Pakistan unveils $47 billion federal budget, allocates 41% to debt servicing

Pakistan's Finance Minister Miftah Ismail is presenting the annual budget 2022-23 in the National assembly on June 10, 2022. (AFP)
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Updated 11 June 2022

Pakistan unveils $47 billion federal budget, allocates 41% to debt servicing

  • Government sets an inflation target of 11.5%, raises salaries of employees by 15%
  • Country earmarks $7.4 billion for defense, $3.9 billion for development projects 

KARACHI: Pakistan’s Finance Minister Miftah Ismail on Friday presented Rs9.52 trillion ($47 billion) federal budget for fiscal year (FY) 2022-23, allocating around 40 percent to service the South Asian country’s foreign and domestic debts. 

Grappling with a widening current account deficit, currency depreciation and record inflation, the Pakistani government targets 5 percent GDP growth in FY23 that is lower than the 5.97 percent of the outgoing year. 

The budget is aimed at fiscal consolidation to convince the International Monetary Fund (IMF) to release the much-needed bailout payments for the cash-strapped South Asian nation of 220 million. 

“The total expenditures of the federal government will be Rs9,502 billion ($47 billion) out of which the debt servicing would be Rs3,950 billion ($19.5 billion), while for the next year, the PSDP (Public Sector Development Program) would be Rs800 billion ($3.9 billion),” Ismail said, while presenting the budget in the lower house of Pakistan parliament, the National Assembly. 

“For the defense of the country, Rs1.5 trillion ($7.4 billion) and for Civil administration’s expenditures Rs550 billion ($2.7 billion) have been earmarked, and for payments of pension Rs530 billion ($2.6 billion) have been allocated.” 

During his speech, Ismail said Budget 2022-23 was a “growth budget,” based on a well-thought-out strategy to boost economic growth, control inflation and increase revenue generation. 

The finance minister said the government had set an inflation target of 11.5 percent and a tax-to-GDP ratio of 9.2 percent. The fiscal deficit target has been set for 4.9 percent of the GDP, while the export target has been set at $35 billion. 

He said the government would provide targeted subsidies to protect the marginalized segments of the country in the next fiscal year. 

“To facilitate the public, a targeted subsidy of Rs699 billion ($3.4 billion) has been allocated, while in the form of grants, Rs1242 billion ($6.2 billion) have been included in BISP (Benazir Income Support Program) and Bait-ul-Mal [semi-autonomous charity organization].” 

The Federal Board of Revenue’s (FBR) revenue collection has been estimated at Rs7 trillion ($34.6 billion) for the next fiscal year.  

“This includes Rs4.1 trillion ($20.3 billion) share of provinces. The net revenue with the federal government will be Rs4,904 billion ($24.2 billion). The non-tax revenue will be Rs2 trillion ($9.8 billion),” Ismail said. 

The country has raised the tax rate on banking companies from 39 percent to 42 percent, including 3 percent “Super Tax,” which is expected to raise Rs15-20 billion ($74.2-$98 million) in revenue, according to the budget. 

The capital gains tax on the sale of immovable property has been increased to 15 percent, if sold within one year. This rate will become zero over the period of six years. Withholding tax on filers and non-filers on the acquisition of property has been increased to 2 percent and 5 percent, respectively.  

The finance minister announced that immovable property, meant to park money and valued above Rs25 million ($0.127 million), would be subject to a deemed tax. The income for such deemed tax would be 5 percent of the fair value of such property, he added. 

“The major part of the wealth of rich people is parked in the real estate sector in Pakistan. This is a double-faceted menace. It leads to the accumulation of unproductive assets and raises the prices of housing for the poor and lower-income groups,” finance minister said. 

“We intend to correct this imbalance. Therefore, all persons who have more than one immovable property exceeding Rs25 million situated in Pakistan shall be deemed to have received rent equal to 5 percent of the fair market value of the immovable property and shall pay tax at the rate of 1 percent of the fair market value of the said property. However, one house of each individual will be excluded.” 

The government has decided to impose an advance tax of 1 percent on foreign transactions through debit/credit cards, which would be 2 percent for non-filers. 

Speaking of the relief measures, the finance minister announced a 15 percent increase in salaries of government employees, along with the merger of ad hoc allowances. 

He said the tax exemption slab for salaried class has also been increased from Rs600,000 ($2,968) to Rs1.2 million ($5,937). 

“This step will benefit the salaried class and enhance business activities and consumption. The slab for business individuals and associations of persons has been also been increased from Rs 400,000 to Rs 600,000,” Ismail said. 

“Prime Minister Shehbaz Sharif wants to provide maximum relief to the people of the country, particularly those who are unable to bear the burden of rising inflation.” 

He also announced tax exemption on the import and local supply of solar panels, saying soft loans from banks would be arranged to purchase solar panels for people with less than 200 units of power consumption. 

