Pakistan unveils $47 billion federal budget, allocates 41% to debt servicing

Pakistan's Finance Minister Miftah Ismail is presenting the annual budget 2022-23 in the National assembly on June 10, 2022. (AFP)
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Updated 11 June 2022
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Pakistan unveils $47 billion federal budget, allocates 41% to debt servicing

  • Government sets an inflation target of 11.5%, raises salaries of employees by 15%
  • Country earmarks $7.4 billion for defense, $3.9 billion for development projects 

KARACHI: Pakistan’s Finance Minister Miftah Ismail on Friday presented Rs9.52 trillion ($47 billion) federal budget for fiscal year (FY) 2022-23, allocating around 40 percent to service the South Asian country’s foreign and domestic debts. 

Grappling with a widening current account deficit, currency depreciation and record inflation, the Pakistani government targets 5 percent GDP growth in FY23 that is lower than the 5.97 percent of the outgoing year. 

The budget is aimed at fiscal consolidation to convince the International Monetary Fund (IMF) to release the much-needed bailout payments for the cash-strapped South Asian nation of 220 million. 

“The total expenditures of the federal government will be Rs9,502 billion ($47 billion) out of which the debt servicing would be Rs3,950 billion ($19.5 billion), while for the next year, the PSDP (Public Sector Development Program) would be Rs800 billion ($3.9 billion),” Ismail said, while presenting the budget in the lower house of Pakistan parliament, the National Assembly. 

“For the defense of the country, Rs1.5 trillion ($7.4 billion) and for Civil administration’s expenditures Rs550 billion ($2.7 billion) have been earmarked, and for payments of pension Rs530 billion ($2.6 billion) have been allocated.” 

During his speech, Ismail said Budget 2022-23 was a “growth budget,” based on a well-thought-out strategy to boost economic growth, control inflation and increase revenue generation. 

The finance minister said the government had set an inflation target of 11.5 percent and a tax-to-GDP ratio of 9.2 percent. The fiscal deficit target has been set for 4.9 percent of the GDP, while the export target has been set at $35 billion. 

He said the government would provide targeted subsidies to protect the marginalized segments of the country in the next fiscal year. 

“To facilitate the public, a targeted subsidy of Rs699 billion ($3.4 billion) has been allocated, while in the form of grants, Rs1242 billion ($6.2 billion) have been included in BISP (Benazir Income Support Program) and Bait-ul-Mal [semi-autonomous charity organization].” 

The Federal Board of Revenue’s (FBR) revenue collection has been estimated at Rs7 trillion ($34.6 billion) for the next fiscal year.  

“This includes Rs4.1 trillion ($20.3 billion) share of provinces. The net revenue with the federal government will be Rs4,904 billion ($24.2 billion). The non-tax revenue will be Rs2 trillion ($9.8 billion),” Ismail said. 

The country has raised the tax rate on banking companies from 39 percent to 42 percent, including 3 percent “Super Tax,” which is expected to raise Rs15-20 billion ($74.2-$98 million) in revenue, according to the budget. 

The capital gains tax on the sale of immovable property has been increased to 15 percent, if sold within one year. This rate will become zero over the period of six years. Withholding tax on filers and non-filers on the acquisition of property has been increased to 2 percent and 5 percent, respectively.  

The finance minister announced that immovable property, meant to park money and valued above Rs25 million ($0.127 million), would be subject to a deemed tax. The income for such deemed tax would be 5 percent of the fair value of such property, he added. 

“The major part of the wealth of rich people is parked in the real estate sector in Pakistan. This is a double-faceted menace. It leads to the accumulation of unproductive assets and raises the prices of housing for the poor and lower-income groups,” finance minister said. 

“We intend to correct this imbalance. Therefore, all persons who have more than one immovable property exceeding Rs25 million situated in Pakistan shall be deemed to have received rent equal to 5 percent of the fair market value of the immovable property and shall pay tax at the rate of 1 percent of the fair market value of the said property. However, one house of each individual will be excluded.” 

The government has decided to impose an advance tax of 1 percent on foreign transactions through debit/credit cards, which would be 2 percent for non-filers. 

Speaking of the relief measures, the finance minister announced a 15 percent increase in salaries of government employees, along with the merger of ad hoc allowances. 

He said the tax exemption slab for salaried class has also been increased from Rs600,000 ($2,968) to Rs1.2 million ($5,937). 

“This step will benefit the salaried class and enhance business activities and consumption. The slab for business individuals and associations of persons has been also been increased from Rs 400,000 to Rs 600,000,” Ismail said. 

“Prime Minister Shehbaz Sharif wants to provide maximum relief to the people of the country, particularly those who are unable to bear the burden of rising inflation.” 

