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. 


‘Heartbroken’ Malala calls on world leaders to end Israel’s ‘genocide’ in Gaza

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‘Heartbroken’ Malala calls on world leaders to end Israel’s ‘genocide’ in Gaza

  • Nobel Peace Prize winner draws attenion to starving children, demolished schools and hospitals, blocked humanitarian aid in Gaza
  • The war, now in its 20th month, has killed over 53,000, left Gaza in ruins and its population facing a worsening hunger crisis

KARACHI: Nobel Peace Prize winner Malala Yousafzai on Wednesday said she was “heartbroken” by starving children, demolished schools and hospitals, blocked humanitarian aid and displaced families in Gaza, calling on world leaders to push Israel to end its ‘genocide’ in the besieged enclave.

Israel’s ground and air offensive, launched in October 2023, has displaced nearly all of Gaza’s 2.3 million residents and killed more than 53,000, according to Gaza health authorities. Israeli strikes have killed more than 500 people in the past nine days alone as its military campaign has intensified, Gaza medics say.

The war, now in its 20th month, has left Gaza in ruins and its population facing a worsening hunger crisis. It has strained Israel’s relations with much of the world and those with its closest ally, the United States, now appear to be wavering.

“It makes me sick to my stomach to see Israel’s cruelty and brutality in Gaza. I am heartbroken seeing thousands of starving children, demolished schools and hospitals, blocked humanitarian aid and displaced families,” Malala wrote on X.

“Our collective humanity calls for global and immediate action. I call on every world leader to put maximum pressure on the Israeli government to end this genocide and protect civilians.”

https://x.com/Malala/status/1924903856133308842

Malala’s statement came as Britain announced it was suspending trade talks with Israel and summoning its ambassador over “egregious policies” in the occupied West Bank and Gaza. 

British Prime Minister Keir Starmer told parliament he, along with the leaders of France and Canada, was “horrified” by Israel’s military escalation, repeating calls for a ceasefire.

The three nations had warned on Monday of “concrete actions” against Israel if it did not stop military operations in Gaza and lift restrictions on aid.

In addition to suspending trade talks, Britain announced sanctions against a number of individuals and groups in the Israeli-occupied West Bank over alleged violence against Palestinian residents.

European Union foreign policy chief Kaja Kallas has also asked for a review of the EU-Israel trade deal, according to Dutch news agency ANP.

EU sanctions on violent Israeli settlers have been prepared but have so far been blocked by one member state, Kallas said, without naming the country.

“External pressure will not divert Israel from its path in defending its existence and security against enemies who seek its destruction,” Israeli Foreign Ministry spokesperson Oren Marmorstein posted on X.

The United Nations said no humanitarian aid had been distributed yet in Gaza, although Israel eased its 11-week-old blockade on Monday.

“Israeli authorities are requiring us to offload supplies on the Palestinian side of Kerem Shalom crossing and reload them separately once they secure our team’s access from inside Gaza,” said UN spokesperson Stephane Dujarric.

He said four trucks of baby food were dropped off on the Palestinian side of the border on Monday, and that a few dozen trucks of flour, medicine, nutrition supplies and other basic items entered Gaza on Tuesday.

Israel’s military said 93 UN aid trucks entered Gaza on Tuesday via Kerem Shalom “after a thorough security inspection.”

With inputs from Reuters


Pakistan reports two new polio cases, bringing 2025 tally to 10

Updated 52 min 36 sec ago
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Pakistan reports two new polio cases, bringing 2025 tally to 10

  • Pakistan, Afghanistan last two countries in the world where polio remains endemic
  • Pakistan reported 74 cases of polio in 2024, raising alarm bells over a fresh breakout 

KARACHI: Pakistan’s polio eradication program said on Wednesday two new cases of the wild poliovirus had been detected in the country’s northwestern Khyber Pakhtunkhwa province, bringing the tall of 2025 cases to 10.

The new cases have emerged ahead of the government launching a third nationwide campaign to vaccinate children under the age of five, scheduled from May. 26 to June 1. The campaign will target over 45.4 million children across 159 districts, including high-risk areas of southern Khyber Pakhtunkhwa, where the new cases have been detected.

Polio is a paralyzing disease that has no cure. Multiple doses of the oral polio vaccine and completion of the routine vaccination schedule for all children under the age of 5 is essential to provide children high immunity against the disease.

