The administration will present the upcoming 2023–24 budget on Friday (today), which will have a larger consolidated budget deficit of more than 6% of GDP.
Additionally, it will provide money for a variety of focused campaigns to entice voters in the upcoming general elections. The government has set the FBR’s tax collection objective at Rs. 9.2 trillion and the nontax revenue target at Rs. 2.7 trillion with a budgeted outlay of Rs. 14.7 trillion.
In order to raise the Petroleum Development Levy (PDL) from Rs. 50 per litre to Rs. 55–60 per litre and raise Rs. 870 billion in the next budget, instead of the revised estimates of Rs. 550 billion for the current fiscal year, the government plans to secure powers by amending the finance bill.
The economic managers will continue to suffer from the budgetary numbers’ lack of credibility because they will keep fluctuating throughout the fiscal year.
In order to get a new bailout package from the IMF if a new government is elected following the next round of general elections, it will be necessary to present a mini-budget and match economic realities with the IMF.
Ishaq Dar To Present 2023-24 Budget
It is unclear how Finance Minister Ishaq Dar will try to persuade the IMF to restart the stalled program; if this impasse persists, the State Bank of Pakistan’s (SBP) declining foreign exchange reserves, which have already dropped to below $3.9 billion, may be put in jeopardy.
The signing of the staff-level agreement will be dependent on meeting three requirements, including obtaining $6 billion in external financing, releasing the upcoming budget in accordance with the IMF’s guidelines, and ensuring a market-based exchange rate. All three requirements must be met in order to proceed.
There is no chance of a further extension, as stated by the finance minister in his presser on the occasion of the release of the Economic Survey for 2022–2023 on June 30, 2023, the final date of the IMF program.
Because adjustments are made frequently throughout the course of the year, there is a trust gap about the integrity of the budgetary statistics, so a realistic budget for the upcoming fiscal year must be presented.
On August 12, 2023, the term of the government, which is led by the Pakistan Democratic Movement (PDM), will come to an end.
In contrast to the amended allocation of Rs. 116 billion for the current fiscal year, the government has approved the allocation of Rs. 90 billion for the next budget’s SDGs Achievement Program (SAP) execution.
The government’s top objective will be to ensure the payment of external debt, which will cost $25 billion in the upcoming budget.
When the government only managed to acquire little more than $8.1 billion in the first ten months of the current fiscal year, out of the entire budgeted sum of $22.8 billion, in the form of foreign loans and grants, it is still unclear how it proposes to generate such a staggering amount.
Because the federal government’s overall net revenue sources are insufficient to cover the costs of debt payment, the budgetary restrictions provide significant hurdles.
After allocating funds to the provinces and accounting for nontax revenue, the federal government’s total net receipts will amount to Rs. 6.5 trillion.
A total of Rs. 7.5 trillion would be spent on debt servicing. Thus, a deficit of Rs. 1,000 billion will be experienced by the federal government.
All other expenditure categories, including those for defence, salaries, pensions, running the civil government, subsidies, grants to public sector businesses, and others, must be funded through borrowing.
During the survey’s launch, the finance minister stated that the government would make every effort to raise salaries, pensions, and the minimum wage for workers in the budget for FY2023–2024.
To cover the enormous budget deficit for the upcoming fiscal year, Pakistan will need to borrow between Rs. 7,500 and Rs. 8,500 billion in domestic and foreign loans.
Deep-seated structural adjustments will be required to move the economy out of crisis mode because there are no simple fixes in the near future.
To read our blog on “Budget for FY23-24, all anticipated tax and debt increases,” click here.
