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BALANCING ACT: RS14.5 TRILLION BUDGET UNVEILED 'AVOIDING NEW TAXES' Saturday, 10 June, 2023 I 20 Zilqad, 1444
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Rs 15.00 | Vol XIII No 341 I 8 Pages I Lahore Edition
NOT AN ‘ELECTION BUDGET’, CLARIFIES DAR PROFIT
STAFF REPORT
N annual budget worth 14.5 trillion has been passed by the national assembly on the 9th of June, 2023. Senator Muhammad Ishaq Dar, presented the budget on the floor of the national assembly. In his budget speech Finance minister Ishaq Dar said that, “Any independent analyst will tell you that this budget is not an election budget, but is rather made by keeping in view the elements of the real economy,”. “The current economic crisis is a result of the mismanagement of the economy by the PTI government in its tenure,” he said. He also said that no new taxes have been imposed in this budget. The target for revenues and expenditures in the budget for FY24 are as follows: Expenditure The government has allocated a total current expenditure of Rs13,320 billion for FY24, which represents a 53% increase compared to the budgeted figure of the previous year. For the same fiscal year, the budget for defence expenditure is set at Rs1,804 billion, reflecting a 15.4% increase compared to the previous year’s budget. This amount constitutes 1.7% of the country’s GDP. In FY24, interest payments or debt servicing have experienced a significant rise of 85% from the previous year, reaching Rs7,303 billion. This amount accounts for 55% of the total current expenditure, making it the government’s
largest expenditure category. Apart from that the major expenditures in the budget are Pensions (Rs761
billion), Civil Government (Rs 714 billion). Subsidies worth Rs 1,074 billion have also been announced.
Revenue: The total revenue budgeted for FY23 stands at Rs 12,163bn. Subtracting provincial transfer of Rs5,276bn, net revenue comes out at Rs6,887bn, which is 36.9% higher than last year. Tax revenue for FY24 is estimated at 9.2 trillion which is 21% higher than the previous year. Other than that the government has estimated a hefty amount in foreign loans and grants for the upcoming year. Targets: As per Ishaq Dar, the growth targets set in next year are “modest” and have been put in place by keeping in mind the economic situation. The GDP growth is estimated at 3.5% whereas the inflation target is set at 21%. The government is hopeful for a decline in the current account deficit, leaving it at $6 billion by the end of this year. Similarly the tax to GDP ratio is estimated at an optimistic 8.7%.
Federal Budget 2023-24 at a glance ISLAMABAD
STAFF REPORT
The federal government on Friday presented a proposed budget of Rs. 14.460 trillion for the fiscal year 2023-24. Following is the breakup of resources and expenditure for federal budget 2023-24:TOTAL RESOURCES (I to V): Rs. In Billion: 14,460 (FBR) – Federal Consolidated Fund: 9,200 Non-Tax Revenue: 2,963
a) Gross Revenue Receipts: 12,163 b) Less Provincial Share: 5,276 I.Net Revenue Receipts (a-b): 6,887 II. Non-Bank Borrowing (NSSs & Others) – Public Account: 1,906 III. Net External Receipts – Fed. Consolidated Fund: 2,527 VI. Bank Borrowing (T-Bills, PIBs, Sukuk) – Fed. Consolidated Fund: 3,124 V. Privatization Proceeds – Fed. Consolidated Fund: 15 Total (II+III+IV+V): 7,572 TOTAL EXPENDITURE (A+B) Rs.
