Pakistan’s government presented a PKR 14.5 trillion rupee (around $50.5 billion) budget on June 9, with over half set aside to service Rs7.3 trillion debt.
Finance Minister Ishaq Dar in his speech in the lower house of parliament Friday laid out a growth target of 3.5% for the fiscal year that starts July 1. This has been described as an ambitious goal after currency depreciation, unprecedented floods of 2022 and import curbs are estimated to slash GDP growth to 0.3% in the current year through June.
Total Budget Outlay: PKR 14.46 trillion
Current Expenditure: PKR 13.3 trillion
Total PSDP: PKR 2.7 trillion
FBR revenue: PKR 9.2 trillion
Fiscal Deficit: PKR 6.9 trillion
Interest payments: Rs7.3 trillion
PSDP (health, education, infrastructure): Rs1.150 trillion
Defense: 1.84 trillion
Subsidies (energy, gas and etc): Rs 1.074 trillion
Pensions: 0.76 trillion
Key Highlights of Budget 2023-24
- There is an extension for two years for the purpose of a concessionary tax rate of 20 percent for the banking company’s income from additional advances to low-cost housing, agriculture, and SMEs including Information Technology (IT) and IT-enabled services (ITes).
- Dar said the tax collection target of the Federal Board of Revenue (FBR) for the next fiscal year had been fixed at Rs 9.2 trillion, including a provincial share of Rs 5.276 trillion.
- Defense budget is targeted at PKR 1.8 trillion.
- Total Public Sector Development Programme (PSDP 2023-24) is PKR 2.7 trillion of which the Federal PSDP is budgeted at PKR 950 billion + Rs200 billion for public-private partnership.
- The government claimed that there will be no new taxes for the upcoming year.
- Subsidies: The government had estimated an expenditure of Rs 1.074 trillion for the provision of subsidies in electricity, gas and other sectors.
Social relief measures
The government has announced some relief measures for lower income
groups by increasing the allocation of the Benazir Income Programme (BISP) from PKR 415bn to PKR 460bn, subsidy allocation of PKR 35bn for utility stores corporation, addition PKR 5 billion for Ramzan package, 9 million additional families to be added to eligibility for Benazir Kafalat cash Transfer (allocated PKR 266bn), Benazir Educational Grants Program extended to 2.3 million additional children.
Under BISP, a sum of Rs2,000 will be paid to parents on the birth of a male and Rs2,500 on the birth of a female child.
Salary increase for Govt employees
Salaries of government employees between grade 1-16 are to be increased by 35%, and by 30% for grade 17 and above employees. Pensions augmented by 17.5% across the board.
Minimum wage proposed at Rs32,000.
Incentives for Agriculture sector
The federal government has increased the loan volume for the farmers from Rs1800 to Rs2250 billion.
Rs50 billion has been allocated for shifting the 50,000 tube wells to solar panels.
Allocation of Rs10 billion for the loans of smaller growers.
Exemption of Customs duties on the import of seeds for sowing to promote growth in
the agricultural sector. Grant of exemption of sales tax on plant saplings, combine harvesters, dryer for agricultural products, no-till-direct seeders, and planters.
Health
The federal government proposed an allocation of Rs24.21 billion for the healthcare sector for the financial year 2023-24 as compared to Rs22.49 billion allocated during the outgoing financial year. Around Rs13 billion would be spent to uplift the sector under the public sector development budget. The major chunk of the health budget, Rs16.59 billion, would be spent to maintain hospital services while Rs3.11 billion would be allocated for public health services. Some of the new projects include the establishment of the Centre of Biologics and Cancer Research, PM’s National Programme for Elimination of Hepatitis C Infection, and PM’s National Programme for Prevention of Diabetes – Rs500 million has been allocated for each of the schemes.
Education
The federal government has reserved Rs 65 billion for the current expenditures and Rs 70 billion for the development expenditures of the Higher Education Commission (HEC) during the Fiscal Year 2023-24. The government will also establish Rs 5 billion worth of Pakistan Endowment Fund to provide merit scholarships to high school and college students. He said the Federal Government would distribute 100,000 laptops among deserving and the most talented students for which an amount of Rs 10 billion has been set aside.
IT sector
The budget has proposed incentives for exporters of IT and ITes by allowing duty free import of IT-related equipment equivalent to 1 percent value of their export proceeds.
To boost IT exports, a 0.25% concessional rate of income tax will be intact until June 30, 2026. Moreover, freelancers earning up to $24,000 per year will also be exempted from sales tax registration and filing tax returns while a singe page income tax return will be introduced for them.
The current rate of sales tax on IT services under ICT is being reduced from 15% to 5%.
Incentives to go solar
In line with the government’s solarization initiative, the budget announced an exemption on customs duty on the import of raw materials and machinery used in the production of solar panels, inverters and batteries.
Defense budget goes up Rs1.8 trillion
The government aims to spend Rs1.804 trillion on defense over the next year, which is around 13% higher than the revised allocation for the outgoing year. The defense budget makes up nearly 1.7pc of the GDP and 12.5pc of the total expenditure planned by the government for the fiscal year 2023-24.
- Army: Rs824.6 billion
- Pakistan Air Force: Rs368.5 billion
- Pakistan Navy: Rs188.2 billion
Industries
Tax relief has been offered to industrial and export sectors, including metals and minerals, textiles, and rice mill machinery. Agro-based industries being set up as SMEs on or after July 1, 2023, (from tax year 2024 to 2028) being granted a 5-year tax holiday.
Dining out made easier
To promote digital payments at restaurants, the government has reduced the tax rate from 15% to 5% when payment is through debit/credit cards, mobile wallets or QR scanning. That means dining out has been made cheaper via online payments.
Income Tax Slabs
The revised Super tax slabs for the fiscal year 2023-24 have introduced significant changes, particularly for individuals with higher incomes.
For individuals with the income group of below Rs150 million, Rs150m to Rs200m, Rs200m to Rs250m, Rs250m to Rs300m, and Rs300m to Rs 350m remains unchanged, with the tax rate at 0%, 1%, 2%, 3% and 4% whereas the tax rate for those with income between Rs350m and Rs400m to be increased from 4% to 6% for FY24.
| Income Slabs | Rate of Tax (% of income) | |
|---|---|---|
| FY23 | FY24 | |
| Income does not exceed Rs150 million | 0% | 0% |
| Income exceeds Rs150 million but less than Rs200 million | 1% | 1% |
| Income exceeds Rs200 million but less than Rs250 million | 2% | 2% |
| Income exceeds Rs250 million but less than Rs300 million | 3% | 3% |
| Income exceeds Rs300 million but less than Rs350 million | 4% | 4% |
| Income exceeds Rs350 million but less than Rs400 million | 4% | 6% |
| Income exceeds Rs400 million but less than Rs500 million | 4% | 8% |
| Income exceeds Rs500 million | 4% | 10% |
