Govt set to propose budget deficit of 5.1pc of GDP for FY24

ISLAMABAD: After witnessing delays in tabling the Budget Strategy Paper (BSP) before the federal cabinet, the government is now all set to propose the overall budget deficit of 5.1 per cent of the GDP for 2023-24.

Despite making all-out efforts, the government has so far remained unable to revive the stalled IMF programme. The budget-making exercise had already got hampered and delayed in the wake of uncertainty on the IMF and political fronts. The government has decided to present the next budget on June 9, 2023.

Without striking a staff-level agreement with the IMF, the government has decided to present the BSP for medium term for a three-year period before the federal cabinet next week, tentatively on Monday. The federal government’s budget deficit is proposed at 6.4 per cent of the GDP while the overall deficit of the country was projected to be brought down to 5.1 per cent of the GDP for the next financial year.

The BSP, for the next financial year, has proposed defence budget allocation of Rs1.7 trillion for the next financial year against Rs1.56 trillion in the outgoing fiscal year’s budget for 2022-23. The overall primary surplus of budget deficit has been envisaged at 0.3 per cent of the GDP for the next financial year against the initial projection of 0.2 per cent for the outgoing financial year on the eve of the budget for 2022-23.

The FBR target is put at Rs9.2 trillion for the next budget. The Ministry of Finance has proposed the FBR annual tax collection of Rs9.2 trillion on the higher side. The FBR sources said the tax machinery estimated that it could fetch Rs7.2 trillion for the outgoing fiscal year against the envisaged target of Rs7.64 trillion for the outgoing fiscal year ending on June 30, 2023. The sources said they could fetch maximum Rs8.6 trillion revenues in the next budget, keeping in view the ground realities. However, if the import restrictions are removed, the FBR collection could go up.

The government has envisaged the GDP growth rate of 3.4 per cent for the next fiscal year while inflation might hover around at 21 per cent. The IMF, in its latest presser, also indicated about stagflation, which means the country is heading towards low growth and higher inflation. The ultimate result of stagflation will be rising poverty and unemployment in Pakistan.

The current account deficit is projected at around $8 billion for the next budget with hopes that the import restrictions would be lifted in a gradual manner in the next financial year. Under the Public Finance Management Act approved by the parliament, the BSP is mandatory to be approved by the federal government. The PFM Act on BSP states that the federal government shall approve the budget strategy paper containing quantified macroeconomic and fiscal projections for medium term by 15th of April each year.

It shall be published as well as placed on the Finance Division’s official website. The paper shall indicate strategic priorities of the government revenue and spending policies and specify indicative levels of spending in various ministries and divisions.

Upon approval of the paper, the Finance Division shall issue indicative budget ceilings to ministries and divisions. The minister for finance shall also discuss the budget strategy paper with the Standing Committees for Finance and Revenue in the Senate and the National Assembly.

The federal government may extend the deadline mentioned in Sub-section (1) in case of extreme requirement, the PFM Act says.