“The Regional Reference Laboratory for Polio Eradication at the National Institute of Health has confirmed two new cases of wild poliovirus in District Lakki Marwat and District Bannu, South Khyber Pakhtunkhwa,” the body said in a statement. 

“With these latest detections, the total number of confirmed polio cases in Pakistan in 2025 has risen to 10, five from Khyber Pakhtunkhwa, four from Sindh, and one from Punjab.”

The statement said while polio vaccination campaigns continued nationwide, with two already held in 2025, certain areas, particularly in southern Khyber Pakhtunkhwa, faced challenges such as restricted access and difficulties in conducting house-to-house vaccination drives.

“These access and operational hurdles leave thousands of children particularly in South KP at risk of exposure to poliovirus as a result of missed opportunities for vaccination,” the statement said. 

Due to ongoing access constraints and community concerns, children in UC Bakhmal Ahmad Zai (Lakki Marwat) missed out on vaccination opportunities during the February and April 2025 immunization campaigns, resulting in immunity gaps. 

In UC Saintanga, Tehsil Wazir (Bannu), no comprehensive campaign had been implemented since October 2023. Limited access, shortage of female vaccinators, and gaps in monitoring had contributed to immunity gaps, leaving children at continued risk of poliovirus transmission.

“The Pakistan Polio Eradication Program is actively engaging with all stakeholders to address operational and access challenges and to enhance the effectiveness of vaccination campaigns in these high-risk areas. An intensified vaccination schedule is being implemented to interrupt virus transmission and protect children from lifelong paralysis,” the polio program added.

In the early 1990s, Pakistan reported around 20,000 polio cases annually but in 2018 the number dropped to eight cases. Six cases were reported in 2023 and only one in 2021. 

Pakistan and Afghanistan are the last two countries in the world where polio remains endemic.

Pakistan’s polio program began in 1994 but efforts to eradicate the virus have since been undermined by vaccine misinformation and opposition from some religious hard-liners who say immunization is a foreign ploy to sterilize Muslim children or a cover for Western spies. 

Militant groups also frequently attack and kill members of polio vaccine teams and security guards protecting them.


Islamabad, Beijing discuss bolstering ‘collective response mechanisms’ after India-Pakistan fighting

Updated 21 May 2025
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Islamabad, Beijing discuss bolstering ‘collective response mechanisms’ after India-Pakistan fighting

  • Islamabad’s worst military standoff with New Delhi in decades gave Chinese weapons a rare battle test
  • Pakistan used China’s J10-C Vigorous Dragon and JF-17 Thunder planes, armed with air-to-air missiles

KARACHI: Beijing’s ambassador to Islamabad met the Pakistani air chief on Tuesday evening, with the two leaders vowing to “bolster collective response mechanisms to emerging threats,” the Pakistan army said in a statement, a little over a week after Islamabad’s worst military standoff with New Delhi in decades gave Chinese weapons a rare battle test.

The most striking claim from four days of fighting earlier this month was the contention of the Pakistan Air Force (PAF) that its Chinese-supplied jets had shot down six Indian aircraft — including three French-made Rafale fighters — with some observers seeing this as a symbol of Beijing’s rising military might.

Pakistan accounts for around 63 percent of China’s arms exports, according to Stockholm International Peace Research Institute (SIPRI). 

In the recent fighting with India, Pakistan used the J10-C Vigorous Dragon and JF-17 Thunder planes, armed with air-to-air missiles. It was the first time the J10-C has been used in active combat. Islamabad’s air defenses also used Chinese kit — including the HQ-9P long-range surface-to-air missile system — and deployed Chinese radar as well as armed and reconnaissance drones.

On Tuesday evening, Chinese Ambassador to Pakistan, Jiang Zaidong, called on Air Chief Marshal Zaheer Ahmed Baber Sidhu, Chief of the Air Staff, Pakistan Air Force, and engaged in a “comprehensive and in-depth discussion on a range of matters including corporate-level engagements, defense cooperation and the evolving geostrategic environment in the region.”

“They underscored the importance of cohesive & collaborative approaches in responding to emerging challenges, emphasizing the necessity of maintaining peak operational readiness and swift coordination amidst the prevailing regional security dynamics,” the Pakistan army said in a statement released after the meeting. 

Sidhu commended China’s role in assisting Pakistan’s defense modernization and technological advancement.

