June 12, 2023 (MLN): Federal Minister for Finance and Revenue Muhammad Aurangzeb is delivering the budget speech for the financial year 2024-25 in the federal cabinet session.

"It is a great honour for me to present the budget for the financial year 2024-25 before this honourable House. This is the first budget of the coalition government after the elections of February 2024," he stated.

"I am the leader of the political parties included in the coalition government under the leadership of Prime Minister Mian Muhammad Shahbaz Sharif, especially Mian Muhammad Nawaz Sharif, Bilawal Bhutto Zardari, Khalid Maqbool Siddiqui," he added. 

The total budget outlay for fiscal year 2024-25 is estimated at Rs18.877 trillion while the estimated revenue of FBR is Rs12.97tr, which is 38% more than the current financial year.

The federal non-tax revenue target will be Rs3.587tr and the net income of the federal government will be Rs9.119tr.

Background:

Mian Muhammad Nawaz Sharif in Pakistan in 1990 laid the foundations of the economic reforms, under the leadership of Prime Minister Muhammad Shahbaz Sharif, the homegrown reform agenda.

By overcoming the current economic problems, the speed of development will be increased.

Not long ago the economy of Pakistan was facing a difficult situation as the reserves held by the State Bank were only sufficient for imports for less than 2 weeks. In just one year, the value of the Pakistani rupee had decreased by 40%. Economic growth was close to zero, and inflation had reached such levels that people were rapidly falling below the poverty line.

It looked very difficult to get out of the situation. The IMF program was coming to an end in June last year, and there was much uncertainty about the new program.

A delay in the new IMF program could have created serious problems.

"I have to commend the previous government of Prime Minister Mr Muhammad Shahbaz Sharif who entered into a Stand By Arrangement agreement with the IMF," he stated. 

The measures taken under this program paved the way for economic stability and ended uncertainty.

The results of our continuous efforts in the last few months reassure us that we are moving in the right direction. Inflation, which is the focus of the Prime Minister and his team, eased to around 12% in May. Food items are now within the reach of the masses. Considering the challenges ahead, this is no mean feat.

Inflation is likely to come down further in the coming days. The exchange rate has remained stable. Our financial consolidation efforts are bearing fruit and investors are looking for investment opportunities in various sectors of the economy.

The announcement of interest rate cuts by the State Bank is a support and evidence of efforts to control inflation. Coalition of Prime Minister Muhammad Shahbaz Sharif for tireless work for the recovery of the economy. 

These achievements in the last year are not insignificant as a result of the country.

A crisis has emerged and a journey of lasting development has begun, the fruits of which will reach the people. These achievements are a sign of a better future.

"The need is that we accelerate the current pace of development to achieve the goal of economic self-reliance. It is not something that can be done overnight. For this, we need to work hard, work together with all institutions and people on a homegrown reform plan," 

“We are continuing our home-grown reform agenda with determination and determination, hoping that Pakistan will soon return to the era of Inclusive and Sustainable Growth. Everyone is well aware that the road is very difficult, we have limited options but as I have said before it is time for reform,” he said.

“I believe that it is high time that we give the private sector central importance in our economy, and make the people of Pakistan our priority rather than a few individuals,” he noted.

"For recent decades, we have been caught in the vortex of economic imbalance, due to the structural factors due to which investment, economic output and exports are under pressure," he added.

In the past, the state was burdened with unnecessary responsibilities due to which government expenditure became unsustainable. The public has to suffer the consequences in the form of inflation, low productivity and low-income jobs.

"We have to focus on public welfare through Targeted Welfare System Structure and subsidies that distort prices and efficiency will have to be minimized," he stated.

Steps have to be taken to make the sector viable. Reducing the cost of production is very important in these measures.

He also discussed the top priority of the government i.e. reduction of inflation. A year ago inflation reached 38 percent while Food Inflation was 48%.

In May 2024, Consumer Price Index was 11.8% while Food Inflation was only 2.2%. The government has worked tirelessly to bring inflation down to single digits and we will continue these efforts.

FBR

Unfortunately, Pakistan lags far behind other countries in terms of Tax-to-GDP Ratio. This is why tax reform is critical to our economic success. 