Govt proposes Govt introduces Rs 1.074tr subsidies projects for PROFIT women, children GHULAM ABBAS
Despite pressure from the International Monetary Fund (IMF), the government of Pakistan has proposed a substantial amount of subsidies totaling Rs 1.074 trillion for various sectors in the upcoming fiscal year 2023-24. While this amount reflects a decrease of 2.6 percent compared to the revised Rs 1.13 trillion subsidies allocated in the previous fiscal year, 2022-23, the fund will be less than happy at the continued high expenditure on subsidies. The multiparty government initially reduced subsidies by approximately 54 percent to Rs 664 billion in the budget for 2022-23. However, it later increased the subsidy to Rs 1.1 trillion during the outgoing financial year, deviating from the initial cut in an apparent attempt to balance the needs of the country with the demands of the IMF. Here is a breakdown of the proposed subsidies in different sectors: Power Sector In the power sector, subsidies have been reduced to Rs 579 billion for the fiscal year 2023-24 from the revised Rs 677 billion allocated in the budget for 2022-23. However, this subsidy still reflects a significant increase of 21.4 percent compared to the initial figure of Rs 455 billion set for 2022-23. For Inter-Discos tariff differential, an amount of Rs 150 billion has been allocated in the budget for 2023-24, which is lower than the Rs 225 billion allocated for the fiscal year 2022-23. Independent Power Producers (IPPs) The government has earmarked Rs 310 billion for payment to Independent Power Producers (IPPs) in the fiscal year 2023-24, an increase from the Rs 180 billion allocated in the outgoing fiscal year. Notably, no specific amount has been set aside for FCA Spillover, Kissan Package, flood water management, industrial support package, and zero-rated industrial subsidy. AJ&K TDS For AJ&K TDS (Tariff Differential Surcharge), the government has allocated Rs 55 billion for the fiscal year 2023-24.
PROFIT
GHULAM ABBAS
In an attempt to introduce some popular initiatives for women and children ahead of the next election, the government has proposed the following programs during the next financial year. Prime Minister’s Initiative for Women’s Mobility: As per the budget books this initiative aims to address mobility issues faced by women. It focuses on increasing accessibility and mobility for working women by providing Scooties (scooters) at a 50% subsidized price. The project will benefit women in Islamabad Capital Territory, Punjab, Sindh, Balochistan, Khyber Pakhtunkhwa, AJK, and GilgitBaltistan. The government will provide a capital subsidy to successful applicants, and the remaining cost of the Scooty can be paid in installments with markup through the National Bank of Pakistan or other participating banks. Initially Rs. 500 million has been specifically earmarked for the Prime Minister’s Initiative for Women’s Mobility “Women on Wheels” project, to be executed by the National Commission on the Status of Women under the Ministry of Human Rights. Mother and Child Support Program (MCSP): The Mother and Child Support Program aims to improve maternal and child health outcomes, including mortality rates and nutrition indicators. The program focuses on increasing the utilization of public services and enhancing nutritional intake for mothers and children. Establishment of Rehabilitation/Life Skills Development Centers for Persons with Disabilities (PWDs) in Gilgit Baltistan: Under the Ministry of Kashmir Affairs in collaboration with the Social Welfare Department of Gilgit Baltistan, the government is working on establishing Rehabilitation and Life Skills Development Centers for Persons with Disabilities.
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In Billion: 14,460 A. Current: 13,320 Interest Payments: 7,303 Pension: 761 Defence Affairs & Services: 1,804 Grants and Transfers to Provinces & Others: 1,464 Subsidies: 1,074 Running of Civil Govt: 714 Provision for Emergency and others : 200 B. Development: 1,140 Federal PSDP: 950 Net Lending: 190
Govt announces major tax relief on laptops, PCs, hardware and battery parts to boost IT sector PROFIT
AHMAD AHMADANI
In a bid to bolster the Information Technology (IT) sector and facilitate business growth, the Finance Minister Ishaq Dar unveiled significant tax relief measures in the federal budget for the fiscal year 2023-24. Under the new provisions, Information Technology and IT-enabled service providers will be able to import software and hardware equal to one percent of their exports without incurring any taxes. The import limit for these items has been set at $50,000 annually. Additionally, the government will automate the exemption certificate process for IT exporters, streamlining their operations and reducing bureaucratic hurdles. Addressing the National Assembly, the Finance Minister expressed optimism about the IT sector’s potential to become an engine of economic growth in the coming years. He highlighted the existing 0.25 percent income tax concession for promoting IT exports, which will be extended until June 2026, providing stability and support to the industry. Recognizing the challenges faced by freelancers, the government has exempted them from sales tax registration and returns for annual exports worth up to $24,000. Furthermore, a simplified one-page income tax returns form will be introduced to ease the filing process for freelancers. While the budget lacked significant announcements for the tech and telecom sectors, there was welcome news for gadget lovers and freelancers alike.
