The primary budget is projected to be marginally positive, subject to approval by the federal cabinet for a proposed salary hike. Photo: File
Islamabad: Federal Finance Minister Ishaq Dar wants to present the budget in the National Assembly on June 9, while the size of the budget is 14,600 billion, while the budget deficit may be 0.78 billion rupees, which will be about three-fourths more than the federal deficit target for the current financial year.
Sources told The Express Tribune that the gap between federal budget deficit expenditure and revenue for the next fiscal year 2023-24 is estimated at around 7.4 per cent of GDP. This is quite large but still around 0.7% of GDP which is less than the revised deficit of the previous fiscal year. More than half of the budget will be earmarked for interest payments.
Sources said that after increasing the defense budget as required by the Ministry of Defence, the federal government can spend around 64 percent of the budget on debt servicing and defence.
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The federal primary deficit, calculated after paying interest costs, can be 0.3% of GDP. But this is still better than the 0.7 percent of the estimated GDP core budget for this fiscal year.
Sources say that the overall primary budget may be slightly positive due to provincial cash surpluses. The Ministry of Finance has proposed a 20% increase in the salaries of the employees. But Ishaq Dar deferred the matter to the federal cabinet for a decision.
Sources added that the finance minister also directed to review the proposed allocation of Rs 700 billion for development expenditure in the next financial year.
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The budget figures are tentative amid the failure of the National Accounts Committee (NAC) to convene a meeting to approve the provisional economic growth figures for the outgoing fiscal year from the Ministry of Planning.
The planning ministry has postponed the scheduled meeting of the NAC three times, raising fears of manipulation of economic growth data that some early reports indicated was in negative territory. Even based on the State Bank’s model, the growth rate for this fiscal year was slightly positive at 0.2 percent. The National Assembly approved a budget of Rs 9.6 trillion for the outgoing financial year.
Sources say that the size of the budget for the financial year 2023-24 may increase by 5 trillion rupees or 50 percent to 14.6 trillion rupees. Key reasons behind expansionary fiscal policy amid default risks are interest payments, higher allocation for defense spending and no real increase in FBR’s tax-to-GDP ratio.
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Sources say that the amount allocated for interest payments may be Rs 7.5 trillion, which is Rs 3.5 trillion or 87% more than the approved budget for this year. The central bank has raised the interest rate significantly to 21 percent, which will result in half of the next fiscal year’s budget being spent on these payments. Rupee depreciation is another factor behind record interest payments.
Sources said that the Ministry and Finance wanted to allocate 1.7 trillion rupees for the stated defense budget, but the Ministry of Defense has demanded 1.92 trillion rupees for defense expenses. If the demand of the Ministry of Defense is fulfilled, then the next year’s defense budget A quarter or about 360 billion rupees will be more than the approved budget of this financial year.
According to sources, after paying the provinces’ share, the federal government’s net revenue is estimated at Rs 6.5 trillion. FBR’s tax target is expected to be Rs 9.2 trillion, which is 24% higher. But in terms of GDP volume, it is only equal to 8.7 percent and it is not enough to control the growing public debt and cover the expenditure.
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The Ministry of Planning has also demanded Rs 1.2 trillion for development expenditure, but the Finance Ministry has so far allocated Rs 700 billion. Sources said that the Finance Minister has directed to review the proposed allocation of Rs 700 billion.
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