- Proposed budget likely to envisage revenue collection target of Rs11tr, deficit target of Rs9tr
- Budgeting process for next financial year to be started from ongoing month of December
ISLAMABAD: The federal government has started preparations for the upcoming fiscal year 2024-25 with a proposed budget of a whopping Rs16,500 billion (Rs16.50 trillion) outlay and a financial deficit target of Rs9 trillion.
According to sources in the Ministry of Finance privy to the development, the ambitious figure will come with a likely tax collection target of Rs11 trillion, representing a 12% increase over Rs9.4 trillion in 2023-24.
The process of budgeting for the next financial year will start from the ongoing month of December and the finance and planning ministries will start seeking demands as well as recommendations from other ministries and divisions.
These recommendations will be formulated and finalised in the context of policy measures and objectives agreed with the IMF.
The Federal Board of Revenue (FBR) has already surpassed the revenue collection target for the fifth consecutive month in the ongoing fiscal year, collecting nearly Rs3.5 trillion and has been well in a position to achieve the target set by the International Monetary Fund (IMF) and avoid the need for any mini-budget.
The FBR has collected Rs34 billion more than the target set for the July-November period of this fiscal year on the back of an exceptionally healthy increase in direct taxes.
While the targets have been agreed upon in principle between Pakistan and the International Monetary Fund (IMF), sources confirmed that they will be finalized during the official budgeting process. This crucial stage is set to be kicked off on Monday with the arrival of an IMF technical team for the second round of negotiations.
Upon return from the oversea trip, caretaker Finance Minister Dr Shamshad Akhtar will convene a meeting with the IMF team next week. This gathering will delve deep into the technical team’s recommendations, ensuring alignment with Pakistan’s economic goals. The proposed budget marks a significant increase compared to the current fiscal year’s revised estimates.
This surge reflects the government’s commitment to bolstering economic growth and tackling the ever-present challenge of fiscal deficit.
The ambitious tax collection target also underscores the government’s resolve to broaden its revenue base and reduce reliance on external borrowing. Achieving this objective will be critical in mitigating the fiscal burden and paving the way for sustainable economic development.
The sources revealed that a huge amount of Rs2.10 trillion likely to be allocated for defence in the next financial year’s budget, as compare to defence allocation of Rs1.80 trillion in the current fiscal year.
They continued that the target of transfer to the provinces was likely to be fixed at Rs5.32 trillion while the volume of the Public Sector Development Programme (PSDP) is expected to be set at Rs780 billion during the FY 2024-25, against a sum of Rs301 billion allocated for PSDP during the FY 2023-24. However, there was a significant gap between the authorisation and actual expenditures, underscoring the challenges in the release process, slow progress on schemes, and the capacity to spend the allocated funds.
It is to be recalled that the IMF had deemed Pakistan’s PSDP for 2023-24 as “unaffordable” mainly due to limited fiscal space, noting a total cost of Rs12 trillion to complete approved projects, requiring over 14 years.
The federal government exceeded the budget deficit target by 47%, or Rs2.1 trillion, which skyrocketed to Rs6.68 trillion in fiscal year 2022-23, against the set target of Rs4.54 trillion.
FY23 was one of the worst years in terms of fiscal operations as the coalition government undertook many steps which were not in line with prudent fiscal management.
However, in third quarter of the current fiscal year, the caretaker government took measures such as slashing subsidies and postponing development spending to reduce the overall deficit and meet the IMF’s primary surplus objective.
Strategies including debt re-profiling, expenditure reforms and broad-based taxation have been proposed to mitigate these deficits and manage inflation, government borrowing, growth, as well as future financial obligations.