Shehbaz optimistic about IMF deal amid economic hardship PROFIT
STAFF REPORT
Prime Minister Shehbaz Sharif on Friday expressed his optimism regarding Pakistan’s chances of striking a deal with the International Monetary Fund (IMF). He assured that all prior conditions set by the IMF have been met, and he anticipates the resumption of the stalled bailout programme. During his address to the federal cabinet, ahead of the fiscal year 2023-24 budget revelation, the Prime Minister emphasized the importance of political stability for sound economic growth. He acknowledged the impact of climate change-induced floods, which inflicted losses exceeding $30 billion on the economy. Additionally, the Ukraine crisis has escalated commodity prices in the global market. PM Shehbaz highlighted the government’s awareness of the inflation-related struggles faced by the common man, emphasizing the need to support the salaried class and pensioners to meet their basic requirements. Despite the challenges faced in the last 14 months, the government has been actively dealing with the IMF, post-flood recovery efforts, and global inflation. The Prime Minister expressed satisfaction with the reduction of the current deficit to $3.3 billion in the past 10 months and expressed hope for growth in the agriculture sector. To promote transparency in foreign currency transactions, the government has taken steps to curtail undesirable outflows of foreign currency from Pakistan. According to a report by Bloomberg which cited Fitch Ratings, further devaluation of the Pakistani rupee is not expected due to subsiding pressure and stable reserves. Collaboration between the IMF and Pakistani authorities is underway to address concerns regarding the currency market and other matters before resuming the ongoing bailout program. However, time is limited, with the program originally set to expire in June and significant progress unlikely before the upcoming general elections scheduled for October.
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Govt sets ambitious target of Rs72b from 4G license sales PROFIT
AHMAD AHMADANI
The government has outlined plans to collect a substantial amount of over Rs. 72 billion through the sale of 4G licenses, as part of its non-tax revenue projections for the fiscal year 2023-24. This figure represents a significant increase from the budgeted amount of Rs. 50 billion for the outgoing fiscal year, which was later revised upward to Rs. 74 billion. According to the budget documents for the upcoming fiscal year, the government has also allocated Rs. 10 billion from the mobile handset levy, maintaining the same budgeted amount as the previous year. However, it is worth noting that the revised amount for the current fiscal year stood at Rs. 8 billion. Under the category of income from property and enterprise, specifically from the Pakistan Telecommunication Authority (Surplus), the government projects to generate Rs. 1.628 billion in the next fiscal year. This reflects a significant decrease compared to the budgeted amount of Rs. 9 billion for the current fiscal year, which was later revised to align with the projected figure. In addition, the government has set a budget of Rs. 7.203 billion for the fiscal year 2023-24 from Regulatory Authorities (surplus/penalties). This marks a substantial increase from the initial budget of Rs. 695 million for the ongoing fiscal year, which was later revised to Rs. 438 million. These budgetary allocations indicate the government’s efforts to capitalize on the growth and potential of the telecommunications sector. By targeting significant revenue generation through the sale of 4G licenses and other sources, the government aims to enhance its financial resources and support the development of the telecommunications industry. The successful implementation of these revenue generation strategies will contribute to strengthening the government’s fiscal position and provide a boost to the overall economy in the coming fiscal year.
