KARACHI: Pakistan’s finance minister Ishaq Dar presented the federal budget for the next fiscal year with a total outlay of Rs14.46 trillion ($50.4 billion), aiming for a 6.5% deficit and allocating approximately 50% for interest payments.
In his speech at the National Assembly, Dar criticized the previous administration led by former prime minister Imran Khan, holding it responsible for the current economic turmoil in the country.
Pakistan is currently grappling with major financial challenges, including depleting foreign exchange reserves, a declining national currency, and runaway inflation.
“The overall federal expenditure will be Rs14.46 trillion, with Rs7.30 trillion allocated for interest payments during the next fiscal year,” stated the minister.
He mentioned that the government set a revenue generation target of Rs9.2 trillion through the assistance of the Federal Board of Revenue (FBR) and Rs2.9 trillion through non-tax measures.
The government aims for a fiscal deficit of 6.54% in the next financial year, with an overall federal deficit of Rs6.92 trillion.
“The primary balance would be 0.4% of GDP,” Dar added.
In terms of allocations, he revealed that Rs1.15 trillion were earmarked for the Public Sector Development Program, including Rs200 billion through public-private partnerships.
The budget also allocated Rs1.8 trillion for defense, Rs714 billion for civil administration, and Rs1 trillion for subsidies in the electricity and gas sectors.
The finance minister informed the government had set a “modest GDP target” of 3.5% for the next year, focusing on the element of the real economy.
Dar said the country had averted default due to the efforts of the ruling coalition.
“The government has met all the conditions of the IMF program under the ninth review,” he continued. “That is why it has continued talks with the IMF on a regular basis.”
The ongoing IMF bailout program is set to expire toward the end of the month, with a pending amount of about $2.5 billion.
The IMF has asked the government to arrange approximately $6 billion from friendly nations to close the financing gap and to adopt a market-based exchange rate and a budget aligned with its program objectives.
To address rising inflation, Dar announced an increase in ad hoc relief allowance of 35% for government employees from grades 1 to 16 and 30% for employees falling between grades 17 and 22.
The government also raised pensions by 17.5% and set the minimum pension at Rs12,000.
The minimum wage in the capital territory, Islamabad, was also increased from Rs25,000 to Rs30,000.
The finance minister stated that the coalition government aimed to reduce inflation to 21% in the coming financial year.
He announced several relief measures, including a reduction of customs duty from 10% to 5% on non-localized heavy commercial vehicles and the removal of regulatory duty on second-hand clothing to support the poor segment of society.
Dar also highlighted incentives for the manufacturing of solar panels and related equipment through the exemption of customs duties on machinery and equipment imports.
He said the government aimed to strengthen the information technology sector and its exports by allowing duty-free import of IT equipment equivalent to 1% of the value of export proceeds.
