The incumbent coalition government on Friday unveiled a Rs. 9.5 trillion budget for the financial year 2022-23, with Finance Minister Miftah Ismail saying it aimed to stabilize the struggling economy and control inflation galloping. However, the stabilization measures are likely to cause further price increases, raising questions about their effectiveness for the general public.
Unlike previous budget speeches, which tended to be marred by opposition slogans and protests, this year’s speech saw no resistance from the “friendly” opposition, made up mostly of MPs dissidents from Pakistan Tehreek-e-Insaf. Stressing that the incumbent government was continuing the projects started by the ousted PTI regime, Ismail nevertheless criticized his predecessor’s policy, lamenting that it failed to focus on inclusive growth and led to record inflation.
“The problem with our economy is that growth is 3-4%, but when it hits 5-6% our current account deficit spirals out of control as we prioritize the elite and increase our imports to facilitate them” , he added. said. “We need to adopt a new perspective focused on relieving the weakest sections of society to increase domestic production,” he said, adding that the government wanted to encourage local production.
“We will increase agricultural production to increase arable products and increase yield per acre while also focusing on developing industries, which can help increase the country’s exports,” he said, noting that Prime Minister Shehbaz Sharif wanted to provide maximum relief. to the public through targeted grants.
“The series of tough decisions is not over yet,” he warned, adding that the goal was to convert the primary deficit into a primary surplus. Admitting that rising energy and fuel prices would spur inflation, he said it was necessary to overcome the “devastation” caused by the mismanagement of the previous government.
According to the finance minister, the collection target of the Federal Board of Revenue (FBR) for the next financial year was Rs. 7,004 billion, with the provinces to collect Rs. 4,100 billion. He said the federal government’s net revenue is expected to be Rs. 4,904 billion, with non-tax revenue forecast at Rs. 2,000 billion, against expenditure of Rs. 9,502 billion. He said Pakistan should spend Rs. 3.95 trillion on debt servicing. He said government debt in the outgoing fiscal year stood at 72.5% of GDP, having hit Rs. 44.365 billion in March 2022.
Among the revenue-generating measures, he said, the tax imposed on non-filers would be doubled. The new budget, he said, proposed to increase the advance tax rate on the purchase and sale of goods for filers from 1% to 2%, and for non-filers to 5%.
In a move towards taxing landed properties, Ismail said anyone with real estate valued at Rs. 25 million or more would be considered earning additional income to the tune of 5% of its value. He said the government would levy a 1% tax on this income, adding that a person who owns real estate for more than a year would be subject to a 15% capital gains tax which would be reduced to 0. after six years.
As part of the targeted subsidies proposed by the government, it has been proposed to increase the total allocation of the Benazir Income Support Scheme (BISP) for the incoming financial year from Rs. 250 billion to Rs. 364 billion. As part of this, Ismail said, nine million poor families would receive direct deposits through the Benazir Kafalat cash transfer program with an allocation of rupees. 266 billion. Likewise, he said, the subsidy for the Utility Stores Corporation would be increased to Rs. 12 billion.
The minister said that the Benazir Taleemi Wazaif program would be extended to 10 million children against a stipend of rupees. 35 billion; more than 10,000 students would be granted undergraduate scholarships against the award of Rs. 9 billion. He said the Benazir Nashonuma program would be extended to all provinces with funding of Rs. 21.5 billion, adding that Baitul Maal would allocate Rs. 6 billion for medical treatment of the poor.
Education and Energy
Ismail said Rs. 65 billion had been allocated to the Higher Education Commission in addition to Rs. 44 billion for development projects. “We are trying to convince the provinces to put more emphasis on the development of higher education,” he said.
On energy, the minister stressed that improving power generation, transmission and distribution was a priority for the incumbent government and Rs. 73 billion had been allocated to achieve this, of which Rs. 12 billion to accelerate the construction of the Mohmand dam.
He said Rs. 71 billion had been allocated to pay arrears in the oil sector, adding that the gas tariff for the industrial sector would be announced soon. The government, Ismail said, had allocated Rs. 214 billion in additional grants for the first three months of the incoming fiscal year to reduce the burden of electricity tariffs on the public. In total, he said Rs. 570 billion had been allocated to the power sector.
In a key move, the finance minister said the annual income tax threshold had been raised from Rs. 600,000 to Rs. 1.2 million, adding that this meant there was effectively no no income tax for individuals earning up to Rs. 100,000 per month. The government has also proposed to increase the corporate banking tax to 39%, including 42% super tax.
He said foreign nationals doing business in Pakistan should also pay taxes, adding that the focus was on raising taxes on non-filers, including doubling taxes for vehicles over 1. 600cc. The government has proposed an advance tax on 1,600cc cars and an additional 2% tax on cars with electronic engines, he said, while noting that the tax on the Behbood Savings Certificate and the pensioners’ benefit account had been reduced from 10% to 5%.
Ismail said the government was fixing the levy on small retailers, in the range of Rs. 3,000 to 10,000, adding that it would be added to their electricity bills. He said filers who send money overseas using credit, debit or prepaid cards would have to pay a 1% withholding tax, while non-filers would be charged 2% d tax, he said.
The finance minister said the government has offered to provide easy installment loans to families using less than 200 units of electricity for the purchase of a solar panel. The government is also considering abolishing the sales tax on agricultural machinery and seeds, he said.
On the health sector, Ismail said the proposed budget for the health sector would be over Rs. 24 billion, less than the outgoing budget. Among the ongoing PTI-led projects is the Naya Pakistan Housing Authority, which was awarded Rs. 500 million, compared to Rs. 30 billion in the outgoing financial year. The minister also said that non-resident Pakistanis would be required to become taxpayers in Pakistan unless they are tax residents of their country of residence.
The defense budget saw a massive hike of nearly 11% from Rs. 1.37 trillion rupees. 1.523 trillion. Disturbing for inflation rates, the government has set a non-tax revenue target of Rs. 750 billion from the Petroleum Development Tax, up nearly 455% from an estimated collection of around Rs. 135 billion during the current year.