He also announced tax exemption on the import and local supply of solar panels, saying soft loans from banks would be arranged to purchase solar panels for people with less than 200 units of power consumption. 

Financial experts, however, believe the Rs7 trillion revenue generation target, which is 17 percent higher than the target in FY22, would be hard to achieve, owing to the slow economic growth.  

“It will be a challenge to achieve this target due to economic slowdown and lower collection from oil sales. Please note that tax collection (sales tax, duties, petroleum levy) from oil is roughly around 22 percent of total tax collection,” Muhammad Sohail, the chief executive of Topline Securities, a brokerage house, told Arab News. 

“Budget FY23 is an attempt to satisfy the IMF on key matters relating to revenue collection, subsidy reductions and attainment of fiscal discipline.” 

The IMF and Pakistani officials concluded talks last month, with the fund asking for bailout program objectives, including fiscal consolidation, to be put back on track. 

It is unclear when the global lender plans to consider clearing the release of over $900 million of the latest tranche of the $6 billion, 39-month program Pakistan entered in 2019. 

One of the key steps, a removal of costly fuel subsidies, has already been implemented by the government, with fuel prices being raised by 40 percent. 

Economists say they were not expecting an “expansionary budget” under the current situation. 

“The budget under the present circumstances couldn’t be expansionary. Debt servicing and defense alone take the largest chunk. The net tax and non-tax income of the federal government is too inadequate to meet current expenses, what to speak of the development outlay,” Dr. Ikram ul Haq, a Lahore-based economist, said. 

“The twin menaces of fiscal deficit, coupled with current account and trade deficits, are hard to counter in the coming days, given the high inflation and the unsustainable debt burden.” 

Industrialists and traders say the budget is contrary to the expectation of a tougher one. 

“The budget is not a difficult one as was expected. The government of the few months has presented a good budget,” said Zubair Motiwala, chairman of Businessmen Group at the Karachi Chamber of Commerce and Industry (KCCI). 

“We are thankful for removing duty on solar panels. The decision of a dispute resolution mechanism is a welcoming step it was our persistent demand. The decision of tax adjustment on industrial raw material is also a good one.” 

The federal government has allocated Rs24 billion for health sector and Rs17 billion for imparting training in the information technology (IT) sector, providing youth with laptops, improving network and promoting IT exports. 

Irfan Iqbal Shaikh, president of the Pakistan Chamber of Commerce and Industry (FPCCI), said presenting the budget in the current situation was a “daunting task.” 

“The FPCCI had given proposals for the budget and many have been accommodated in the budget. The GDP target of 5 percent for the next fiscal year is a right move,” he said. 


Pakistan’s defense minister reports ‘death threat’ to British police, received during subway ride

Updated 14 November 2024
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Pakistan’s defense minister reports ‘death threat’ to British police, received during subway ride

  • Individuals who heckled Khawaja Asif recorded a video, warning he could be stabbed with a knife
  • Pakistani ministers have also complained of harassment by Imran Khan’s followers in the past

ISLAMABAD: Defense Minister Khawaja Asif has lodged a report with the British police over the alleged death threat and abuses hurled at him during a train ride in London, the Pakistan High Commission in the United Kingdom said on Thursday.
A viral video surfaced on social media a day earlier, showing an unidentified man hurling abuses at the Pakistani minister in the native Punjabi language, saying, “Take him away before someone stabs him with a knife.”
While Asif chose to ignore the incident and got off the next stop, he visited the Pakistan High Commission on Thursday to formally report the “death threat” to the UK police and demanding an investigation.
“Khawaja Muhammad Asif lodged a report of the train incident with the local police at the Pakistan High Commission,” said a statement released by the Pakistani diplomatic facility. “He informed the police about the details of the knife threat and harassment incident on the train.”
The incident that took place on the Elizabeth Line is now being investigated by the London Transport police, it added.
“I am on a private visit to London,” Asif was quoted as saying. “I was going to Reading via the Elizabeth Line with a loved one.”
He added that a family of three to four persons “harassed and threatened to kill with a knife and used abusive language” against him while making the video.
“I do not know anyone involved in the incident,” the Pakistan High Commission quoted him as saying. “London Transport Police should use CCTV footage to track down the suspects.”
Asif further said death threats and harassment were a “source of shame” for 1.7 million Pakistanis residing in the UK apart from British citizens.
This is not the first time Pakistani ministers belonging to Prime Minister Shehbaz Sharif’s coalition government, led by the Pakistan Muslim League Nawaz party, have been heckled or harassed in the UK.
In the past, Pakistan Information Minister Ataullah Tarar and Punjab Minister Marriyum Aurangzeb have endured the same treatment allegedly by the Pakistan Tehreek-e-Insaf party supporters of jailed former PM Imran Khan.
 


