaring, have been the issue of the Current Account Deficit which had peaked to USD 19 billion (equal to 6.1% of GDP) in FY 2017-18. The previous Government had artificially maintained an over-valued exchange rate (PKR to USD) leading to a higher volume of Imports versus Exports and thus depleting the Foreign Exchange reserves. With the national debt soaring to PKR 30.0 trillion, Fiscal Deficit at PKR 2,279 billion or 6.6% of GDP and inflation on a rising trajectory the Government had to take a number of drastic measures to set the Country on a path of prudent macroeconomic management. A major reform programme to overcome these macroeconomic imbalances was signed with the IMF in May 2019. The Exchange Rate regulation was discontinued and a market pricing regime was adopted. Taxation policy was reviewed and incentives were created to reduce Imports and to restore Trade balance. These steps helped overcome the issue of Trade Deficit through Import contraction and increase in Exports. The Government completely stopped borrowing from State Bank of Pakistan and set itself the tough tasks of increasing Tax-to- GDP ratio, cutting down wasteful and inefficient expenditures, reduction in losses of public sector enterprises, creating incentives to mobilize higher level of savings and increasing the level of private investments to boost Economic Growth. The efforts of the new Government started to reap results towards the start of the FY 2019-20. However, these efforts of the Government for an economic turnaround received a major setback in March 2020 when the COVID-19 Pandemic reached Pakistan. The country came to a standstill both in terms of human mobility and economic activity. Coming to the Punjab, the Province followed a trajectory similar to the National one. With various Service activities like domestic trade and transport in a state of recession due to COVID-19, a fall in private consumption expenditure and fall in the volume of exports of goods and services, it will be difficult for the economy of Punjab to face this major shock, especially with a heightened risk perception in large and small industries and commercial enterprises operating in different sectors. COVID-19 resulted in a major adjustment in the Fiscal position of the Government of Punjab. The Government's revenue fell short of its target by PKR 635 billion compared to the Budget Estimates. This included shortfall of PKR 509 billion in Federal transfers and PKR 126 billion in Provincial Own Source Revenues. Major expenditure cuts had to be imposed on Development and non-development expenditure. The Revised Estimate for Current Expenditure of the Government was brought down from a start-of-the-year estimate of PKR 1,299 billion to PKR 1,257 billion. The Government used all available resources to protect ADP spending from falling below PKR 250.3 billion from the original estimate of PKR 350.0 billion. Budget 2020-21 is, thus, being presented in the backdrop of tough economic conditions. The Estimates have been framed under the Macroeconomic assumptions that the real GDP growth will be 2.1%, inflation at 6.5% and FBR revenue at PKR 4,962 billion during next Financial Year. The total Receipts of the Government have been pitched at PKR 2,240.6 billion. This includes General Revenue Receipts of PKR 1,750 billion; including Federal Divisible Pool transfers of PKR 1,433 billion and Provincial Revenues of PKR 317.0 billion. The Current Expenditure of the Government has been pitched at PKR 1,318.0 billion which is only 1.4% higher than the BE for 2019-20. Due to the tight fiscal situation, the Government has almost kept the major expenditure heads like Salary, Pension, Non-salary etc. frozen at the level of the allocation during 2019-20. The size of Development Expenditure is estimated to be PKR 337 billion as against PKR 350.0 billion in 2019-20. The Budget also stipulates an EPS of PKR 125.0 billion which, of course, is conditional to achievement of revenue targets by the FBR. The Government has formulated Punjab's Post COVID-19 Public Investment Strategy titled "Responsive Investment for Social Protection and Economic Stimulus (RISE)". The Strategy presents targeted interventions and policy responses to contain the COVID-19 crisis. It also includes ADP prioritization framework which has not only set the direction for ADP 2020-21, but has also supported in developing the Mid-term Development Framework of Punjab. ADP 2020-21 includes China Pakistan Economic Corridor as one of the important priority areas. The two major ongoing projects being implemented by Government of the Punjab are Orange Line Metro Train Project and Allama Iqbal Industrial City, Faisalabad. For FY 2020-21 adequate resources have been prioritized for the timely completion of both the projects. Government also intends to use PPP financing to enlarge its portfolio of Development interventions. In this regard effort has been made to create an enabling environment for PPP projects. The ADP will continue to pursue Sustainable Development Goals agenda. While putting massive pressure on the Healthcare systems, the Covid- 19 has pushed a large portion of the population into extreme poverty and hunger in the largest Province of Pakistan, which requires a strong sustainable recovery approach. Government of the Punjab believes that the response to the Pandemic cannot be de-linked from actions on Page IX

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