Decoding the budget: A simple question of revenue and expenditure CONTINUED ON PAGE 02
PROFIT
DANIYAL AHMAD
The Government of Pakistan has presented its proposed budget for the Fiscal Year of 2023-24 on Friday 9th of June. The budget outlines the government’s proposed spending and revenue generation for the upcoming fiscal year. The art of budgeting: a delicate balancing act The budget is a delicate balancing act between spending on essential services and investing in future growth. It involves matching expenses to revenues in a way that ensures the government’s spending is sustainable and aligned with its policy priorities. It requires careful planning and analysis to strike the right balance between current and development expenditure. Where will the money come from? The total resources for the federal budget 2023-24 are Rs. 14.460 trillion. The government plans to generate revenue through several sources, including Federal Board of Revenue (FBR), Non-Tax
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Revenue, Non-Bank Borrowing, Net External Receipts, Bank Borrowing, and Privatisation Proceeds. Federal Board of Revenue (FBR) refers to the tax collection agency of the government and accounts for Rs. 9.200 trillion or 63.6% of the total resources. Non-Tax Revenue refers to revenue generated from sources other than taxes, such as fees, fines, dividends, profits, etc. and accounts for Rs. 2.963 trillion or 20.5% of the total resources. Non-Bank Borrowing refers to borrowing from sources other than banks, such as National Saving Schemes (NSSs) and other non-bank sources. This category accounts for Rs. 1.906 trillion or 13.2% of the total resources. Net External Receipts refers to the net amount of external financing received by the government and accounts for Rs. 2.527 trillion or 17.5% of the total resources. Bank Borrowing refers to borrowing from banks through instruments such as Treasury Bills (T-Bills), Pakistan Investment Bonds (PIBs), and Sukuk bonds and accounts for Rs. 3.124 trillion or 21.6% of
the total resources. Privatisation Proceeds refers to the revenue generated from the sale of state-owned assets or enterprises and accounts for Rs. 0.015 trillion or 0.1% of the total resources. How will the money be spent? The total expenditure for the federal budget 2023-24 is Rs. 14.460 trillion and is divided into two main categories: Current expenditure and Development expenditure. The current expenditure is Rs. 13.320 trillion or 92% of the total expenditure and encompasses several subcategories such as Interest Payments, Pension, Defence Affairs & Services, Grants and Transfers to Provinces & Others, Subsidies, Running of Civil Govt, and Provision for Emergency and others. Interest Payments refers to the payments made by the government on its debt obligations and accounts for Rs. 7.303 trillion or 50.5% of the current expenditure. Pension refers to the payments made by the government to retired employees and accounts for Rs. 0.761 trillion or 5.3% of the current expenditure. Defence Affairs & Services refers
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to spending on national defence and military services and accounts for Rs. 1.804 trillion or 12.5% of the current expenditure. Grants and Transfers to Provinces & Others refers to grants and transfers made by the federal government to provincial governments and other entities and accounts for Rs. 1.464 trillion or 10.1% of the current expenditure.Subsidies refers to financial assistance provided by the government to support certain industries or sectors and accounts for Rs. 1.074 trillion or 7.4% of the current expenditure. Running of Civil Govt refers to spending on the day-to-day operations of civil government departments and accounts for Rs. 0.714 trillion or 4.9% of the current expenditure.Provision for Emergency and others refers to funds set aside for emergency situations or other unforeseen expenses and accounts for Rs. 0.200 trillion or 1.4% of the current expenditure. The development expenditure is Rs. 1.140 trillion or 8% of the total expenditure and includes two subcategories: Federal
PSDP (Rs. 0.950 trillion) and Net Lending (Rs. 0.190 trillion). Federal PSDP stands for Federal Public Sector Development Programme, which refers to spending on development projects at the federal level while Net Lending refers to lending by the government minus repayments received. A theoretical projection subject to change It is important to note that these figures are theoretical projections based on current information available at this time; actual numbers can fluctuate in course of year due to various factors such as changes in economic conditions or unforeseen events. While it is true that these are theoretical projections, it is also important to remember that budgeting now does make it harder for things to change through the year as it sets a framework within which spending decisions are made. The budget is a glimpse into the government’s vision and priorities for the country. It is a tool to achieve its goals and objectives. It is also a statement of accountability and transparency to the public. It is a document that deserves attention and scrutiny from all stakeholders.