Rs18.9 trillion federal budget unveiled with IMF bailout in sight

Thursday, Jun 13, 2024

By News Desk

ISLAMABAD: As Pakistan lays grounds for securing a fresh IMF bailout, Finance Minister Senator Muhammad Aurangzeb on Wednesday unveiled Rs18.877 trillion federal budget for the fiscal year 2024-25, setting an ambitious tax revenue target of Rs12,970 billion.

Presenting the budget in the National Assembly amid protest by opposition lawmakers belonging to Pakistan Tehreek-e-Insaf (PTI)-backed Sunni Ittehad Council, the minister said despite the challenges during the past one year, the government’s progress on the economic front had been impressive.

He praised the previous government for striking a short-term standby agreement with the IMF, which he said paved the way for economic stability and ended uncertainty.

He said inflation, which was the centre of attention of Prime Minister Shehbaz Sharif and his team, came down to almost 12 per cent in May leading to a decrease in the prices of essential commodities. The minister further said the foreign exchange reserves have also been stable. He said the recent cut in the interest rate by the SBP was proof of the government’s efforts to bring down inflation.

The minister said GDP growth target for the fiscal year 2024-25 is fixed at 3.6 per cent, while inflation rate is expected to remain 12 per cent. He further said budget deficit to GDP during the period under review is estimated at 6.9 per cent, whereas primary surplus during the review period is projected at 1.0 per cent of the GDP.

The minister said the revenue collection of the Federal Board of Revenue is estimated to be Rs12,970 billion, adding tax revenue collection during the current fiscal year grew by 38 per cent.

He said non-tax revenue targets of the federation are fixed at Rs3,587 billion, whereas net income of the federal government would be Rs9,119 billion.

The total expenditures of the federal government are estimated at Rs18,877 billion. Rs9,775 billion to be spent on interest payments, he added.

The government has allocated Rs1,400 billion for Public Sector Development Program, adding an additional amount of Rs100 billion would be allocated under Public Private Partnership.

In the PSDP 2024-25, the completion of ongoing projects has been prioritised with up to 83 per cent of resources allocated for the ongoing projects and only 17 per cent of resources for new projects.

The minister said the government would provide Rs2,122 billion for defence, and Rs839 billion would be allocated for Civil Administration.

He said Rs1,014 billion is allocated for pension expenses, adding Rs1,363 billion are earmarked for the subsidy of gas, electricity and other sectors.

The minister said it was a constitutional responsibility to ensure a balanced local development, that’s why, 10 per cent of the funds have been reserved for the districts merged into Azad Jammu and Kashmir, Gilgit Baltistan and Khyber Pakhtunkhwa, while approximately 11.2 per cent of resources have been earmarked for the IT, telecommunication, science and technology, governance and production sectors.

In his speech, the minister said the Federal Board of Revenue (FBR) had imposed Corporate Income Tax reforms from 2019-2023. Now, he said, there is a need to impose personal tax reforms so that it can be brought in line with international standards.

Considering this, he said, the minimum tax slab will remain the same at Rs600,000 (annual income) and the maximum tax slab will also remain unchanged. “There are some changes proposed in tax slabs. There is also a proposal to keep the maximum tax rate at 45 per cent for non-salaried people,” he added.

The minister, noting that the government was ready to support the export sector, said it would now fall under the normal tax regime. To increase tax collection from the real estate and securities sector, he said irrespective of the holding period, a 15 per cent tax would be imposed on filers and up to 45 per cent on non-filers under different slabs. “This will help document the economy.”

Moreover, he said, different tax slabs would be introduced for filers, non-filers, and those who file their returns late on the purchase of immovable properties. He also proposed that tax should be imposed on the rate of the car instead of its engine capacity. Aurangzeb said there is a proposal to end zero rating, exemptions, and reduced rates.

The minister said the government took into account several exemptions and concessions, following which it was decided that some of them should end.

He also proposed that the taxes on TIER-I Retailers should be increased from 15 per cent to 18 per cent.

Aurangzeb said Benazir Income Support Programme (BISP) possesses the status of a cornerstone of the country’s social welfare measures from which millions of families receive cash assistance. The incumbent coalition government aims to provide maximum assistance to the weak segments of the Pakistani society, he said. The financial aid of the weak segments will be continued under the BISP via the budget 2024-25, he added.

The minister announced that the federal government decided 27 per cent hike in the BISP allocations by up to Rs593 billion in the next fiscal year.

Additionally, the government also plans to introduce a hybrid social protection programme for promoting financial self-sufficiency.

The minister said the government would adopt a three-pronged strategy to reform the pension scheme in line with international best practices.

He said the government had to pay unfunded pension liability, which was increasing every year. He said after reforms in the pension scheme, the pension liability would be reduced considerably in next three decades.

The minister said for fresh employees, a contributory pension scheme would be introduced for which the government would deposit its share every month.

Moreover, a pension fund would be created to manage the liability, he added.

He also proposed a 20-25 per cent increase in the salaries on ad-hoc basis and 15 per cent enhancement in the pensions of the federal government employees, realising their financial hardships due to increased inflation.

The minister said despite financial constraints, the government had decided to give 25 per cent ad-hoc relief in the salaries of employees from Grade 1-16 and 20 per cent to Grade-17-22 employees aimed at increasing their purchase power. He also announced an increase in the minimum wages from existing Rs32,000 to Rs 36,000 per month. During the speech, the finance czar also mentioned the steps being planned by the federal government to cope with the challenges emanating from climate change.

He said the government was reviving the Pakistan Climate Change Authority to ensure the implementation on “climate mitigation and adaption”.

The finance minister said National Finance Climate Strategy will be prepared by the November this year aimed at bringing Global Climate Finance into the country to implement projects to reduce carbon emissions in the country.

The minister further apprised the house that a national digital climate finance monitoring dashboard will also established to maintain data regarding climate data. The federal government has fixed Rs4 billion for e-bikes and Rs2 billion for energy saving fans, he shared.