The Prime Minister is keeping a close eye on liberalization, tax policy and administrative reforms in the FBR, and has clear instructions not to burden those already in the tax net but to expand the tax net.

He also informed that the government has introduced merchant merchant-friendly scheme aimed at wholesalers, and retailers and will present it to the Cabinet. The Prime Minister has announced the closure of the PWD department as a first step towards Right Sizing.

Pakistan Regulatory Modernization Initiative

Simplification of the Regulatory Framework is very important to accelerate business activities in the country and increase exports.

In this regard, BOI has been initiated. The Pakistan Regulatory Modernization Initiative aims to simplify the government's regulatory framework and improve the business environment through automation to accelerate investment, exports and economic growth.

A large part of any government's budget is spent on the procurement of goods and services for ease and transparency in the system. Through procurements, the efficiency of the government can be improved as well as resources can be saved. According to research, government expenditure can be reduced by 10 to 20% through E-Procurement.

This system also helps in controlling problems like corruption, fraud and malfeasance in government procurements.

This system has been implemented in 37 ministries and 279 Procuring Agencies. Under this, procurement of Rs14 billion has been done by the federal government. The government has a firm intention to bring the entire governance within the framework of e-procurement this year.

The efforts in terms of expenditures and receipts are resources for the federal government's Human Resource Development, Social will help provide which Resources will be available for Protection and Climate Resilience.

Privatization

He was of the view that governments should not do business. The Prime Minister strongly believes in reducing government intervention in the commercial space and promoting the private sector.

That is why the government has made privatization a key priority. It will not only accelerate the ongoing privatization of institutions like PIA, Roosevelt Hotel, House Building Finance Corporation and First Women's Bank but also embark on a concrete program of offering other SOES for private sector investment. Special attention will be given to the transition to the sector In the following years SOES owned and managed the energy, financial and industrial sectors

In this context, "I would like to explain the details regarding the privatization of PIA. This privatization started in November 2023 with the appointment of Financial Advisor," he said.

The current government took this trend forward as soon as it assumed the reins of government in February 2024. In March 2024, PIA Holding Company was formed. After which the liability of Rs622bn was transferred from PIA.

Taking this trend forward, the Privatization Commission has invited Expression of Interest through advertisements in national and foreign newspapers for the privatization of PIA in April 2024. 12 companies expressed interest in the privatization of PIA.

The Board pre-qualified six (6) companies to the Privatization Commission. Bids will be invited from investors in the first week of August 2024 After that this series will reach completion.

According to International Best Practice-26, the government is outsourcing the major airports of the country.

This will provide better facilities to passengers on the one hand and on the other hand, the income from airports will increase. International Competitive Bidding will be done for Islamabad International Airport.

Bids in this regard will be received by Outsource before July 15, 2024. The outsourcing process of Lahore and Karachi airports will be started after a few months.

Pension

The federal government has an unfunded pension liability of trillions of rupees. Pension costs are increasing rapidly. Therefore, the rate of increase in these costs needs to be reduced.

The government has formulated a three-pronged strategy to reform this sector. In which a considerable extent of consultation has been completed.

As per international best practices, the existing pension scheme will be reformed. This will result in a substantial reduction in pension liability for the next three decades.

A pension fund will be established to manage the pension liability.

Salaries Increased

Due to inflation, people's purchasing power has been affected. The salaried class is particularly affected by this. This is the reason why the government realizes the difficulties of government employees despite their financial difficulties and relief measures are being taken for them.

To improve the purchasing power of government employees of grades 1 to 16, the salaries have been increased by 25%. While the salaries of officers from 17 to 22 grades are being increased by 20%.

Moreover, it is proposed to increase the pension of retired employees by 15%. (Corrected from 22% reported previously. Earlier budget document showed 22% while Aurangzeb in budget speech stated 15%)

Similarly, it is proposed to increase the minimum monthly salary from Rs32,000 to Rs37,000 (Corrected from Rs36,000 reported earlier).

Benazir Income Support Programme (BISP)

BISP is the cornerstone of our social security initiatives, providing essential cash assistance to millions of families across the country.

The current Coalition Government is determined to provide maximum support to the weaker sections. Through the budget of FY 2024-25, the support to the weaker sections will be continued through the BISP programme.