Seven killed in Pakistan’s northwest as militant’s car bomb explodes accidentally

Updated 14 November 2024
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Seven killed in Pakistan’s northwest as militant’s car bomb explodes accidentally

  • The explosion took place in Mir Ali where a militant was fitting a bomb in a car at his residence
  • Blast damaged several nearby homes and wounded 14 people, with some in critical condition

PESHAWAR: A powerful car bomb accidentally detonated at the house of a Pakistani Taliban militant in northwestern Pakistan on Thursday, killing at least two children and five suspected militants, police said.
The explosion took place before dawn in the city of Mir Ali in Khyber Pakhtunkhwa province when a man identified a local commander of the militants, Rasool Jan, was fitting a bomb in a car at his house, police official Irfan Khan said.
He said other militants from the Pakistani Taliban group quickly arrived at the scene and removed the bodies of the insurgents who died. Authorities later found the bodies of two children in the rubble of the house, which collapsed in the explosion.
The blast also badly damaged several nearby homes and wounded 14 people, including women. Some of the injured were in critical condition in a hospital, Khan said, but he did not provide details.
The Pakistani Taliban and other insurgents in the region often target security forces with assault rifles, rockets, grenades and suicide car bombings, and Khan said it appeared the car bomb was being prepared for such an attack.
The Pakistani Taliban, known as Tehreek-e-Taliban Pakistan, are separate from the Afghan Taliban but have been emboldened by the group’s takeover of Afghanistan in 2021.
Also Thursday, security forces raided a hideout of insurgents in Harnai, a district in restive southwestern Balochistan province, triggering an intense shootout in which a soldier and three insurgents were killed. During the operation, an army major was killed when a roadside bomb exploded near his vehicle, the military said in a statement.
Pakistan’s President Asif Ali Zardari and Prime Minister Shehbaz Sharif paid tribute to whom they called the “martyred soldiers” in separate statements. They said the fight against terrorism will continue until the elimination of all insurgents.
 


Pakistan, Russia call for regional collaboration on Afghanistan amid shared security concerns

Updated 14 November 2024
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Pakistan, Russia call for regional collaboration on Afghanistan amid shared security concerns

  • The call comes as Moscow’s special representative for Afghanistan visits Pakistan for a day
  • Despite security issues, Afghanistan’s neighboring states view its stability as vital for progress

ISLAMABAD: Pakistan and Russia on Thursday called for greater collaboration among regional states to address the situation in Afghanistan, amid shared concerns over militant violence emanating from the war-torn country.
The call came during a visit by Moscow’s special representative for Afghanistan, Ambassador Zamir Kabulov, who met with Pakistan’s foreign secretary, Amna Baloch, and held detailed discussions with the additional secretary, Ahmad Naseem Warraich, at the Ministry of Foreign Affairs in Islamabad.
“The two sides exchanged views on relations with Afghanistan and called for enhanced coordination among regional countries for a peaceful and prosperous Afghanistan,” the foreign office said. “The two sides agreed to remain engaged toward this end.”
The talks come as both nations grapple with security threats linked to Afghanistan. Russia has voiced alarm over Daesh and its attacks, including a concert bombing in Moscow earlier this year that was linked to militants with ties to Afghanistan.
While the Afghan Taliban and Daesh are sworn enemies, Pakistan accuses the Afghan administration of facilitating the Tehreek-e-Taliban Pakistan (TTP), a proscribed militant network blamed for cross-border attacks, an allegation Kabul denies.
Pakistan’s approach to Afghanistan has grown increasingly confrontational since last year as it pressures Kabul to rein in the TTP. By contrast, Russia announced last month it would remove the Taliban from its list of terrorist organizations, signaling a step toward normalizing ties with Afghanistan’s rulers.
Beyond security, Russia is keen to retain its influence in Central Asia and engage in Afghanistan’s economic reconstruction, particularly in energy and infrastructure projects.
Initiatives such as the Turkmenistan-Afghanistan-Pakistan-India (TAPI) Gas Pipeline and the Trans-Afghan Railway remain key priorities for Moscow, though persistent security challenges have delayed progress.
For Pakistan also, Afghanistan is critical for regional connectivity. Islamabad has offered landlocked Central Asian nations access to its ports, aiming to facilitate trade with global markets via sea routes.
Despite security concerns shared by Afghanistan’s neighboring countries, its stability is viewed as vital to unlocking the economic potential of regional projects.
 


