The federal budget 2022-23 has been presented with the outlay of Rs 9.5 trillion. The Gross Federal Revenue is estimated at Rs 9 trillion and total expenditure is estimated at 9.5 trillion. The total budget deficit is estimated at Rs 3.8 trillion. The growth target has been set at 5%.
The budget figures show the large dependency of budget upon the foreign loans and taxes. 41.5% of the total budget i.e. Rs 3.95 trillion will be spent on just debt servicing this fiscal year. It means that the large portion of our budget will be eaten by the debt and to tackle the deficit in budget, the nation will get more debt and this process is not expected to an end.
As far as foreign loans are concerned, it is worthy to note that the budget has been presented in the economic condition in which Pakistan is seeking loans from International Monetary Fund (IMF) to meet the financial turmoil and bad economic conditions. In this situation, these foreign loans would also increase the debt of Pakistan beside the debt that would be taken in case of expected budget deficit.
It is also to note that in the present economic scenario, IMF is urging government for strict economic conditions against loans i.e. culmination of subsidies, increment in taxation and rise in oil, electricity and gas prices etc. These strict economic conditions are not in the general favor of common people as the tsunami of inflation would come. It seems that the present government is ready to fulfill the demands of IMF on immediate basis due to which the signs of horrible inflation are shown before the nation. According to the present government, the difficult decisions must be taken otherwise Pakistan would go to default.
As far as salaried and pension class is concerned, the salaries of government employees have been raised to 15%. There will be no tax on the salary of Rs 100,000 per month. The tax slabs have also been reduced. The tax on pensioner has been reduced to 5% from 10%. The families with income below Rs 40,000 to be given Rs 2,000. It is very interesting to note that just Rs 2,000 would be given to people whose monthly income is below Rs 40,000. The government can assess the value of just Rs 2,000 in the present economic scenario. It is nothing for a deprived unit of the society. There is a need of proper socio-economic strategy for the deprived segment of the society rather than these useless relief acts in the inflated economy.
In the budget, the average inflation forecast is 11.5%. It is the fact that apart from budget exercise, the common man has concern only with the inflation. According to Miftah Ismail, the Minister of Finance that there is no choice for the government other than going out for difficult decisions. It means that the nation will face more inflation and more difficulties in the coming days then why the inflation has been set to just 11.5%.
The predicted rate of 11.5% is the amazing prediction as if we look at the present rising condition of inflation in Pakistan, this rate is just a joke in the budget. It is worthy to note that the annual inflation rate in Pakistan in May 2022 increased to 13.8 percent from 13.4 percent in April 2022. The continuous rise in US dollar rate and the recent imprudent rise of Rs 60 after removal of subsidies in petrol prices have opened the door of enormous inflation that Pakistan has never been faced before. The government has proposed a petroleum levy of Rs750 billion and in this way, the government would abolish the incentives of the former government. It would also the reason of rise in petrol prices. The petrol prices will increase more and the inflation will also rise. The government is increasing electricity and gas prices. In this scenario, it is amazing to see that the government has predicted the annual inflation rate as 11.5%. How it will be 11.5% as the current rate is 13.8% and it is continuously rising? The government has imposed additional taxes of Rs 355 billion in this budget. Therefore, the mounting US dollar rate, additional taxes, rising petroleum prices, increasing electricity would put the common man of Pakistan in the great financial turmoil.
In the overall budget scenario, it is very clear to say that the so-called relief in income tax etc. cannot give socio-economic relief in the real sense as the rising inflation would abolish this relief.
The present budget shows alarm for the economy and the government must take prompt and strategic steps to improve the economy with the consultation of all stakeholders otherwise Pakistan may face dreadful economic situation. First of all, the stable political conditions boost the economy.
Unfortunately, the recent political turmoil has badly affected the economy. Now, the main task to escape the nation from the foreign debt and there is a requirement of effective strategic planning in this respect. There is a need of increment in exports and decrement in imports due to which the pressure upon the rupee would be reduced.
The Author is a Team Leader-Training & Development Unit, Shariah Compliance Department, National Bank of Pakistan