Cabinet okays Rs 14.46 trillion budget
ISLAMABAD: The federal cabinet today approved the new budget for the fiscal year 2023-24 involving around Rs 14.46 trillion outlay along with up to 35 percent increase in pay and 17.5 percent pension of government employees.
The cabinet approved a 35 percent pay raise for grade 1-16 employees and a 30 percent increase in the salary of 17-22 grade officers.
The coalition government did not impose new taxes and tried its best to give relief to people, including government employees and pensioners. The provincial governments are also expected to announce a matching pay and pension raise for their employees in 2023-24 budgets, starting from July 1, 2023.
Prime Minister Shehbaz Sharif chaired the meeting of the federal cabinet. Finance Minister Senator Muhammad Ishaq Dar briefed the cabinet about the salient features of the new budget.
While addressing the cabinet members, PM Shehbaz said the government has presented the best budget in the prevailing circumstances.
Prime Minister said that the previous PTI government violated the IMF program and ruined the national economy. He said that the government was giving priority to resolving the problems of the people.
PM Shehbaz said the government has accepted the IMF conditions and sitting with IMF people for the resumption of the loans program. He was optimistic about signing a staff-level agreement with the IMF within this month.
Premier said that China, Saudi Arabia, and the United Arab Emirates have supported Pakistan financially in a very critical time.
The government announced a major decision and ended duties and taxes on the import of solar panels and related items to promote clean energy.
Earlier, the cabinet approved Rs 1150 billion Federal Development Program for the fiscal year 2023-24.
After the cabinet’s approval, finance minister Senator Muhammad Ishaq Dar unveiled the new budget in the National Assembly on Friday afternoon.
In the new budget, the government has projected a fiscal deficit of around 7 percent of the GDP. The development spending is expected around Rs1.15 trillion while the economic growth target is 3.5 percent for 2023-24.
Meanwhile, the government set the Federal Board of Revenue tax collection and non-tax revenue targets
Tax Collection Target Rs 9.2 trillion for 2023-24
Non-Tax revenue collection target Rs 2.7 trillion
Total Revenues Rs 11.9 Trillion
To achieve the non-tax revenue target, the federal government is amending the finance bill to enhance the petroleum development levy (PDL) from the existing Rs 50 per liter to Rs 55-60 per liter.
This will enable the government to raise Rs 870 billion in additional non-tax revenue just from the PDL in the 2023-34 budget, starting from July this year. For the outgoing fiscal year, the revised estimate of PDL collection is Rs550 billion.
Hence, in 2023-24, the government will try to raise Rs 320 billion in additional revenue by increasing the PDL rate.
In the new budget for 2023-24, the federal government has projected 3.5 percent GDP growth against 0.29 percent in the outgoing fiscal year.
The budget appears a tough task for the coalition government as it would have to strike a delicate balance between voters friendly budgetary measures while meeting IMF conditions.
Since elections are expected within this CY23, it is true that government will try to present a vote-winning budget.
Key features of the new budget for 2023-24
The key challenges for the government are to achieve the below-mentioned targets:
- The total outlay for the fiscal year 2023-24 is estimated at Rs14.4 trillion (12.4% to 14.2% of GDP) as against the budget of Rs9.6tr in FY2022-23.
- The fiscal deficit target is expected to be Rs6.8tr in FY24, which would be around 7% of the GDP.
- Ministry of Planning has set a GDP growth target of 3.5% for FY24 as compared to 0.29% GDP growth expected within FY23.
- The revenue collection target for FBR has been set at Rs9.2tr (8.76% of GDP) for FY24, up by 23% YoY as compared to the budget target of Rs7.5tr for FY23.
- The non-tax revenue will be Rs2.5tr (2.4% of GDP) as compared to Rs1.6tr (2% of GDP) estimated for FY23.
- The total expenditure target has been set at Rs14.6tr for FY24 (13.9% of GDP), which is around 12% YoY higher than budgeted in FY23.
- The government is likely to set aside Rs7.6-8tr for interest payment for the FY24 budget and Rs1.8tr is likely to be set aside for the Defense sector.
- For pension, the government is expected to set a target of Rs780bn for FY24 as opposed to Rs550bn budgeted in FY23.
- The government is likely to set a target of Rs980bn for power subsidies, however, the Energy Ministry has demanded Rs1.54tr in power subsidies for FY24.
- The current expenditure is expected to rise 15% YoY, worth Rs13.2tr for FY24. This uptick in current expenditure is mainly due to higher interest expenses up by a significant 30% YoY against the budget of FY23.
- The development expenditure is expected to be at Rs1.35tr in FY24 against Rs964bn in FY23.
- The public sector spending (PSDP) target for FY24 will be at Rs950bn against Rs727bn budgeted in FY23.
- The Planning Ministry is also proposing an allocation of Rs150bn through Public Private Partnership
- Assuming no current account deficit and debt rollover by friendly countries and their
- institutions, a shortage of $4-6bn in FY24 is expected.
- The overall manufacturing sector is expected to project a growth of 4.3%, followed by agriculture sector growth of 3.5% and service sector growth of 3.6% for FY24.
- The investment level for FY24 is projected to be set at 15.1% of the GDP as compared to 13.6% set in the FY23 budget.
- National Savings Rate is expected at 13.4% of GDP.
- Inflation for FY24 is expected to be around 21% as compared to 29% for FY23 and compared to the 8-10% historical average
- The ministry is expected to set aside Rs7.6tr for debt servicing.