Financial experts, however, believe the Rs7 trillion revenue generation target, which is 17 percent higher than the target in FY22, would be hard to achieve, owing to the slow economic growth.  

“It will be a challenge to achieve this target due to economic slowdown and lower collection from oil sales. Please note that tax collection (sales tax, duties, petroleum levy) from oil is roughly around 22 percent of total tax collection,” Muhammad Sohail, the chief executive of Topline Securities, a brokerage house, told Arab News. 

“Budget FY23 is an attempt to satisfy the IMF on key matters relating to revenue collection, subsidy reductions and attainment of fiscal discipline.” 

The IMF and Pakistani officials concluded talks last month, with the fund asking for bailout program objectives, including fiscal consolidation, to be put back on track. 

It is unclear when the global lender plans to consider clearing the release of over $900 million of the latest tranche of the $6 billion, 39-month program Pakistan entered in 2019. 

One of the key steps, a removal of costly fuel subsidies, has already been implemented by the government, with fuel prices being raised by 40 percent. 

Economists say they were not expecting an “expansionary budget” under the current situation. 

“The budget under the present circumstances couldn’t be expansionary. Debt servicing and defense alone take the largest chunk. The net tax and non-tax income of the federal government is too inadequate to meet current expenses, what to speak of the development outlay,” Dr. Ikram ul Haq, a Lahore-based economist, said. 

“The twin menaces of fiscal deficit, coupled with current account and trade deficits, are hard to counter in the coming days, given the high inflation and the unsustainable debt burden.” 

Industrialists and traders say the budget is contrary to the expectation of a tougher one. 

“The budget is not a difficult one as was expected. The government of the few months has presented a good budget,” said Zubair Motiwala, chairman of Businessmen Group at the Karachi Chamber of Commerce and Industry (KCCI). 

“We are thankful for removing duty on solar panels. The decision of a dispute resolution mechanism is a welcoming step it was our persistent demand. The decision of tax adjustment on industrial raw material is also a good one.” 

The federal government has allocated Rs24 billion for health sector and Rs17 billion for imparting training in the information technology (IT) sector, providing youth with laptops, improving network and promoting IT exports. 

Irfan Iqbal Shaikh, president of the Pakistan Chamber of Commerce and Industry (FPCCI), said presenting the budget in the current situation was a “daunting task.” 

“The FPCCI had given proposals for the budget and many have been accommodated in the budget. The GDP target of 5 percent for the next fiscal year is a right move,” he said. 

In ‘Saadhay 14 August,’ Pakistani playwright Anwar Maqsood brings heroes of independence to life 

Updated 6 sec ago

In ‘Saadhay 14 August,’ Pakistani playwright Anwar Maqsood brings heroes of independence to life 

  • ‘Saadhay 14 August,’ an ode to Jinnah and Gandhi, premiered in Karachi on Pakistani Independence Day
  • Play will also be performed in Islamabad and Lahore as well as several international destinations next year

KARACHI: A Pakistani stage production that spotlights the relationship between two leading figures of the Indian independence movement, Muhammad Ali Jinnah and Mahatama Gandhi, has received widespread applause from audiences in Karachi since it premiered there on the 75th anniversary of Pakistan’s birth. 
Written by renowned dramatist Anwar Maqsood, “Saadhay 14 August” is the last part of a trilogy that centers on events leading to the emergence of two independent nations, India and Pakistan, after the end of British rule in the Indian Subcontinent in 1947.
The play tries to imagine interactions between Pakistan’s founding father Jinnah and Indian independence icon Mohandas Karamchand Gandhi.
The previous two parts of the series were called “Pawnay 14 August” and “Sawa 14 August.”
“I didn’t write ‘14 August’ because Independence Day never came for me after August 14, 1947,” Maqsood told Arab News in an interview this week. “People do not really understand what independence truly means and I have tried to convey it in the play.”
Discussing the central theme of the new production, the platwright said it was an attempt to determine who was responsible for the division of the Subcontinent and “should be punished.” The drama then plays out as a court case that takes Jinnah and Gandhi to London, Lahore, Kashmir and New Delhi in search of the answer to the play’s central puzzle.
“We wanted to show a lighter side of the two leaders,” Dawar Mehmood, who directed the play, told Arab News.
“It was a huge responsibility to portray a big, national leader,” actor Omar Kazi, who plays Jinnah, told Arab News. “It was a new look, new style and a new aura … as opposed to the clichéd Jinnah in his Karakul cap. The play is also set in current times so he is supposed to behave in a manner that aligns with present times.”
Tanveer Gill, who has won audiences with his portrayal of Gandhi, said he worked really hard to get into his character.
“There is only so much you find about original Gandhi on YouTube,” he said. “To make this character [work], I observed and thought of positive, older people who used to be in my life. It was their positivity that helped me play the part.”
Veteran actor Sajid Hasan, who played a small role in the production, said Maqsood had “done us a very big favor” by turning the two characters into “real humans.”
“There is a little irreverence in Anwar [Maqsood] Bhai for which he has always been known,” he said. “But it is a brilliant take on the overall India-Pakistan situation.”
Musician Ali Hamza said such historical plays were needed in Pakistan and Maqsood was well placed to write on partition since he had witnessed it closely.
“He uses humor but what he feels in his heart is also reflected in [the play],” Hamza said. “This was so engaging and so on-point.”
Actor Fahad Mirza said “Saadhary 14 August” could be compared to any international stage production.
“I hope the world sees how much talent and skill we have,” he said. “It was so beautiful. There were times when people were horrified to see the scenes of partition and violence … Dawar [Mehmood] has nailed it and Anwar Sahib is at his best.”
“Saadhay 14 August” will be staged in Karachi until November 15, after which it will move to Lahore and Islamabad as well as to various international destinations next year.