“Both the dignitaries reaffirmed their pledge to institutionalize regular high-level exchanges through expanded joint operational exercises and exploration of multilateral frameworks that bolster collective response mechanisms to emerging threats,” the Pakistan army said.

The statement said the Chinese ambassador lauded the “unmatched operational excellence” demonstrated by PAF personnel during the recent standoff with India, terming it a reflection of PAF’s “high standards and unwavering commitment to national defense.” 

“He praised Pakistan Air Force for its exemplary professionalism and commendable utilization of Chinese-origin equipment & technology to thwart enemy aggression,” the Pakistan army said. 

“The dignitary also acknowledged PAF’s operational effectiveness and strategic acumen in employing indigenous solutions and advanced systems to safeguard national interests and deter potential threats under the current leadership.”

The ambassador assured “full technical assistance” to PAF to bolster its aerial defense capabilities, adding that continued focus on homegrown technological development would further elevate the country’s defense capabilities. 

Nuclear-armed neighbors Pakistan and India halted their worst fighting in nearly three decades after agreeing to a ceasefire on May 10, following diplomacy and pressure from the United States.

On Tuesday, China’s Foreign Minister Wang Yi sad Beijing welcomed and supported efforts by Pakistan and India to handle their differences through dialogue and to achieve a “comprehensive and lasting” ceasefire.

With inputs from AFP and Reuters
 


Pakistan says open to talks with India after IMF flags tensions as loan risk

Updated 58 min 39 sec ago
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Pakistan says open to talks with India after IMF flags tensions as loan risk

  • Indian Defense Minister Rajnath Singh has called on IMF to reconsider $1 billion loan to Pakistan
  • Finance advisor says structural benchmarks mentioned in the lender’s latest report not new terms

KARACHI: Pakistan on Tuesday hinted that it was open to “constructive diplomatic and economic engagement” with India as the International Monetary Fund (IMF) said prevailing tensions between the two archfoes had increased enterprise risks to Islamabad’s ongoing loan program.

The development comes days after Indian Defense Minister Rajnath Singh said the IMF should reconsider a $1 billion loan to Pakistan alleging it was “funding terror,” a move denounced by Islamabad as proof of New Delhi’s desperation.

India and Pakistan this month clashed in the worst military violence in decades, killing around 70 people before agreeing a ceasefire on May 10. The conflict was sparked by an attack on tourists in Indian-administered Kashmir that New Delhi blamed on Islamabad, a charge it denies.

Khurram Schehzad, adviser to Pakistan’s finance minister, said the Washington-based lender had not imposed any new “conditions” on Pakistan, which continues to pursue stability and responsible governance that supports long-term growth for itself and the region alike.

“Constructive diplomatic and economic engagement in the region, including with neighbors, remains essential,” Schehzad told Arab News, when asked about the recent developments on the fiscal front.

The IMF last week approved a loan program review for Pakistan, unlocking a $1 billion payment which the State Bank of Pakistan said had been received. A fresh $1.4 billion loan was also approved under the IMF’s climate resilience fund.

But the lender last week said the rising India-Pakistan tensions, if sustained or deteriorated further, could heighten enterprise risks to the fiscal, external and reform goals of its $7 billion ongoing loan program for cash-strapped Pakistan.

The IMF loan is vital for Pakistan which is trying to revive its debt-ridden economy that is expected to expand 2.68 percent by June, about one percent lower than the government’s earlier projection.

“Yes, the IMF report identifies regional tensions as a potential risk, as is customary in such assessments,” Schehzad said, adding that at the same time, the Fund had noted that Pakistan’s stocks market had reacted to the conflict modestly and retained most of its recent gains.

“We view this as a reflection of investor confidence in Pakistan’s macroeconomic path.”

Pakistan’s stocks, which rose more than 80 percent last year, have largely resisted selling pressures in recent weeks, despite the country’s conflict with India that saw the two sides strike each other with missiles, drones and artillery.

Schehzad rejected the impression that Pakistan had increased its defense budget and said it remained constant at 1.9 percent of the gross domestic product this fiscal year starting in June 2024.

“The Rs2.414 trillion defense budget cited in the IMF’s staff report is an absolute projection,” he said.

After debt servicing, defense spending is the second biggest drain on Pakistan’s revenues that the country is trying to improve by withdrawing energy subsidies and taxing incomes from agriculture, retail and real estate sectors as one of the conditions set by the IMF under its 37-month Extended Fund Facility (EFF) secured in September.

