The government of Pakistan has set an ambitious target of raising $2 billion by issuing Eurobonds in the upcoming 2023-24 budget. However, budget planners are facing significant challenges due to a lack of foreign loans inflow and the absence of an active International Monetary Fund (IMF) program. Despite these obstacles, the government is determined to secure approximately $22 billion in foreign loans for the upcoming budget. Let’s delve into the details of the budgetary plans and the proposed measures.
Eurobonds as a Revenue Generation Source:
In the previous fiscal year, the government had intended to issue international bonds but faced hurdles primarily due to the non-revival of the IMF program, poor credit ratings, increased bond rates, and associated risks. However, in the upcoming fiscal year, Islamabad aims to overcome these challenges and generate $2 billion by launching Eurobonds. The process of crunching the numbers is still ongoing, and the government remains optimistic about meeting this target.
Proposed Measures for Revenue Generation:
To address the revenue shortfall, the government has proposed implementing several measures in the 2023-24 budget. One of the key proposals is the introduction of an income levy on all types of assets, aiming to enhance tax revenues. Additionally, the government plans to raise withholding taxes on cash withdrawals and motor vehicle registrations. These measures are expected to contribute significantly to the government’s revenue generation efforts.
Salary and Pension Hikes:
The government plans to prioritize its employees by increasing salaries and pensions for government personnel in various grades. Employees from grade 1 to 16 can expect a substantial hike of around 30%, while those in grades 17 to 22 can anticipate an increase of approximately 20%. Notably, the pension bill is projected to exceed the salary bill for the federal government, reflecting the government’s commitment to improving the financial well-being of its employees.
Budget Outlay and Revenue Targets:
The total budget outlay for the upcoming fiscal year is estimated to exceed Rs14.2 trillion. The Federal Board of Revenue (FBR) has set an ambitious target of collecting taxes ranging from Rs9.2 to Rs9.5 trillion, while the non-tax revenue target is set at Rs2.5 trillion. These targets highlight the government’s determination to enhance revenue collection and reduce the budget deficit.
Primary Balance and Debt Servicing:
To achieve a primary balance of 0.1% of GDP, the provinces are expected to generate a 1% revenue surplus, which will contribute to a slightly positive primary balance in the next budget. However, debt servicing will consume a significant portion of the budget, with approximately Rs7.5 trillion allocated for this purpose. Balancing the need for debt servicing while ensuring sustainable economic growth remains a critical challenge for the government.
Conclusion:
The upcoming 2023-24 budget in Pakistan presents significant challenges for the government in terms of revenue generation and budget management. However, the government remains committed to its objectives, aiming to raise $2 billion through Eurobonds and secure substantial foreign loans. With proposed measures such as the income levy and increased withholding taxes, the government aims to enhance revenue collection. The budget also emphasizes improving the financial well-being of government employees through salary and pension hikes. As the budgetary process continues, it will be crucial to strike a balance between debt servicing and promoting sustainable economic growth to ensure a prosperous future for Pakistan.
