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June 10 , 2022

Daily Times

Development Allocations Take a Hit in Rs9.5tr FY23 Budget

Islamabad: Finance Minister Miftah Ismail presented the budget for fiscal year 2022-23 (FY23) in the National Assembly on Friday.

This year the budget session was less chaotic than the last few presentations during the PTI-led government as there was no opposition present in the House since PTI members had tendered their resignations.

Ismail began his speech by bashing the previous PTI government, saying its policies had hurt the economy and damaged the lives of the country's masses.

"An inexperienced team brought the country to the brink. Different people presented the budget every year presenting different policies which hurt investor sentiment," the finance minister said, adding that his government had begun repairing the economy by taking the tough decisions that were the need of the hour.

Shortly after the budget was presented in the lower house of parliament, Prime Minister Shehbaz Sharif took to Twitter to assure the public that the government was prepared to take tough decisions in an effort to rectify "years of economic mismanagement".

"These are difficult times brought upon us by recent years of economic mismanagement. Through this budget, my government will steer our way out of these challenges by taking tough decisions while minimizing [the] impact on vulnerable segments of [the] population," he said.

Key budgetary proposals

Petroleum levy of Rs750bn proposed
No tax on salaries of up to Rs100,000 per month; previously minimum taxable salary was Rs50,000/month
Taxes proposed on real estate holdings (property valued over 25m) and capital gains on property sale
Minimum tax bracket for small-business persons to be raised from Rs0.4 million to Rs0.6m
15pc increase in salaries of government employees
Sales tax exemption on import of solar panels and distribution
Advance withholding tax will be collected from those sending remittances abroad via credit, debit and pre-paid cards
Advance tax will be increased on cars above 1,600cc
Exemption of complete custom duty on pharmaceutical ingredients
Rs51bn proposed for education projects
Rs24bn for health sector
People earning an annual income of Rs300 million or more per year are proposed to pay 2pc extra tax
Advance 2pc tax on the value of high-value hybrid and electric vehicles.

Budget outlay

The budget outlay this year is Rs9,502 billion, almost a trillion rupees higher than last year's outlay.

Current expenditure

The government has budgeted total current expenditure at Rs8,694bn for FY23, which is 15.5pc higher than last year's budgeted figure.

Defense expenditure is budgeted at Rs1,523bn, which makes up 17.5pc of total current expenditure and is 11.16 per cent higher than last year.

Interest payments, or debt servicing, budgeted for FY23 have risen a whopping 29.1pc from last year to Rs3,950bn — making up the single largest expenditure of the government, accounting for 45.4pc of total current expenditure.

Net federal revenue

Total revenue budgeted for FY23 stands at Rs9,004bn. After subtracting provincial transfer of Rs4,100bn as part of the National Finance Commission (NFC) Award, net revenue comes out at Rs4,904bn, nine per cent higher than last year.

FBR tax target

The government has set the tax collection target for the Federal Board of Revenue (FBR) at Rs7,004bn for FY23, which is 20.1pc higher than last year's Rs5,829bn.

Fiscal deficit

Fiscal deficit, or overall budget deficit, which is the difference between the government's total expenditure and revenue is calculated as: Gross Revenue at Rs9,004bn (minus) Transfer to Provinces Rs4,100bn (plus) Provincial Surplus Rs800bn (minus) Total Expenditure Rs9,502bn.

For FY23, overall deficit is budgeted at Rs3,798bn, which is 4.9pc of GDP. Last year, the deficit was budgeted at 6.3pc of the GDP.

PSDP

Total allocations for the Public Sector Development Program (PSDP) have been budgeted at Rs2,158bn for FY23, up just one per cent from Rs2,135bn last year.

Under this, federal PSDP makes up Rs727bn, which has gone down 19.2pc from last year's budgeted amount of Rs900bn.

Provincial PSDP for FY23 has been allocated at Rs1,432bn, an increase of 16pc from last year's budget of Rs1,235bn.

Growth target

"The problem of our economy is that growth is 3-4pc, but when it moves up to 5-6pc, our current account deficit goes out of control, because we give priority to the elite, which increases our imports. We need to adopt new thinking, to facilitate the lower-income section to increase domestic production," the minister said.

He said the government had to move towards "sustainable growth", adding that the growth target for next year was set at five per cent… Dawn

Courtesy https://www.dawn.com