BUDGET DISCUSSIONS

An IMF team is currently discussing with Pakistan the upcoming federal budget that the country is expected to unveil early next month, said IMF officials privy to the discussions, requesting anonymity as they were not authorized to speak to media.

The talks are expected to conclude “this week” after which the IMF would issue a concluding statement, they told Arab News, without explaining what exactly the two sides were discussing.

The IMF’s latest country report, issued last week, mentioned certain structural benchmarks for Pakistan’s economic reform program that Schehzad said represented the natural progression of the measures already agreed upon, when Pakistan signed the Memorandum for Economic and Financial Policies (MEFP) in September.

“There are not newly introduced conditions. Each step builds logically on the foundations laid in earlier phases of the program,” he said, adding that each structural benchmark the IMF’s report mentioned was part of a sequenced approach to reforms that was designed in phases and built upon progress achieved in the country’s earlier reviews.

Pakistan on May 9 secured the IMF board’s nod for its first review that saw the release of about $1 billion to the cash-strapped country and the approval of the country’s request for a 28-month, $1.4 billion Resilience and Sustainability Facility (RSF) to cope with environmental vulnerabilities.

“These benchmarks are not surprises. They are deliberate follow-ons to earlier milestones,” Schehzad said, citing Pakistan’s parliamentary approval of the next budget in line with the IMF staff agreement as a second step toward the country’s goal of achieving a primary surplus of 2 percent of GDP by FY27.

“The first step was the FY25 budget [presented in June last year], which targeted a 1.0 percent surplus.”

Terming several other IMF structural benchmarks as a continuation of what has been agreed upon with the lender, Schehzad said some new benchmarks were introduced in response to recent developments.

“The plan to publish a post-2027 financial sector strategy and the move to remove the cap on the debt service surcharge are based on new realities, including the recent constitutional amendment and the government’s evolving energy sector reform strategy,” he said.

Other reforms, according to the adviser, included phasing out incentives in Pakistan’s special technology zones and industrial parks by 2035 to ensure a level-playing field, and lifting a ban on the import of used cars to reduce trade barriers was consistent with the trade liberalization goals outlined in the September 2024 MEFP.

The finance adviser confirmed that the remaining 13 actions fall under the separate climate resilience-focused facility, RSF, that were approved by the IMF’s executive board.

“These measures reflect Pakistan’s steady and sovereign commitment to economic reform and transparency, not externally imposed demands,” he said. 


Egyptian president has accepted invitation for official visit to Pakistan — PM Sharif

Updated 20 May 2025
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Egyptian president has accepted invitation for official visit to Pakistan — PM Sharif

  • Pakistan and Egypt have cordial relations and both countries have resolved in recent years to enhance their bilateral trade
  • PM thanks President El-Sisi for Egypt’s proactive diplomacy that helped Pakistan, India reach a truce after this month’s standoff

ISLAMABAD: Egyptian President Abdel Fattah El-Sisi has accepted an invitation to visit Pakistan, Prime Minister Shehbaz Sharif said on Tuesday, following a telephonic conversation between the two leaders.
Pakistan and Egypt have cordial ties and both countries have resolved in recent years to enhance bilateral trade by facilitating businessmen with visas, exchanging trade-related information and promoting private-sector contacts.
During their conversation, PM Sharif conveyed his profound gratitude to President El-Sisi for Egypt’s constructive role and proactive diplomacy that helped Pakistan and India reach a truce after a four-day standoff.
“Expressing satisfaction on Pakistan-Egypt relations, the prime minister highlighted the need to enhance bilateral trade and investment,” Sharif’s office said.
“The prime minister extended a most cordial invitation to the Egyptian president to undertake an official visit to Pakistan which was graciously accepted.”
Friendly ties between Pakistan and Egypt can be traced back to 1947, when the former gained independence and its founder, Muhammad Ali Jinnah, visited Egypt on the special invitation of King Fuad II.
In July last year, Pakistan’s then religious affairs minister Chaudhry Salik Hussain and Egyptian Ambassador to Pakistan Dr. Ihab Abdelhamid Hassan agreed to enhance cooperation between the two countries in religious education and other areas of mutual interest.
During the call on Tuesday, PM Sharif and President El-Sisi also discussed developments in the Middle East, particularly the situation in Gaza.
“The prime minister urged the international community to ensure consistent and timely delivery of badly needed humanitarian assistance to the people of Gaza,” Sharif’s office said.