Pakistan likely to present nearly Rs 9.5 trillion budget on Friday: Report
Islamabad: Cash-strapped Pakistan is likely to present a nearly Rs 9.5 lakh crore budget with 58% of the fund to be spent only on debt servicing and defence, according to a media report on Wednesday.
The budget, prepared on a highly ambitious target of a mere 4% increase in expenses but one-fourth surge in revenues, would be unveiled on Friday and the revenue increase was aimed at meeting a core condition of the International Monetary Fund (IMF), the Express Tribune newspaper reported.
Quoting sources, the report said the defence budget is estimated around Rs 1.53 lakh crore - up by Rs 73,000 cr or 5% over the revised budget of the outgoing fiscal year. The Ministry of Defence has already taken a Rs 80,000 cr supplementary budget last week for the outgoing fiscal year.
The federal government has finally agreed to exhibit a primary budget surplus of nearly Rs 20,000 crore by planning fiscal consolidation of nearly Rs 1.8 lakh crore or 2.2% of the Gross Domestic Product in the next fiscal year, the sources said.
The budgetary framework is projecting about 0.3% of the GDP primary budget surplus showing that its net income will be more than the expenditure, excluding debt servicing cost.
Earlier, during the Doha round of talks, the government had presented a primary budget deficit framework, which the IMF did not agree to.
A major chunk of the new budget the Rs 5.5 lakh crore or 58% of the budget will be spent only on two heads debt servicing and defence. There is an alarming increase of over Rs 80,000 crore or 26% increase in debt servicing cost in just a year. In the outgoing fiscal year, the share of these two components was half of the total budget. The defence services' share remained constant but the debt servicing has gone out of control.
Although the government will be aiming at close to a Rs 20,000 crore primary budget surplus, the finance ministry will still borrow Rs 4.6 lakh crore to run its operations, thanks to the nearly Rs 4 lakh crore debt servicing cost in the fiscal year 2022-23. This will be the highest-ever debt servicing cost in the history of Pakistan.
The sources said as against Rs 1.6 lakh crore estimated primary deficit in the outgoing fiscal year, the new budget may be unveiled with a primary surplus target of nearly Rs 20,000 cr. The Rs 1.8 lakh cr or equal to 2.2% of the GDP steeper adjustment will be challenging in an election year and chances of slippages will remain high.
Quoting sources, the report said that a budget of close to Rs 9.5 lakh crore has been prepared on the assumption of less than 4% increase in expenditures over the revised estimates of this year but one-fourth increase in income.
A senior official of the finance ministry agreed that these assumptions were ambitious but there was no other option due to the IMF's demand for showing primary budget balance.
The total size of the federal government expenditure is estimated around Rs 9.5 lakh crore, which is higher by nearly Rs 35,000 crore or 4% over this year's revised budget of over Rs 9 lakh crore. There was an increase of 11% in expenditures if compared with the original budget of Rs 8.5 lakh crore, which now has become redundant.
The current expenditures are targeted to grow only over 2% to Rs 8.6 lakh crore against the revised estimates, the sources said.
The debt servicing cost that was Rs 3.1 lakh crore this year will jump close to Rs 4 lakh crore -- an increase of Rs 80,000 cr or 26%. The domestic debt servicing will eat up nearly Rs 3.5 lakh crore, while another Rs 50,000 crore will be given for foreign debt servicing.
The government may drastically cut subsidies that are estimated near Rs 65,000 cr in the next fiscal year. These are down by Rs 85,000 cr or 60% over this year's revised estimates, the sources said.
The government has pitched the budget deficit target of 4.8% of the total size of the economy, or Rs 3.77 lakh cr, to the IMF for the next fiscal year.
But the major challenge for the finance minister would be arranging a record USD 41 billion in foreign loans in the next fiscal year to remain afloat. Pakistan would require repaying USD 21 billion foreign loans. It will need another USD 12 billion for current account deficit financing and USD 8 billion more for increasing foreign exchange reserves to USD 18 billion, the finance minister said.
Prime Minister Shehbaz Sharif on Tuesday said that his government would impose taxes on nonproductive sectors, particularly real estate.
Although the overall budget deficit is projected at Rs 3.8 lakh crore due to an anticipated Rs 80,000 crore provincial cash surpluses, the federal government will still have a Rs 4.5 lakh cr deficit, equal to 48% of the total size of the budget, the report said.
