Draft of Federal Budget with Over Rs6 Trillion Deficit Prepared for Presentation
Islamabad: The federal budget draft, which includes a deficit of over Rs6 trillion, has been prepared and is set to be presented in the cabinet for approval today. Subsequently, it will be presented in parliament later in the day.
The proposed budget suggests implementing new taxes amounting to Rs700 billion. The total budget outlay is expected to reach Rs14.5 trillion. Government employees may receive a significant boost with a 30% increase in their ad hoc relief allowances, along with a 20% hike in pensions.
Furthermore, there is a suggestion to raise the medical and conveyance allowance of government employees by 100%. The fiscal deficit target has been set at 7.7% of the GDP.
The estimated revenue collection target is Rs9.2 trillion, with the Federal Board of Revenue (FBR) assigned the task of generating Rs2.8 trillion in revenue. Approximately 55% of this revenue will be transferred to the provinces.
The federal government plans to allocate Rs950 billion for development purposes, including Rs200 billion for new projects under the public-private partnership mode.
The provincial development budget has been allocated a total of Rs1.55 trillion.
A proposal of Rs1.8 trillion has been made for defense expenditures.
Additionally, the FBR is expected to collect an additional Rs1.9 trillion in the upcoming fiscal year.
According to sources, the budget includes the imposition of new taxes on the property sector and company profits. The levy on petroleum products is also likely to increase. A standard sales tax rate of 18% will be imposed, along with a 25% sales tax on luxury items. The budget also proposes an increased duty rate on imported vehicles with a capacity greater than 1,000cc. Mutual funds and real investment trusts for non-filers will face a tax rate of over 30%.
Moreover, the budget suggests increasing the withholding tax on imported luxury goods and doubling the withholding tax for non-filers involved in property sector transactions.
There are three proposals under consideration regarding salaries and pensions of government employees. The first proposal suggests a 100% increase in medical and conveyance allowances, a 10% increase in salaries as ad hoc allowance, and a 10% increase in pensions. The second proposal suggests a 25% increase in salaries for all government employees from Grade-one to Grade-22, along with higher medical and conveyance allowances. Pensioners’ medical allowance and pensions should also be increased. The third proposal recommends a 30% increase in salaries for employees from Grade-one to Grade-16 and a 20% increase for officers of Grade-17 and above. Medical and conveyance allowances should be increased by up to 50%, while pensions should be raised by 20%. Additionally, the medical allowance for pensioners should also be increased.
Furthermore, there are proposals to increase Employees Old-Age Benefits Institution (EOBI) pensions and minimum wages.
The government’s budget is drawing significant attention as it faces the challenge of balancing fiscal adjustment reforms, as per the agenda set by the International Monetary Fund (IMF), while also considering the need for relief for the people ahead of the national election scheduled for early November. (With input from agencies)
Key Points:
- The federal budget for the fiscal year 2023-24 is expected to be around Rs14.5 trillion.
- The government is planning to impose new taxes worth Rs700 billion.
- The fiscal deficit target has been set at 7.7% of the GDP.
- The Federal Board of Revenue (FBR) has been assigned a target of generating revenue at Rs2.8 trillion.
- The federal government plans to spend a sum of Rs950 billion on development.
- An amount of Rs200 billion will be spent on launching new projects under the public-private partnership mode.
- The total provincial development budget has been allocated at Rs1.55 trillion.
- A sum of Rs1.8 trillion has been proposed for defence.
- New taxes will be imposed on the property sector and company profits.
- The rate of levy on petroleum products is likely to be increased further.
- A standard rate of 18% sales tax will be imposed in the budget.
- Sales tax of 25% will be charged on luxury items.
- It is proposed to increase the rate of duty on imported vehicles with a capacity greater than 1,000cc.
- It has been decided to tax more than 30% on mutual funds and real investment trusts for non-filers.
- It has also been proposed to increase the withholding tax on imported luxury goods.
- It has also been decided to double the withholding tax for non-filers engaged in property sector transactions.
- There are also proposals to increase the Employees Old-Age Benefits Institution (EOBI) pensions and minimum wages.
The budget is being keenly watched as the government is caught between painful fiscal adjustment reforms agenda set by the International Monetary Fund (IMF), and to make room for any relief to the people ahead of a national election scheduled for early November.
Published in PakWeb, June 9th, 2023.
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