During this month the federal and three provincial governments have unfolded their budgets for the fiscal year (FY) 2024-25. The provincial budget of Baluchistan is yet to be announced but nearly 75 percent of its work has been completed.
The first of these budges was presented by Khyber Pakhtunkhwa and the last before Baluchistan is of the Sindh province. So far in the announced budgets, positive developments, surprising elements, ambitious targets, political differences, enhanced allocations, and new challenges have been witnessed. Debates on these budgets have yet to be started after which they will be formally passed for their execution.
Sindh surpasses all in development budget allocations
The Pakistan People’s Party (PPP) government in Sindh has surpassed all in development budgetary allocations for the FY 2024-2025. The Sindh government presented an annual budget with an outlay of Rs 3.056 trillion (tr) setting Rs. 959 billion (bn) for development, and proposed up to 30 percent increase in the salary of provincial government employees. This development budget accounts for a third of the total budget.
Chief Minister (CM) Sindh today addressing media said that the Sindh government could easily induct more development schemes worth Rs. 500bn in this budget. He said that the outgoing caretaker government deleted some important development schemes of the province including for the flood-hit areas and people. He said it was beyond understanding that the caretaker government removed those schemes. He said Rs. 84bn development schemes of the province were removed during the development scheme surveys.
He said neither it was the first and nor was the last government of the PPP in Sindh and why schemes including of the flood hit areas were deleted was not something that could make any sense. Sindh proposed Rs. 160bn for the local government. In this budget, minimum wage increased from Rs. 35,500 to Rs. 37,000. Education in this province gets Rs. 454bn, health Rs. 300bn. In comparison, the development budget for the next year is more than the current year’s estimates of Rs. 735bn. The provincial government was reported to end up spending a far lower amount -Rs. 529.6bn – under this head. How this government will meet the new targeted spending leaves a question on its working effeminacy. The MQM-Pakistan led opposition haven’t expressed any resistance to this new proposed budget.
The budget estimates for the next fiscal year mainly focus on rehabilitating flood-affected people and providing social protection for the poor. The total projected revenue and expenditure are exactly equal in this budget and didn’t mark any deficit or surplus. The federal government expects the provinces to deliver a surplus of Rs. 1.217tr in the coming fiscal year Most of Sindh’s revenues, or 62 percent (pc) is expected to come from federal transfers, followed by 22pc from provincial receipts. The remaining revenue will come from current capital receipts of Rs. 21.6bn, foreign project assistance of Rs. 334bn, federal grants in the form of PSDP of Rs. 77bn, foreign grants of Rs. 6bn, and a carryover cash balance of Rs. 55bn. The government also announced a proposed a 15pc increase in the pension of retired employees.
Federal budget
The federal government presented a budget of Rs. 18.87tr for the FY 2024-25, with a deficit of Rs. 8.5tr. This budget focused on fiscal consolidations, support for productive sectors, and relief measures. Gross revenue receipts have been estimated at Rs. 17815bn. They include FBR’s revenue collection of Rs. 12970bn and non-tax revenue of Rs. 4845bn. The share of provinces in the federal receipts will be Rs, 7438bn.
The growth rate is expected to be 3.6 percent during FY 2025. Inflation is expected to be 12 percent, the budget deficit is 5.9%of the GDP and the primary surplus will be one percent of the GDP. Rs. 9775bn will be have to be paid in interest on the bank loans. A twenty-five percent increase was announced in the salaries of government employees from Grade-1 to 16 and 20pc from Grade-17 to 22. The government also proposed 15pc raise in the pension of retired government employees. The minimum wage increased from Rs. 32,000 to 37,000. Benazir Income Support Program (BISP) with increased 27pc is Rs. 593bn. The amount for student scholarships is Rs 10.4 million. Rs. 13.8bn are for export promotion and it was increased from Rs. 3.8bn,
Credit for small and medium enterprises enhanced from 540bn to 1100bnRs. 206bn allocated for water resources. Rs. 79bn proposed for the IT sector. For the education and health care are Rs. 93bn and 27bn respectively. These federal budgetary allocations earmarked a twofold increase for health services. Rs 1400bn set aside for the PSDP. Rs. 839bn reserved for the expenditure of civil administration. Rs. 1014bn was given to pension expenditure and Rs. 1363bn was allocated for subsidy on electricity, gas, and other sectors.
Rs. 280bn have been given to the social sector. Rs. 75bn kept for special areas including AJK and Gilgit-Baltistan, and 64 billion rupees for tribal districts. Rs. 50bn for the production sector including agriculture. The proposed increase in GST on Tier-1 Retailers of textile and leather products is from 15 to 18%. It has also been proposed to impose a standard rate of 18% tax on Mobile Phones. Exemption in taxes for five years was given to newly merged districts that were previously FATA and PATA. Tax on all the vehicles would be taken on prices of vehicles instead of engine capacity as it was enforced earlier according to the proposals.
The government in this budget has set an ambitious Rs13 trillion tax collection target aiming for 3.6 percent GDP growth. The total outlay of this budget is 30% more than the total outlay of the previous year. This budget also has Rs. 5bn for Kissan Package, Rs. 253bn for the development projects of the energy sector while Rs, 2.122tr have been allocated for defense in this budget. Last year defense allocation was Rs. 1.804tr.
