Ishaq Dar to address post-budget press conference 10 June 2023

“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.

Unveiling the budgetary measures, Dar announced the government’s proposal to increase the salaries of government employees by 30pc-35pc and a 17.5pc in the pensions of the retired persons.

There would be a raise of 35pc in the salaries of employees from grade 1-16 and 30 per cent to grade 17-22 employees aimed at increasing their purchase power.

Besides that, the government proposed to fix the minimum pension at Rs 12,000 and raised the minimum monthly wage from Rs 25,000 to Rs 32,000.

The government has budgeted total current expenditure at Rs13.3tr for FY24, which is 53pc higher than last year’s budgeted figure.

Of that, defence expenditure constitutes Rs1.8tr, 15.4pc higher than last year’s budget, making up 1.7pc of GDP.

The government has projected a fiscal deficit of Rs7.57tr (7.1pc of GDP) for the upcoming year, which is the highest in history, surpassing the Rs6.4tr recorded during the current fiscal year. This will be partially offset by an anticipated Rs650bn provincial cash surplus, bringing the consolidated deficit to Rs6.9tr or 6.5pc of GDP.

Interest payments, or debt servicing, budgeted for FY24 have risen a whopping 85pc from last year to Rs7,303bn — accounting for 55pc of total current expenditure — making it the single largest expenditure of the government.

The tax collection target for the Federal Board of Revenue (FBR) has been set at Rs9.2tr, which is 23pc higher than last year’s target.

Following last year’s actual high inflation at 28.2pc, the government set a target of 21pc for the next fiscal year.

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.

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.

‘A difficult task’

Prime Minister Shehbaz Sharif said in a tweet that the budgeting for FY2023-24 was a “difficult task” given the “persistent challenges” that the government faced throughout the year like flood-related relief and rehabilitation, the disruption of the global supply chain, and the political instability in the country.

“Never-ending headwinds of political instability created by Imran Niazi damaged the economy and created uncertainty, as the country remained on the boil for well over a year,” the premier said.

The budget (FY23-24) represents the beginning of the process to fix the economy’s long-term ailments, he added, stating that the coalition government has prioritised the right areas that have the potential to spur economic growth, attract investment and make the economy self-sufficient.

“The government has provided relief to public sector employees and pensioners in the form of pay raise of up to 35pc and 17.5pc respectively, and increased minimum wage to Rs32,000,” he said.

He said that a budget that levies no new tax was not possible given the current economic constraints and economic reforms can only take place in a stable political environment.

“The economy direly needs reforms, which, in turn, can be undertaken in a stable political environment, for economic development is intrinsically linked to political stability,” he added.