Follow Us on Google News
For a nation to progress it must have a clear idea of its longer-term aspirations. Without this clarity, it will neither be able to prepare a coherent roadmap for action nor adopt and implement the policies that would lead towards the objectives. A national vision is meant to provide clarity to our shared vision of the future. Indeed, Pakistan was founded on such a vision—the “Pakistani Dream”, a vision of a prosperous, equitable, tolerant, and dynamic society—which was at the heart of the Independence Movement, even if, over the years, its clarity has diminished.
It was the foundational vision for the new country, inspired by that generation of leaders, and articulated through the struggles of our people for independence and nationhood. Since 1947, Pakistan has made considerable progress on many fronts.
The Shehbaz Sharif-led coalition government Friday unveiled the “toughest” federal budget for the next fiscal year 2022-23 in the National Assembly with an outlay of Rs 9.5 trillion amid strict conditions of the International Monetary Fund (IMF) for the revival of $6 billion loan programme stalled since months over policy breaches. The federal budget presented on June 10, 2022.
As a result of excessive politicization of the subject, the real picture is being unnecessarily mutilated. Federal Minister for Finance and Revenue Miftah Ismail, while presenting the budget proposals, berated the “incompetent” PTI-led government for its poor performance, saying that the current budget focuses on “sustainable and inclusive growth”.
PKR in Billion
Federal Budget 2021-2022 2022-2023
Taxes Revenue 6129 6750
Non-tax Revenue 2080 2100
(Provincial Shares-NFC) (3412) (3800)
Net Revenue 4797 5050
Domestic Debt servicing 2800 3000
Foreign Debt servicing 302 550
Defense 1370 1500
Pension 480 520
Subsidies 682 750
Civil Government 639 750
Grants & transfers 1167 1600
Total expenditures 7440 8670
Deficit 2643 3620
This is a very optimistic position. Grants and transfers in the Federal Government expenditures include BISP, losses of the State-Owned Enterprises (SOEs) and special grants to the provinces and projects. It also includes Kamyab Jawan Programme, etc. As can be seen from the aforesaid estimate around seventy (70) percent of the total available resources of the Federal Government are consumed by debt servicing. With every year’s deficit, the liability further increases and the vicious circle multiplies. The other item which is not seriously considered is the ever increasing
bill for pensions. This has reached almost 10% of the net available resources and there is no apparent possibility to achieve any reasonable solution for it.
- The minimal taxable income limit will be raised from Rs 0.6 million to Rs 1.2 million for the salaried class
- Salaries of government increased by 15%
- Taxes on Behbood Saving Certificate and Pensioners Benefit Account to be dropped to 5%
- Rs 24 billion has been allocated to health sector
- Rs 65 billion proposed for HEC
- Advance tax to be increased on cars above 1600cc
- Exemption of complete custom duty on more than 30 pharmaceutical ingredients
- The banking sector will now face a taxation rate of 42%, up from the current 39%
- Rs 1,523 billion allocated for defense expenditures
- Withholding tax abolished on film distributors
- A family with a household income of less than Rs 40,000 will be given a transfer of Rs 2,000
- Families using less than 200 units of electricity will be given loans in easy instalments for purchasing a solar panel.
Keeping in view the prevailing situation, the general public will likely continue to face double-digit inflation in the next fiscal year, along with an increased risk of food shortages. CPI-based inflation stood at 13.4% in April 2022. Forecasts put it in the range of 11.8% to 12.5% on average for the outgoing fiscal year ending on June 30, 2022. For meeting domestic consumption requirements and maintaining strategic reserves, Pakistan would have to import four to five million tons of wheat in the next fiscal year 2022-23. The lingering Russia-Ukraine war might impact wheat exports by 40%, with India which has 20% share in the global wheat market already having slapped a ban on exports.
This would choke the wheat market by up to 60%. Pakistan used to import palm oil from Indonesia. But the country has banned import of palm oil and now Islamabad has to explore other markets. Keeping the rising price of palm oil in international market, the price of cooking oil/ghee in domestic market would shoot up too.
As a staple, one could have relied on rice, as its production remains good. But the commodity was meant for exports, leaving domestic market reeling from the surge in prices. While rising inflation is currently a global phenomenon, and has touched 9% in the UK, and 8.3% in the US, the risk of food shortages in the South Asia region including Pakistan looms large. Without creating buffers in foreign exchange reserves and food stocks the country of over 220 million might plunge into a serious crisis-like situation.
On the external front, it has been projected that the current account deficit would remain on higher side mainly because it would be hard to slash down imports in any substantial manner. Imports of goods would be touching $71-72 billion for the current fiscal year as they stood at close to $60 billion in the first ten months of the current fiscal year. The imports have been projected to remain in the range of $65-67 billion in the next fiscal year 2022-23, with little room to suppress the demand for imports. The government would have to shift focus toward higher exports and remittances to increase reliance on non-debt creating dollar inflows during the next fiscal year. The new coalition government is eyeing the revival of the IMF programme and it is
likely that the upcoming budget will have measures which promote fiscal austerity and stabilization as per the directions of the Fund. The list of preconditions handed over by an IMF team to Finance Minister Miftah Ismail for the next loan tranche requires continuous belt-tightening, starting with the upcoming budget. It should be observed whether more IMF preconditions are pushed through the Finance Bill such as producing a primary budget surplus instead of a deficit, increasing the tax rate, etc., or not.
IMF has also demanded the government remove tax exemptions and subsidies and increase the rate of taxes on a few sectors as per news reports. According to Topline Securities, the government is likely to set a tax revenue collection target of Rs 7.25 trillion for the fiscal year 2022-23 (9.2% of GDP), which is up 19% from the revised target of Rs 6.1 trillion (9% of GDP) for fiscal year 2022.
Meanwhile, the current expenditure target is likely to be set at 12% of GDP in fiscal year 2023 or Rs 8 trillion, which is around 11% year-on-year higher than what was budgeted in fiscal year 2022. For the last few years, Pakistan has missed targets frequently. It will be imperative to see if the new coalition government manages to achieve the target set for the next fiscal. This is overall IMF designed (influenced) budget where nothing is for Pakistani people except manipulation of number(s).