How the government will achieve the growth and revenue collection targets is a huge challenge. If succeeds in achieving the targets anyway then it will surely increase the productions costs that may increase inflation. Traders and industrialists opposed this budget on one hand and on the other its coalition partner – PPP has serious differences on this budget. The government doesn’t look in a position to get this budget passed without addressing the concerns of its major coalition partner that is PPP.
KP budget
The most surprising element about the KP budget is that the PTI-led government of this province tabled this budget before the federal government without knowing how the central budget could these budget allocations. This act of the provincial government was historical and generated much criticism in this regard.
Presenting a budget without knowing the federal allocations for the province makes no sense at all. It just marked political disturbance and point scoring. Such a budget looks like a guesswork. The KP’s chief minister defended this act of his all the way, but his hopes didn’t meet what he was expecting from the Center.
The federal government this week presented its budget and dashed the hopes of the KP government to the ground. The Centre allocated Rs. 57bn for the merged districts of this province contrary to the province’s expectations of Rs. 71bn. The KP government earmarked Rs. 30bn for development programs and Rs. 40bn for accelerated development programs in the merged districts of this province totaling Rs. 70bn.
The federal government proposed Rs. 26bn for the development program of the province and Rs 31bn for development in the merged districts. The KP’ then came up with a statement that the federal government’s budget was not up to its expectations, which would result in a cut in the funds allocated for said districts. It might not be a big deal for the KP’s executive but at least it highlights its political maturity.
In this unprecedented move, the PTI-led unveiled a budget of Rs. 1.7tr for the FY 2025 with a development outlay of Rs. 416bn mainly focusing on social protection, law and order, and economic development. This budget envisaged a surplus of Rs. 100bn. The nearly 1.7tr expenditure is 21 percent higher than Rs. 1.3tr incurred during the FY24. Rs. 28bn allocated for the government’s flagship health card plus program. Rs. 29bn kept for wheat subsidy and Rs. 12bn for three youth employment programs in KP.
For education, health, and law and order are Rs. 362.68bn marked 13% increase than the previous financial year. Rs. 232.8bn is for the health sector. Rs. 140.62bn is for law-and-order sectors. These areas marked an increase of 13 and,12 percent respectively. How the KP government will meet the targets when expecting a huge amount from the federal government that the center owes to it under the NFC is a challenge.
However, State Minister for Finance Ali Pervez Malik then strongly criticized the KP government for announcing the provincial budget before the federal budget for FY25. He called this act as ‘irresponsible’ and this budget was based on assumptions. He hoped the KP government would surely “review its behavior.”
Punjab Budget
After the federal budget was presented the Punjab budget with an outlay of Rs. 5.446 trillion. The development budget has been set at Rs842 billion for FY25, up from Rs. 655 billion in FY24 (28.5% increase). The current service delivery budget is Rs2.633 trillion, up from Rs2.074 trillion in FY24. (27% increase). Rs375 billion has been earmarked for wheat debt retirement. Rs. 539 billion for health, Rs, 669.7 billion for education, Rs374.2 billion for infrastructure, Rs. 321.7 billion for local government, Rs. 220 billion for public safety and police, and Rs. 117.2 billion were set aside for agriculture for the FY 24-25.
The minimum wage in the province has been proposed at Rs37,000. For salaries of government employees, the provincial government has proposed a 25% increase for Grades 1 to 16 and a 20% increase for Grade 17 to 22 employees. It tabled the proposal to increase pensions by 15%. A significant feature of the ADP must be that almost all sectors include the Punjab chief minister’s special initiatives. How the Punjab government will be able to address the concerns of the Punjab’s farmers is a challenge.
Small allocations for seed development are another gray area of this budget when this is province that is majorly based on agriculture. The opposition is another challenge for this Punjab government to which landing petitions in the courts is very common and the major portion of the development budget is based on the CM’s initiatives that the opposition vigorously opposes such as the Kisan card and others.
Rs. 842 billion are under the annual development program and figure includes a foreign aid component of Rs. 106.167 billion and is 28% higher than the previous year’s Rs. 655 billion. The ADP allocates 33% to the social sector, 29% to infrastructure, 13% to production, 5% to the services sector, and 20% to special initiatives. Rs. 394.4 billion are for the ongoing schemes and Rs, 404.41 billion are for the new projects.
Baluchistan Budget
CM Sarfraz Bugti on Friday chaired a review meeting on the preparations for the budget 2024-25. The meeting was informed about the departmental progress related to the budget and that 70 percent of the work on the budget preparation for the new financial year has been completed according to the targets. The CM was reported saying that in this budget efforts were made to avoid repeating the past mistakes. In the budget, education and health were the first priority of the provincial government, it was said.
However, judging the performance of the government would begin with the pace of budget approval and implementation. The implementation of development projects would be a test of the performance of governments. Among all the proposed budgets one thing is common and that is the increase in salaries and pensions. How the governments will move forward with an increased burden is also a challenge. According to the estimates, 50 percent of the government’s income goes into debt interests and nearly 5% goes to pensions, etc. Time is not away, the public is waiting for what the governments perform.
(Article by senior journalist Rana Kashif)