For the next fiscal year, the government will increase the allocation for BISP by 27% to Rs593bn for the developments.

The current number of beneficiaries under the sponsorship program will be increased from 9.3 million to 10m.

Cash transfers will also be increased to protect these families from the effects of inflation.

An additional 10m children will be enrolled in the scholarship program, bringing the total number of scholarships to 10.4m.

For the first time, BISP government is going to start a program under poverty graduation and skills development to promote economic inclusion and improve the economic condition of people.

Agriculture

Agriculture is the main pillar of our economy, contributing 24% to GDP and 37.4% to employment generation. The country's food security and industrial sector productivity depend on this sector.

Agriculture, livestock and fisheries are also major sources of earning valuable foreign exchange. The Prime Minister Muhammad Shahbaz Sharif announced the Markup and Risk Sharing Scheme for Form "2022 Mechanization under Kisan Package" in October.

It is proposed to allocate Rs5bn for this scheme next year. Private sector investment will be leveraged, making financing available for planters, tractors, harvesters and mobile grain dryers and help in increasing agricultural productivity and reducing wastage.

Power Sector

"The power sector is facing the challenge of revolving credit. This debt is now unaffordable," the Minister stated during the budget speech. 

Solving the complexities of the power sector is undoubtedly difficult because, from power generation, each level has its dynamics. There are difficulties at every level.

"I want to point out that the government has never been so committed to course correction in this sector and to solving these problems," he added.

During the current financial year, several measures have been taken to improve power distribution and as a result of these measures, we hope that there will be no increase in the Circular Debt Stock by the end of the year.

There will be no increase in Circular Debt Stock till the end. Campaign against electricity theft has saved Rs50bn.

Improving efficiency to reduce transmission and distribution losses. There is a plan to accelerate the privatization of 9 DISCOS and GENCOS. The campaign against power theft will be more organized and institutionalized.

Rs253 billion has been budgeted in the development budget for the energy sector.

Similarly, an amount of Rs5bn has been allocated for the project. Rs21bn have been proposed for the 1200 MW coal power plant at Jamshoro and Rs11bn for upgrading NTDC's systems.

The water sector is of critical importance for food security, affordable power generation and climate change mitigation.

This is the reason that Rs206bn has been allocated for water resources in the development budget of the next financial year. This investment will be invested in projects related to access to clean drinking water, agricultural productivity and hydel power.

Among these projects, Rs45bn for the Mohammedan Dam, hydropower project, Rs40bn for the Diamir Bhasha Dam, Rs18bn for the lift-cum-gravity project and It is proposed to allocate Rs10bn for the Re-modeling of the pit feeder canal in Balochistan.

Information Technology

In the next financial year, the federal government will pay special attention to the IT sector. Ability to give high returns in a short period through targeted investment in the IT sector.

"The skills and talents of the country's youth are second to none, which is the reason why IT exports will reach $3.5bn this year after the implementation of favourable policies by the government," Aurangzeb stated.

More than Rs89bn are being proposed for the IT sector in the financial year 2024-25. Which is the highest allocation for this sector so far. Enter this amount

Allocations continue for the following purposes:

Rs7bn are being allocated for digitization and reforms in the Federal Board of Revenue.

This amounts to the latest IT system will help in the government's efforts to expand the tax base and remove loopholes in the system.

Rs8bn were provided for the creation of an IT park in Karachi.

Rs11bn is allocated for the Technology Park Development Project Islamabad.

Pakistan Software Export Board (PSEB) is proposed to allocate Rs2bn this year compared to Rs1 billion last year. This amount is being kept for encouraging exporters of IT sector and internships of students in IT firms.

Rs20bn have been allocated for digital infrastructure information initiatives. 

The government plans to establish a National Digital Commission and a Digital Pakistan Authority to harness the potential of digital technologies for the socio-economic development of the country.

Over time, these institutions will play an important role in advancing digital transformation in various sectors, promoting digital solutions and innovations in wide adoption. Rs1 billion is being proposed for the establishment of these institutions.

Education

It is proposed to allocate money for improving infrastructure and educational facilities in 167 government schools in Islamabad.

To support the physical and mental development of young students, the government is introducing the School Meal Program to provide balanced and nutritious meals to students in 200 primary schools in Islamabad will be provided.

