The government is expected to present an overall budget deficit of 5.1 per cent of the GDP for the fiscal year 2023-24, as stated in the delayed Budget Strategy Paper (BSP) to be presented before the federal cabinet. A recent report by The News highlighted that the paper will be tabled amid the government’s failure to revive the stalled International Monetary Fund (IMF) programme.
The budget-making process has already been affected by uncertainty on both the IMF and political fronts. Nonetheless, the government has decided to present the next budget on June 9. Despite failing to reach a staff-level agreement with the IMF, the government will present the BSP for a medium-term period of three years. The proposed federal government budget deficit stands at 6.4 per cent of the GDP, while the overall deficit of the country is estimated to be lowered to 5.1 per cent of the GDP for the next financial year.
In addition, the BSP for the upcoming fiscal year has proposed an allocation of Rs1.7 trillion for the defence budget compared to Rs1.56 trillion in the outgoing fiscal year. The overall primary surplus of budget deficit is estimated to be 0.3 per cent of the GDP for the next fiscal year, up from the previous projection of 0.2 per cent for the outgoing year.
The Federal Board of Revenue (FBR) has been set a target of Rs9.2 trillion for the next budget, and the finance ministry suggests this is on the higher side. The FBR estimates that it could collect Rs7.2 trillion in the outgoing fiscal year against the targeted Rs7.64 trillion. In the next budget, the FBR could collect up to Rs8.6 trillion, subject to import restrictions being lifted, which could boost revenue collection. The government is projecting a GDP growth rate of 3.4 per cent for the next fiscal year, while inflation is expected to hover around 21 per cent.
According to the IMF’s latest press briefing, the country may experience stagflation, which means low growth and higher inflation rates. If stagflation continues, it could lead to rising poverty and unemployment in Pakistan. The current account deficit is estimated to be approximately $8 billion for the next budget, and there is hope that import restrictions will be gradually lifted during the next financial year.
The BSP has to be approved by the federal government under the Public Finance Management Act, which states that the paper must contain quantified macroeconomic and fiscal projections for the medium-term, be approved by April 15 of each year, and published on the Finance Division’s official website. Upon approval, the Finance Division will issue indicative budget ceilings to ministries and divisions.
The minister for finance will also discuss the budget strategy paper with the Standing Committees for Finance and Revenue in the Senate and the National Assembly. The government may extend the deadline mentioned in Sub-section (1) of the PFM Act in case of an extreme requirement.
