The total budget outlay is Rs9.5tr; Rs3,950b allocated for debt servicing, Rs800b for PSDP; Govt employees’ salaries increased by 15%; Subsidies on sugar, wheat flour proposed; Taxes on cigarettes, over 1,600CC cars will be increased; Non-tax revenue will be Rs2000b; Tax on profit of Saving Certificates, Pensioners Benefit Accounts, martyrs family welfare accounts slashed to 5 pc; Tax on small-scale retailers to be fixed; Industrial policy is being introduced; Various schemes have been proposed for youth; 250 mini-sports stadium will be constructed; Remittances of $33.2b expected
Ijaz Kakakhel Islamabad
The coalition government Friday unveiled the federal budget for the next fiscal year 2022-23 in the National Assembly with an outlay of Rs9.5 trillion amid strict conditions of the International Monetary Fund for the revival of the $6 billion loan programme stalled since months over policy uncertainty.
Federal Minister for Finance and Revenue Miftah Ismail presented the budget in the National Assembly. This year the budget session was less chaotic than the last few presentations during the PTI-led government as there was no opposition present in the House since PTI members could not attend the session.
Ismail began his speech by bashing the previous PTI government, saying its policies had hurt the economy and damaged the lives of the country’s masses. “An inexperienced team brought the country to the brink. Different people presented the budget every year presenting different policies which hurt investor sentiment,” the finance minister said, adding that his government had begun repairing the economy by taking the tough decisions that were the need of the hour.
The budget outlay this year is Rs9,502 billion, almost a trillion rupees higher than last year’s outlay. The government has budgeted total current expenditure at Rs8,694 bn for FY23, which is 15.5pc higher than last year’s budgeted figure.
Total revenue budgeted for FY23 stands at Rs9,004b. After subtracting provincial transfer of Rs4,100b as part of the National Finance Commission Award, net revenue comes out at Rs4,904b, nine per cent higher than last year.
The government has set the tax collection target for the Federal Board of Revenue at Rs7,004bn for FY23, which is 20.1pc higher than last year’s Rs5,829bn.
Fiscal deficit, or overall budget deficit, which is the difference between the government’s total expenditure and revenue is calculated as: Gross Revenue at Rs9,004b (minus) Transfer to Provinces Rs4,100bn (plus) Provincial Surplus Rs800bn (minus) Total Expenditure Rs9,502bn.
For FY23, overall deficit is budgeted at Rs3,798b, which is 4.9pc of GDP. Last year, the deficit was budgeted at 6.3 pc of the GDP.
“The problem of our economy is that growth is 3-4 pc, but when it moves up to 5-6 pc, our current account deficit goes out of control, because we give priority to the elite, which increases our imports. We need to adopt new thinking, to facilitate the lower-income section to increase domestic production,” the minister said.
He said the government had to move towards “sustainable growth”, adding that the growth target for next year was set at five per cent. “The government is aware that the common man is struggling with high prices and we are doing our best to bring them down,” Ismail said, adding that the government had set a target for 11.5 pc inflation next year.
The minister said that due to the previous government, the IMF programme, which should have ended this year, got suspended in February, and basic reforms that should have taken place in 2019 were not implemented. The poor-income group needs to be supported, he said and added this group buys goods that are produced in the country.
He criticized former PM Imran Khan by saying that he never cared for the poor for he himself said that “keeping a check on potato and tomato prices is not a PM’s job”. The minister said that Budget 2022-23 will focus on providing facilities to farmers growing crops that produce cooking oil, like corn and sunflower, so that the country doesn’t have to import palm oil, which is touching a record high in international market.
According to Miftah Ismail, the PTI-led govt took loans of Rs20,000 billion during their tenure. “This is 80% of the total loans taken since the time of Liaquat Ali Khan.” This was because they spent more than they earned, he added. The Finance Minister said austerity is the top priority of the present government. Reducing government’s expenditure is part of this budget and we are taking concrete steps in this regard. He said there will be complete ban on purchase of vehicles. Except, development projects, there will also be a ban on procurement of furniture and other items. The petrol quota of cabinet members and government officials will be reduced by 40 percent. There will also be ban on foreign tours under government expense, except the important ones.
