Friday, June 10, 2022
ISLAMABAD: The Shehbaz Sharif-led coalition government Friday unveiled the “toughest” federal budget for fiscal year 2022-23 in the National Assembly with an outlay of Rs9.5 trillion amid strict conditions of the International Monetary Fund (IMF) for the revival of the $6 billion loan programme stalled since months over policy breaches.
Federal Minister for Finance and Revenue Miftah Ismail, while presenting the budget proposals, berated the “incompetent” PTI-led government for its performance, saying that the current budget focuses on “sustainable and inclusive growth”.
Important budget proposals
The finance minister said that due to the “incompetency” of the PTI-led government, Pakistan has been witnessing "skyrocketing" inflation.
The minister said the government had to move towards "sustainable growth", adding that the growth target for next year was set at 5%.
"The problem of our economy is that growth is 3-4%, but when it moves up to 5-6%, our current account deficit goes out of control, because we prioritise the elite and increase our imports to facilitate them. We need to adopt a new outlook focused on alleviating the lower-income sections of society to increase domestic production," the minister said.
Addressing the Speaker of the National Assembly Raja Pervez Ashraf, Miftah assured him that the new coalition government will pull Pakistan out of the economic crisis. “We have done it before, we can do it, we will do it.”
Miftah added that in the next fiscal year, the government aims to facilitate the poor to improve their economic conditions.
“When the income of the poor people increases, they purchase consumer goods which are produced locally. And this, in turn, reduces the exports and initiates the development process. We can achieve inclusive growth by taking the above-mentioned steps," he said.
The finance minister further highlighted that Pakistan has become the third-most-expensive country due to the "incompetency" of the PTI-led government.
Shedding light on the budget philosophy of the coalition government, the finance minister said: “We will increase the agricultural production to increase arable produce and increase per acre yield while also focusing on the development of industries which can help increase the exports of the country.”
“Prime Minister Shehbaz Sharif wants to provide maximum relief to the people of the country, particularly those who are unable to bear the burden of rising inflation,” he said, revealing that for this purpose, the government has taken several decisions to provide subsidies.
Miftah, while sharing the details of the federal budget for the next fiscal year 2022-23, revealed that the Federal Board of Revenue (FBR) target for the next fiscal year is 9% — Rs7,004 billion — while the provinces will be asked to collect Rs4,100 billion.
The federal government's net revenue is projected to be Rs4,904 billion, non-tax revenue will be Rs2,000 billion, and the expenditure is expected to be around Rs9,502 billion for the next fiscal year, Miftah said.
Pakistan will spend Rs3,950 billion on debt servicing, the finance minister told the House. The tax imposed on non-filers has been proposed to be hiked from 100% to 200%, he said.
The total expenditure for interest payments during the current fiscal year has been estimated at Rs3,144 billion — including Rs2,770 billion domestic and Rs373 billion international — while for the next year, it will climb to Rs3,950 billion.
The finance minister added that the public debt of the outgoing fiscal year would stand at 72.5% of the GDP as it reached Rs44,365 billion in March 2022.
The FBR tax revenue for the ongoing fiscal year is projected to clock in at Rs6,000 billion, and the contribution of the provinces will stand at Rs3,512 billion, he said, adding that the Centre's net revenue is estimated to be Rs3,803 and non-tax revenue Rs1,315 billion.
The total expenditure of the federal government for the current fiscal year is expected to clock in at Rs9,118 billion, with the Public Sector Development Programme (PSDP) at Rs800 billion, Miftah said.
He proposed increasing the rate of advance tax on purchase and sale of property for filers from 1% to 2%, and for non-filers to 5%.
The finance minister said if a person has an immovable property of Rs25 million or more, then 5% of its rate will be considered as an individual's additional income. He said that on this income, the government would charge a 1% tax. In case a person holds an immovable property for more than a year, then they will be charged with 15% capital gain tax, which will become 0% after six years, he said.