In rare move, court orders ex-PM Khan aide’s police remand for another two days

Updated 17 August 2022

In rare move, court orders ex-PM Khan aide’s police remand for another two days

  • Dr. Shahbaz Gill was arrested last Tuesday over televised comments media regulator says were ‘seditious’
  • Senior PTI leader Fawad Chaudhry seeks judicial inquiry into alleged torture of Gill during police custody

ISLAMABAD: A local court in the federal capital on Wednesday remanded Dr. Shahbaz Gill, a senior Pakistan Tehreek-e-Insaf (PTI) leader and former prime minister Imran Khan’s chief of staff, in police custody for two days for investigation in a sedition case.

Gill was arrested last Tuesday afternoon, a day after he made a controversial comment in a talk show aired by a private news channel, asking army officers not to follow orders of their top command if they were “against the sentiments of the masses.”

The country’s national media regulator described the statement as “seditious” and said it was tantamount of inciting revolt within the military. The regulator also issued a show-cause notice to the channel, ARY News, for airing the “illegal” content. The channel has since been off air. 

Last Friday, after Gill had been in police custody for two days, the court sent him to jail on judicial remand, rejecting a request by the police to extend the suspect’s physical remand. Islamabad Advocate General Jahangir Khan Jadoon filed a plea in the Islamabad High Court on Saturday last week challenging the order and saying the physical remand of Gill was important to help complete the investigation.

Prosecutor Raja Rizwan Abbasi on Wednesday urged the court to allow physical remand of the suspect as investigators have yet to recover his mobile phone and conduct a polygraph test. In a rare move, the court accepted the demand for another round of police remand. 

“We are yet to investigate the person who approved the script [of what Gill said on TV show],” Abbasi told district and session judge Zeba Chaudhry during the hearing.

Gill’s counsel Barrister Salman Safdar opposed the prosecution’s plea for physical remand and said he had already faced torture by police last week.

“Shahbaz Gill has been tortured in police custody,” Safdar said, referring to a previous period of physical remand, adding that Gill was blindfolded when subjected to torture: “Even his private parts were tortured in custody.”

After hearing arguments from both the sides, the judge first reserved the verdict and later announced that Gill should be handed over to police on physical remand for 48 hours.

Meanwhile, senior PTI leader Fawad Chaudhry called for an independent inquiry.

“A judicial inquiry should be conducted and an independent board should be constituted on which both Shahbaz Gill and prosecution have the trust,” he told reporters.

PTI chairman Imran Khan wrote on Twitter he was “very concerned about Shahbaz Gill being sent into police remand again.”

“He is in a fragile state of mental & physical health because of the torture inflicted on him when he was abducted & taken to undisclosed location & then again at the police station,” Khan said.



Pakistan to host ten international cricket teams over next 4 years

Updated 17 August 2022

Pakistan to host ten international cricket teams over next 4 years

  • Cricket-obsessed Pakistan will also host Asia Cup and Champions Trophy during this period
  • Pakistan has struggled to convince international players to visit since attack on Sri Lanka team in 2009

ISLAMABAD: Pakistan will host ten test playing nations between 2023 and 2027, the Pakistan Cricket Board (PCB) said on Wednesday as it unveiled the country’s cricketing schedule under the next Future Tours Programme.

International cricket teams stopped visiting Pakistan after a 2009 attack on Sri Lankan players in Lahore and Pakistan hosted most bilateral international series in the UAE.

However, international matches partially resumed in May 2015, when Zimbabwe toured the South Asian country, followed by other international teams. 

Early this year, the Australian team visited Pakistan in February for their first cricket tour in nearly 24 years and later West Indies played three one day matches in Pakistan in June.