Recognizing the importance of digital literacy, the government has equipped schools with Smart Screens, Chromebooks, Tablets and internet Equipped with facilities

Digital interventions and blended learning are intended to be introduced. Additionally, e-libraries will be established to promote a culture of learning and research.

16 degree colleges in Islamabad are NUML, NSU, NUST and High scorers in collaboration with reputed universities like COMSATS will be converted into training institutes. These institutions are for the youth.

To provide access to quality education to disadvantaged and poor students, an education voucher scheme was introduced for students studying in private schools.

Early childhood education centres will be established in 100 schools to give young children a strong start to education.

Introducing pink buses for the travel of students from rural to urban areas is being done.

On the direction of the Prime Minister, the program of Danish schools is being extended to Islamabad, Balochistan, Azad Jammu and Kashmir and Gilgit-Baltistan.

Overseas Pakistanis

Overseas Pakistanis are the backbone of our economic structure and their remittances play an important role in the economy. The government is introducing several facilities to help expatriates:

For the promotion of remittances sent by overseas Pakistanis, it is proposed to allocate an amount of Rs86.9bn in the budget for reimbursement of TT charges.

This money will be used for the Sohny Dharti Scheme and other schemes.

An effective Complaint Resolution system will be created for timely redressal of complaints. An international call center was also established for this purpose.

The Mohsin Pakistan Award is being introduced to recognize the exceptional services of Pakistanis living abroad.

Other similar initiatives indicate the government's commitment to support overseas Pakistanis and leverage their contribution to national development.

Exports

Despite efforts to promote exports in the past, there has been no substantial increase in exports.  Considering the importance of the sector through EXIM Bank, the amount allocated for refinance scheme increased from Rs3.8bn to Rs13.8bn.

These measures are expected to increase the portfolio from Rs100bn to Rs280bn. Rs549bn export credit will be provided through the State Bank of Pakistan.

 The Prime Minister has directed to ensure that at least 20% of this facility should be focused on the SME sector.

Under the government's SME Strategy, credit for SMEs will be increased from Rs540bn to Rs1.1tr of which one Rs100bn will be added during the next financial year.

In future, this step will provide an important lifeline to Pakistan's export sector. Additionally, the government will pay the long-pending DLTL claims in a phased manner. A risk-sharing scheme is also being devised to help exporters.

Foreign investment & CPEC

Foreign investment is important for our balance of payments and for enhancing Pakistan's reputation. In this regard, discussions and efforts with brother and friendly countries are at an advanced stage.

He also acknowledged the role of SIFC in leading the process of bringing investment from GCC countries in sectors like agriculture, livestock, mining and tourism.

He also mentioned the visit of the Prime Minister of Pakistan to China in this connection. CPEC was to be done in this phase. The objective of Rejuvanate's CPEC (Phase-II) visit is to provide opportunities for Chinese companies to invest in Pakistan through the Special Economic Zone.

The Prime Minister's delegation for the visit to China included representatives of 97 important companies of Pakistan. In this regard, a conference was held in Shenzhen, China.

Thirty-one B2B (31) MoUs were signed with Chinese companies related to energy culture, IT, pharmaceuticals, agriculture and food sectors.

They are related to sectors like Iron and Steel, Mobile Solar Cells, EVs and Automobiles, Manufacturing and Textiles. Simultaneously BOI with six different Chinese entities MoUs have been signed for B2B Collaboration.

Climate Change

Pakistan is highly vulnerable to the effects of climate change, and the government is working on many initiatives to strengthen climate mitigation efforts including the implementation of climate mitigation and adaptation measures to ensure the Pakistan Climate Change Authority

A National Climate Finance Strategy should be prepared by October 2024 which aims to bring Global Climate Finance to Pakistan.

Gender has been tagged in the Budgeting and Accounting system of government and Climate Budget which will help in policy making and implementation regarding these sectors.

The government is allocating Rs4bn for E-Bikes and Rs2 billion rupees for energy-saving fans.

Karachi's infrastructure

Karachi is not only the largest city in the country but also plays a key role in the economic development of the country.

"Therefore, it is very important to take Karachi's infrastructure towards innovation in consultation with all stakeholders," the finance minister said.