For the next fiscal year, the total allowance for the Benazir Income Support Programme (BISP) has been proposed to be increased from Rs250 billion to Rs364 billion. To that end, Miftah said that nine million families would receive money through the Benazir Kafalat Cash Transfer Programme, and Rs266 billion have been proposed to be allocated for it.
The finance minister added it had been proposed to increase the subsidy for the Utility Stores Corporation to Rs12 billion.
He added that the Benazir Taleemi Wazaif Programme will be extended to 10 million children, while more than Rs35 billion will be earmarked for the programme. More than 10,000 students will be given undergraduate scholarships and over Rs9 billion have been allocated for it, he said.
On the other hand, the Benazir Nashonuma Programme will be extended to all the provinces and the fund allocation will be increased to Rs21.5 billion, while the Bait-ul-Maal will allocate Rs6 billion for the medical treatment of needy people.
Miftah said that despite several hurdles in the country, Rs65 billion has been earmarked for the Higher Education Commission (HEC). Other than that, Rs44 billion has been allocated for the development projects of HEC, which is 67% higher in line with the government's commitment to the country's youngsters.
“We are trying to convince the provinces to further focus on the development of higher education,” he added.
Moving forward, Miftah said that improved production, transmission and distribution of electricity is a priority for the government for which Rs73 billion has been allocated. Of this, Rs12 billion will be utilised to speed up the construction of the Mohmand Dam.
The finance minister said that Rs71 billion have been allocated for the payment of arrears of the petroleum sector, and the gas rate for the industrial sector will be announced soon.
"In this sector, the government has provided Rs214 billion in additional subsidies in the first three months so that the burden of the previous government's [policies] does not fall on the masses," he said.
In the next fiscal year, it has been proposed to allocate Rs570 billion for this sector so that the people can survive the scorching heat and have electricity supply in their homes.
Miftah said the income tax threshold (per year) has been raised from Rs600,000 to Rs1.2 million. "This proposal effectively means there will be no income tax on individuals earning up to Rs100,000 a month."
He shared that the government has suggested increasing the tax on banking companies to 39%, including 42% super tax.
Foreign nationals doing business in Pakistan will also have to pay taxes.
The finance minister further proposed increasing the tax rate on non-filers from 100% to 200% for vehicles having horsepower greater than 1,600cc.
The government has proposed an advance tax on 1,600cc cars and a 2% additional tax on electronic engine cars, he said.
Miftah said that it has been proposed that the tax slabs for salaried people be revised and the cap be increased to Rs100,000.
He said the tax imposed on Behbood Saving Certificate and Pensioners Benefit Account has been proposed to be dropped to 5% from 10%.
The tax on small-scale retailers has been proposed to be fixed, which will range from Rs3,000-10,000 and will be collected through their electricity bills, Miftah said.
It has also been suggested that the filers who send money abroad through credit, debit, or prepaid cards will have to pay 1% withholding tax, while for a similar transaction, non-filers will be charged 2% tax, he said.
However, the withholding tax on credit, debit and prepaid cards can be adjusted later on, he said.
The finance minister said that it has been proposed that families using less than 200 units of electricity will be given loans in easy instalments to purchase a solar panel.
The government is also considering abolishing sales tax on agricultural machinery and seeds, he said.
Miftah announced that the proposed budget for the health sector would be more than Rs20 billion, which has been decreased, as the previous government had allocated more budget to health due to the coronavirus pandemic.
For dealing with different diseases, better facilities for people, and ensuring medical instruments are available to medical facilities, the budget will be Rs24 billion, he said.
The finance minister said agriculture is the backbone of the country’s economy and in this regard, the government has decided to increase its grant and allocate Rs21 billion for the sector.
“This will help increase the output of the sector. Moreover, the Ministry of National Food Security & Research has devised a growth strategy for the next three months with the help of the provinces and planning commission,” he said.
The finance minister said the strategy aims at making farmers prosperous, dealing with the changing weather, promoting “smart” agriculture, self-reliance, value addition, and agro-processing.