Finance Minister to Unveil Federal Budget for FY 2023-24 with Focus on Targeted Schemes and Revenue Generation

• If new govt comes into power after next polls, it will have to introduce a mini-budget.
• Govt has set FBR’s tax collection target at Rs9.2tr and a non-tax revenue target of Rs2.7tr.
• Govt will do its best to increase salaries, pensions and minimum wages of workers.

Finance Minister Ishaq Dar is set to reveal the federal budget for the fiscal year 2023-24, with a proposed outlay of Rs14.7 trillion. The budget aims to address a higher consolidated budget deficit, exceeding 6% of GDP, while also allocating funds for targeted schemes to attract voters in the upcoming general elections.

Ishaq Dar to table Rs14.7tr budget today in National Assembly

The Federal Board of Revenue (FBR) has been assigned a tax collection target of Rs9.2 trillion, with a non-tax revenue target of Rs2.7 trillion. To achieve the non-tax revenue target, the government plans to amend the finance bill and increase the petroleum development levy (PDL) from Rs50 to Rs55-60 per litre. This adjustment is expected to generate Rs870 billion in the next budget, compared to the revised estimates of Rs550 billion for the outgoing fiscal year.

The credibility of budgetary numbers has been a concern, as they tend to change throughout the financial year. This lack of credibility may pose challenges for economic managers and could require a mini-budget by a new government to align with the International Monetary Fund (IMF) and secure a fresh bailout package.

Finance Minister Dar will need to make concerted efforts to address the concerns of the IMF and revive the stalled program. Failing to strike a broader budgetary framework with the IMF could jeopardize foreign exchange reserves, which have declined to below $3.9 billion held by the State Bank of Pakistan.

Signing a staff-level agreement with the IMF is contingent on fulfilling three conditions: securing external financing of $6 billion, unveiling the next budget in line with IMF guidelines, and maintaining a market-based exchange rate. With the IMF program ending on June 30, an extension is not possible.

The credibility gap in budgetary numbers necessitates the presentation of a realistic budget for the next financial year. The government has approved the allocation of Rs90 billion for the SDGs Achievement Programme (SAP) in the upcoming budget, lower than the revised allocation of Rs116 billion for the current financial year.

The primary focus of the government will be on external debt servicing, which requires $25 billion in the next budget. It remains to be seen how the government plans to generate such a substantial amount, considering it secured less than $8.1 billion in the first ten months of the current fiscal year out of the total budgeted figure of $22.8 billion for external loans and grants.

Given fiscal constraints, the federal government’s total net revenue receipts will fall short of meeting debt servicing requirements. After transferring resources to provinces and considering non-tax revenue, the total net receipts are projected to be Rs6.5 trillion. With total debt servicing at Rs7.5 trillion, the federal government will face a deficit of Rs1,000 billion, necessitating borrowing to cover other expenditures.

The finance minister has expressed the government’s commitment to increasing salaries, pensions, and minimum wages of workers in the FY24 budget. To finance the significant budget deficit for the next financial year, Pakistan will need to acquire domestic and foreign loans ranging from Rs7,000 to Rs7,500 billion.

The challenging situation ahead calls for deep-rooted structural reforms to steer the economy out of crisis mode.