“The PCB has scheduled around 238 days of international cricket during the four-year period comprising 27 ICC World Test Championship fixtures (13 home and 14 away), 47 One-Day Internationals (26 home and 21 home) and 56 Twenty20 Internationals (27 home and 29 away),” PCB said in a statement.

“Pakistan’s FTP 2023-2027 reflects that it will play hosts to 10 out of 12 ICC Full Member nations for the first time in more than two decades.”

Pakistan will also host major cricket events like the Asia Cup and Champions Trophy. 

“Pakistan will host the Asia Cup 2023 and triangular series in February 2025 in the lead up to the ICC Men’s Cricket World Cup 2023 and the ICC Champions Trophy 2025, respectively, it will play 11 T20Is against the Netherlands, Ireland and England in the build up to the ICC Men’s T20 World Cup 2024, which will be jointly hosted by the United States and the West Indies,” PCB said.

“I am sure that our cricket fans will be delighted to know that top-ranked and attractive sides such as Bangladesh, England, New Zealand, South Africa, Sri Lanka and the West Indies will visit Pakistan to compete in matches for the ICC World Test Championship,” PCB Chief Executive Faisal Hasnain said.

Pakistan fulfills another FATF condition, makes currency declaration mandatory for air travelers

Updated 17 August 2022

Pakistan fulfills another FATF condition, makes currency declaration mandatory for air travelers

  • No passenger will be able to board a flight or leave the airport without submitting the declaration form
  • The global financial watchdog praised Pakistan for implementing its recommendations in its last meeting

ISLAMABAD: The Civil Aviation Authority (CAA) of Pakistan has made it mandatory for all incoming and outgoing passengers to fill out a currency declaration form, said an official statement on Tuesday, to meet yet another requirement of the Financial Action Task Force (FATF).
Pakistan has been on the international watchdog’s “grey list” of countries since 2018 due to inadequate controls over money laundering and terrorism financing.
However, the country moved closer to exiting the list in recent months after implementing FATF recommendations to strengthen its financial system.
The Paris-based international watchdog also praised Pakistani officials for making substantial progress while saying its team would soon carry out an onsite visit of the country.
The CAA notification on Tuesday said no passenger would be allowed to board a flight or leave the airport without submitting the declaration.
“For inbound flights, airlines are required to ensure in-flight announcement by the flight crew for every inbound flight for submission of subject declaration wherein the passengers will mention the currency under the regulatory requirement of FATF,” the notification informed.
“The said declaration will be deposited at the customs counter before the immigration desk at international arrival,” it added.
The CAA said airline staff and travel agents should provide a copy of the declaration form to all potential passengers who intend to be on an outbound flight while booking their tickets.
“At check-in counters, airlines are directed to issue boarding pass only once the passenger has deposited the declaration with the them,” the notification added.

Pakistan's finance minister criticizes manufacturers for importing parts instead of building them

Updated 17 August 2022

Pakistan's finance minister criticizes manufacturers for importing parts instead of building them

  • Miftah Ismail says cellphone manufacturers were only adding five percent value to their products
  • He points out that automobile manufacturers had not exported cars to lucrative destinations in 30 years

ISLAMABAD: Federal Minister for Finance and Revenue Miftah Ismail on Wednesday highlighted the structural problems of the country’s economy, saying that Pakistani companies preferred to import parts of their products instead of manufacturing them indigenously at home.

The government recently imposed a temporary ban on the import of luxury items since it was facing a massive current account deficit along with dwindling forex reserves and a rapidly depreciating currency.

The finance minister issued the statement against the same backdrop while addressing a conference of business leaders in the federal capital where he specifically mentioned the country’s cellphone and automobile manufacturers.

“We have given subsidies and 10 percent duty advantage to mobile industry to manufacture phones in Pakistan but their value addition is not more than five percent,” he said. “They get all of their parts from outside and only assemble them here. We have given double duty protection than its value addition and the same thing holds true for car manufacturing companies as well.”

Ismail noted that automobile manufacturers had been working in Pakistan for more than 30 years, but they had not exported vehicles worth a single dollar.

“Pakistani companies are selling inside the country only, though they should try to sell [their products] in rich markets of the United States, Europe and far eastern countries,” he added. “They sell locally to earn more profit because it is a protected market.”

The minister pointed out that out of Pakistan’s $30 billion exports, around $20 billion were generated by the textile sector.

“We import $80 billion worth of goods from abroad which is unsustainable,” he continued. “Our industries have to increase exports instead of only making local sales.”

Ismail also maintained that agriculture was the backbone of Pakistan’s economy, though he added it needed more innovation by adopting advanced Agri-Tech.

“My focus is to strengthen our agriculture as we have imported $450 million tons of wheat this year and more is still required,” he said.

The money spent on the import of wheat, the minister continued, could be used to support farmers and introduce latest technology in the sector.