Miftah Islamabad said that a family with household income of less than Rs40,000 will be given a transfer of Rs2,000 every month.
The minister said the government had to move towards “sustainable growth”, adding that the growth target for next year was set at 5 per cent. He said the tax to GDP ratio is estimated to increase to 9.2 percent from the current 8.6 percent during the next financial year. He recalled that we had left this ratio at 11.1 percent in the year 2017-18. He said the overall deficit which currently stands at 8.6 percent will be gradually brought down. This will be brought down to 4.9 percent in the next fiscal year. Similarly, the overall primary balance which is currently -2.4 percent of the GDP will be improved to 0.19 percent.
The Finance Minister said the imports, which are expected to be 76 billion dollars during the current fiscal year will be reduced to 70 billion dollars in the next financial year. At present, exports are 31.3 billion dollars, which will be enhanced to 35 billion dollars in the next fiscal year. The current account balance will be reduced to -2.2 percent of the GDP from the current -4.1 percent.
The Finance Minister said that the energy sector has pivotal importance for the people as well as the industries and trade. For these sectors and the people we gave an additional subsidy of Rs214 billion. He said Rs573 billion have been earmarked in the next financial year so that the people could afford the electricity in the harsh weather of summer. He said we released Rs248 billion for the payment of outstanding amounts in the petroleum sector and Rs71 billion will be provided in the next fiscal year. He said we will soon announce new gas tariffs which will be aimed at providing gas to the industries at competitive rates which will help in bolster exports.
The finance minister announced that owing to the high inflation in the country, the government has increased salaries for its employees by 15 per cent, adding that the pensions have also been raised by 5 per cent. The minister said that FBR revenue has been estimated at Rs7,004 billion for the next fiscal year. “This includes Rs4100 billion share of provinces. The net revenue with the federal government will be Rs4904 billion. The non-tax revenue will be Rs2000 billion.”
He said tax on profit of Saving Certificates, Pensioners Benefit Accounts and martyrs family welfare accounts has been slashed from 10 to 5 percent.
Miftah also shared that the government has suggested increasing the tax on banking companies to 39%, including 42% super tax, while the foreign nationals doing business in Pakistan will have to pay taxes.
The finance minister also proposed to increase the tax rate on non-filers from 100% to 200% for vehicles having horsepower greater than 1,600cc. The government has also proposed an advance tax on 1,600 cc cars and a 2% additional tax on electronic engine cars, he said.
The government has also suggested revising the tax slab for salaried people and increased the cap to Rs100,000. Miftah said the tax imposed on Behbood Saving Certificate and Pensioners Benefit Account has been proposed to be dropped to 5% from 10%.
The tax on small-scale retailers has been proposed to be fixed, which will range from Rs3000-10,000 and will be collected through their electricity bills, said Miftah. It has also been suggested that the filers who send money abroad through credit, debit, or prepaid cards will have to pay 1% withholding tax, while for a similar transaction, non-filers will be charged 2% tax, he said.
Finance Minister Miftah Ismail said an industrial policy is being introduced in collaboration of Asian Development Bank to strengthen industrial base of the country. He said the Prime Minister has directed to immediately clear all claims of exporters. At present, an amount of Rs40.5 billion is payable to them and we will pay this amount forthwith. Despite, financial difficulties sales tax refunds are also being released immediately. He said that Industrial feeders have been exempted from load-shedding to ensure uninterrupted power supply to the industrial sector.
Miftah Ismail said a new strategy is being evolved for the promotion of investment in the country. He said the policy is aimed at providing an enabling environment to the investors by doing away with the complex procedure. He said that our government will bring reforms in dispute resolution mechanism to facilitate domestic and foreign investors. He said that it will be ensured that this mechanism is simple and effective.