A comprehensive Karachi package is proposed for this. Along with this, it is proposed to prepare plans for Hyderabad, Mirpur Khas, Sukkur and Benazirabad. Similarly, a significant amount is proposed to be earmarked for the 4-K project to improve the water supply to Karachi so that this important project can be taken towards completion.

Subsidy

An amount of Rs1.363te has been allocated as a subsidy for electricity, gas and other sectors.

Total grants amounting to Rs1.777tr were mainly earmarked for promoting AJK BISP, Gilgit-Baltistan, Khyber Pakhtunkhwa merged districts, HEC, railways, remittances and IT sector.

Enforcement for Non-Filers

It has been proposed to bar exit from Pakistan of such persons with exceptions for Hajj and Umrah travellers, minors, students, overseas Pakistanis and such other classes of persons as notified by the Board.

In case the implementing agencies do not block sims or disconnect utility connections or do not comply with bar on foreign travel, a penalty of Rs100m will be imposed upon the implementing agency for first default and Rs200m for each subsequent default.

Penalties and prosecutions are proposed for entities failing to fully disclose relevant particulars or submitting incomplete information in their tax returns or failure to file return on discontinuation of their business.

Further, penalty of sealing of shop is being proposed for traders and shopkeepers who fail to register under a scheme such as Tajir Dost Scheme. Further, failure to register by a shopkeeper or trader is proposed to be made an offence punishable on conviction with imprisonment for six months or with fine, or both.

Concession on Imports for Promotion of Aquaculture

To promote shrimp and fish farming for the development of aquaculture and given the objectives of food security and increase in exports, along with the import of seed and feed for the breeding of fish and shrimp, farming, breeding, concessions are being given on import of feed mill and assaying units.

Discount on import for promotion of Solar Panel Industry

Concessions on import of plant, machinery and associated equipment and raw materials and components used in the manufacture of solar panels, inverters and batteries for export and for manufacturing solar panels to meet local needs. are being given to reduce dependence on imported solar panels and save valuable foreign exchange.

Abolition of customs duty exemption on import of hybrid vehicles

In 2013 customs duty on the import of hybrid vehicles was discounted due to the huge price difference between hybrid and normal vehicles due to new technology.

At present, the difference between the prices of both types of vehicles has narrowed down and the production of hybrid vehicles has started locally. 

Federal Excise Duty (FED):

The proposed budgetary measures of Federal Excise Duty (FED) for FY 2024- 25 are as follows:

• Imposition of FED on acetate tow at Rs44,000 is proposed.
• Imposition of FED on nicotine pouches at Rs1,200 per kg.
• Enhancement of FED on e-liquids is also proposed.
• FED @ Rs15 per kg on supply of sugar to manufacturers.
• The rate of FED on cement is being enhanced from Rs2 per kg to Rs3 per kg.
• FED on commercial properties and first sale of residential properties at 5%.
• The rate of FED on filter rods is to be enhanced from Rs1,500 per kg to Rs80,000 per kg.
• Power to seal the business premises of retailers selling illicit cigarettes.
• Exemption from FED to diplomats and diplomatic mission.
• The price threshold for locally manufactured cigarettes increased from Rs9,000 to Rs12,500.

Salient features of the budget for FY25

• The economic growth rate for the fiscal year 2024-25 is expected to be 3.6%.
• The average rate of inflation is expected to be 12%.
• The budget deficit will be 6.9% of GDP while the primary surplus will be 1.0% of GDP.
• FBR revenue is estimated at Rs12.97tr which is 38% more than the current financial year.
• The share of the provinces will be Rs7.438tr.
• The federal non-tax revenue target will be Rs3.587tr.
• The net income of the federal government will be Rs9.119tr.
• The total expenditure of the federal government is estimated at Rs18.877tr out of which Rs9.775tr is interest payment will be made.
• A budget of Rs1.4tr has been allocated for PSDP
• An additional Rs100bn has been allocated through a public-private partnership.

The total development budget is at the highest level in history is Rs1.5tr. Rs2.122tr will be provided for defence needs and Rs839bn will be allocated for civil administration expenses. Rs1.014tr has been allocated for pension expenditure.

Copyright Mettis Link News 

Posted on: 2024-06-12T18:01:06+05:00