With the looming elections in mind, the coalition government presented an expansionary budget for fiscal 2023-24 late Friday evening, increasing salaries for federal government employees by a massive 30-35 per cent, increasing development expenditures by 33pc, and announcing tax incentives for agriculture, information technology, construction and industry. It balanced these with increased tax rates for non-filers, an increased tax burden on capital markets and a projected higher yield from petroleum levy.
Curiously, despite the difficulties it continues to face in convincing the International Monetary Fund (IMF) to start seeing its way, it also budgeted a $2.4 billion inflow from the lending agency for next year. “No new tax is being imposed this year, and the government has tried to provide as much relief as possible,” Finance Minister Ishaq Dar announced at the beginning of his budget speech, which continued without the customary interruptions thanks to a ‘friendly’ environment in the National Assembly, which is currently devoid of any real opposition.
Even though the finance minister insisted that all conditions of the IMF had been met and that a staff-level agreement over the 9th review can be signed at the earliest, the budget documents indicated no inflows from the IMF for the remainder of this year.
Surprisingly, they did provision for a $2.4bn (Rs696bn) injection the next year as part of the about $24bn (Rs6.87trillion) in external loans that the government plans to raise.
The external borrowing projections for the next fiscal are 114pc higher than the actual Rs3.2tr of inflows recorded this year. The government expects a total of $5bn in inflows from Saudi Arabia, including $3bn in time deposits and $2bn fresh deposit, compared to about $2bn received this year.
The government has also targeted $1.5bn in international bonds, $4.5bn from international commercial loans, and about $4bn from China’s SAFE deposit, which is almost double the amount received from China this year. Most of these loans would remain subject to Pakistan re-entering the IMF umbrella, as the prime minister expects their materialisation on the basis of his engagement with the managing director of the fund.
Also read: https://newsguru.pk/finance-minister-ishaq-dar-to-present-budget-2023-24-at-4pm/
The government’s hopes for the continuation of the IMF programme seem to be banking on a negligible change it has made in power sector subsidies (Rs894bn for the next fiscal against Rs870bn in the current year).
The major chunk of these subsidies would go to K-Electric and Independent Power Producers (IPPs) — Rs315 and Rs310bn respectively — leaving only Rs150bn for the tariff differential subsidy (TDS) for consumers of other Discos, down from about Rs225bn this year.
KE’s TDS has, on the other hand, been racked up to Rs315bn for next year against Rs193bn this year, an increase of 63pc. In sum, this will mean the national average electricity tariff will go further up.
The allocation for overall subsidies has been brought slightly down for next year to Rs1.074tr against actual subsidies of Rs1.1tr this year. But then, the budget last year had set aside only Rs664bn for subsidies, which were almost doubled as the year passed.
The increase in salaries and other benefits for government servants is the highest in about a decade — likely a signature PPP move, as the party had previously announced a 50pc increase in salaries in its previous tenure.
The finance minister has announced a 35pc increase in ad-hoc relief for grades 1-16 and 30pc for grades 17-22. On top of that, outstanding travelling and daily allowances and additional charge allowances have been increased by 50pc, orderly allowance for officers raised by 43pc, and a 100pc increase has been made in the special conveyance allowance for the disabled. In addition, constant attendant allowance (military) and authorised pensioners’ driver allowance have also been increased by 50pc.
It bears pointing out that the percentage increase in salaries and allowances announced is much higher than the core inflation rate of 16-18pc, which the minister had mentioned just a day earlier, and also higher than the average inflation rate of 29pc for the outgoing year.