PM Sharif urges nation to perform rain prayers as toxic smog chokes Pakistani cities

Updated 14 November 2024
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PM Sharif urges nation to perform rain prayers as toxic smog chokes Pakistani cities

  • Shehbaz Sharif urges Islamic scholars to play their role in organizing ‘Istisqa’ prayers across the country
  • Toxic smog has enveloped Pakistan’s cultural capital, Lahore, and 17 other districts of Punjab province

ISLAMABAD: Prime Minister Shehbaz Sharif has urged the nation to perform prayers for rainfall, calling on Islamic scholars to take the lead in organizing “Istisqa” prayers, his office announced on Thursday, as worsening air quality continues to endanger the health of millions.
The Istisqa prayer is a special Islamic ritual performed to seek rain, primarily during times of drought or severe water shortages. It symbolizes the community’s humility, repentance and reliance on divine mercy for sustenance.
Toxic smog has enveloped Pakistan’s cultural capital, Lahore, and 17 other districts in Punjab since last month. Health officials report that more than 40,000 people have sought treatment for respiratory illnesses, prompting Punjab authorities to close schools until November 17 to safeguard children’s health.
“PM Sharif appeals to the nation to offer Istisqa prayers for rain,” his office announced in a statement. “Scholars should especially play their role in organizing Istisqa prayers.”
The prime minister noted the rainfall would improve the environment apart from aiding in getting rid of diseases.
“Istisqa prayers should be organized in all mosques under the auspices of the federal government and the provinces,” he was quoted as saying. “In the current situation, there is a dire need for rain.”
A day earlier, Pakistan’s Meteorological Department forecast light rains from Nov. 14-16 in most districts of the country’s populous Punjab province.
The UN children’s agency has warned that the health of 11 million children in Punjab is in danger due to air pollution.
South Asia, particularly India and Pakistan, gets shrouded in intense pollution every winter as cold air traps emissions, dust, and smoke from farm fires.
Pollution could cut more than five years from people’s life expectancy in the region, according to a University of Chicago’s Energy Policy Institute study last year.
 


Pakistan signs four-year pact with Global Green Growth Initiative to boost climate resilience

Updated 14 November 2024
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Pakistan signs four-year pact with Global Green Growth Initiative to boost climate resilience

  • The agreement will help Pakistan’s transition to a green economy, address water scarcity and deforestation
  • Pakistan has ranked as the fifth most vulnerable country to climate change, with its cities engulfed in smog

ISLAMABAD: Pakistan has signed a four-year country program framework agreement with an international green economy organization to advance its sustainable development goals by enhancing climate resilience through green growth initiatives, according to an official statement released on Thursday.
The agreement was signed by Pakistan’s Climate Change Ministry Secretary, Aisha Humera Moriani, and the Global Green Growth Initiative’s (GGGI) Deputy Director-General, Helena McLeod, during a formal ceremony at the United Nations-led Global Climate Conference (COP29) in Baku, Azerbaijan.
Pakistan ranks as the fifth most vulnerable country to climate change, according to the Global Climate Risk Index. In 2022, catastrophic floods claimed over 1,700 lives, affected more than 33 million people, and caused economic losses exceeding $30 billion.
While international donors pledged over $9 billion last January to help Pakistan recover from the devastating floods, officials report that little of the pledged amount has been disbursed so far.
“The Ministry of Climate Change & Environmental Coordination and GGGI has signed a four-year Country Programme Framework agreement to advance Pakistan’s sustainable development goals through targeted climate action and green growth interventions,” said the official statement.
On the occasion, McLeod said her organization aimed to facilitate Pakistan’s transition to a green economy through collaboration with national stakeholders to address water scarcity, deforestation and energy challenges “compounded by climate change effects.”
Prime Minister Shehbaz Sharif’s Coordinator on Climate Change Romina Khurshid Alam thanked the GGGI for engaging with Pakistan to “mobilize green finance, support climate action frameworks and promote investment” to achieve climate resilience.
Pakistan also regularly faces other climate change-induced effects such as droughts, cyclones, torrential rainstorms and heatwaves.
Currently, record-high air pollution levels have triggered hundreds of hospitalizations, school closures and stay-at-home orders in the eastern city of Lahore and other cities in the populous Punjab province, which has been enveloped in thick, toxic smog since last month.
A mix of low-grade fuel emissions from factories and vehicles, exacerbated by agricultural stubble burning, blanket Lahore and its surroundings each winter, trapped by cooler temperatures and slow-moving winds.
The city of 14 million people stuffed with factories on the border with India regularly ranks among the world’s most polluted cities, but it has hit record levels this month, as has New Delhi.