Finance Minister Muhammad Aurangzeb is presenting the federal budget 2024-25 as the PMLN-N led government looking to secure a long-term International Monetary Fund (IMF) bailout package.
In an attempt to disrupt the finance minister’s speech, members of parliament from the Sunni Ittehad Council (SIC), backed by Pakistan Tehreek-e-Insaf (PTI), staged a protest in the National Assembly.
Important points from budget session:
- Forecasts for 3.6% annual GDP growth in FY2024–2025.
- The fiscal deficit for FY2024–2025 is 6.9% of GDP.
- In FY2024–2025, total spending is projected to be Rs18.9 trillion ($67.84 billion).
- Total of 9.8 trillion rupees are expected to be paid off in debt in FY2024–2025.
- In FY2024–2025, defense spending of 2.1 trillion rupees is anticipated.
- One trillion rupees will be paid out in pensions in FY2024–2025.
- In FY2024–2025, total subsidies are anticipated to be 1.4 trillion rupees.
The finance minister stated in his opening remarks of presenting federal budget 2024-25 that the administration has made remarkable progress on the economic front despite the political and budgetary difficulties of the last year.
All political parties have expressed a desire to work together for the good of the nation on several occasions. He stated, “We can’t afford to waste this opportunity as nature has given Pakistan another chance to walk on the path of economic progress.” He also asked all MNAs to work with the administration to move the nation forward.
The minister stated, “I want to highlight our journey so far before presenting the budget.” We have adopted an indigenous strategy under Prime Minister Shehbaz Sharif’s direction, which has allowed us to overcome the present economic obstacles and quicken progress.
Aurangzeb recognized the difficulties Pakistan’s economy was facing: declining foreign reserves, a 40% decline in the value of the rupee, slow economic development, and skyrocketing inflation that was forcing people into poverty.
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He credited the administration for getting a crucial nine-month IMF deal in June 2023, which kept Pakistan’s economy from collapsing.
“A fresh agreement was necessary to avoid a default since the existing IMF program was coming to an end. He remarked, “I applaud Shehbaz Sharif’s government for their efforts in securing the program.”
Acknowledging the PM and his team’s efforts, Aurangzeb emphasized the noteworthy progress in economic statistics. “In May, inflation was 11.8 percent, which is noteworthy given the difficulties. We’re on the right road, and in the days ahead, inflation should drop much more,” he stated.
The minister reported that foreign exchange reserves had increased and that foreign investors were expressing a strong desire to invest in Pakistan, indicating a major reversal in the nation’s economy.
Highlighting the improving economic outlook, Aurangzeb stated, “Pakistan’s foreign exchange reserves have been strengthened and foreign investors are now seeking possibilities to invest in our economy.”
He praised the State Bank’s move to lower interest rates, pointing to clear initiatives to fight inflation. “Reducing interest rates by the State Bank is a big step, and it’s clear that they’re trying to control inflation.”
The objective of all these initiatives is to increase GDP by 3.6% in the upcoming fiscal year, 2024–2025.
According to Finance Minister, the Public Sector Development Programme (PSDP) is essential to the nation’s growth, prosperity, and social welfare.
He added, “this serves as a catalyst for the modernization, growth, fundamental infrastructure, and sustainable development.”
According to the minister, for the fiscal year 2024–2025, the government created the largest PSDP in history, valued at Rs. 1,500 billion.
This amount, he said, is 101% greater than the corrected volume from the previous year.
He added that the developmental budget was an indication of the government’s commitment to handling the difficulties in the administration of affairs related to as development of infrastructure, transportation, energy, IT, and water resources in these trying times. Rs100 billion has been set aside for the Pakistan Peoples Party’s (PPP) projects.
With up to 83% of resources designated for current projects and only 17% for new ones, the PSDP 2024–25 prioritizes the completion of ongoing initiatives.
According to the minister, 59% of the PSDP’s funding for the sector for the fiscal year 2024–2025 has been proposed to be allocated to the federal government, which is in charge of providing basic infrastructure. Additionally, it has been suggested that the social sector get 20% of the developmental budget.
According to the minister, it is required by the constitution to guarantee balanced local development, which is why 10% of the funds have been set aside for the districts that were combined to form Azad Jammu and Kashmir, Gilgit Baltistan, and Khyber Pakhtunkhwa. The remaining approximately 11.2% of resources have been designated for the fields of information technology, telecommunication, science and technology, governance, and production.
The Federal Board of Revenue (FBR) has implemented Corporate Income Tax revisions from 2019 to 2023, the Finance Minister stated in his address. He stated that personal tax reforms must now be implemented in order to bring it into compliance with global norms.
He stated that in light of this, both the highest tax bracket and the minimum tax slab, which is set at Rs 600,000 (year income), will stay the same.
“Some adjustments to tax slabs are being suggested. Another idea is to maintain the top tax rate of 45% for individuals who are not employed,” he continued.
He indicated that regardless of the holding term, a 15% tax will be levied on filers and up to 45% on non-filers under multiple slabs in order to improve revenue collection from the real estate and securities sector. “This will help document the economy.”
He stated that upon the purchase of immovable assets, separate tax slabs will be implemented for filers, non-filers, and those who file their returns after the deadline.
He also suggested that taxes be based on the car’s rate rather than its engine capacity. There is a suggestion, according to Aurangzeb, to discontinue zero rating, exemptions, and lower charges.
According to the minister of finance, the administration considered a number of exemptions and concessions before deciding to discontinue some of them. Additionally, he suggested raising the 15% to 18% tax rate for TIER-I retailers.
Salaries and Pension
According to the finance minister, the government will change the pension plan in three steps to bring it into compliance with global best practices.
The government was required to cover the unfunded pension liabilities, which was rising annually. He predicted that the pension liabilities will be significantly lower over the next three decades after changes to the pension plan.
A contributory pension plan will be implemented for new hires, with the government contributing a monthly portion.
He also mentioned that a pension fund will be established to handle the burden.
Aware of the financial difficulties federal government employees were facing as a result of rising inflation, he also suggested a 20–25% ad hoc salary boost and a 15% pension improvement.
The minister stated that the government has chosen to increase the buy power of employees by giving 25% ad hoc relief in the salaries of Grades 1–16 employees and 20% to Grades 17–22 employees, notwithstanding financial restrictions. Additionally, he declared raising the minimum salary to Rs 36,000 per month from the current Rs 32,000.
The entire outlay, or the sum of all expenditures plus net loan of money, in the government budget for the fiscal year 2025 is Rs18.877 trillion, which is a 30% increase over the budget for the year prior.
The budgeted amount of income for Pakistan’s fiscal year 2025 is Rs. 17,815 billion. The net revenue, after deducting the Rs7,438 billion in provincial payments, is Rs10,377 billion, a noteworthy 48.7 percent rise from the year before.