The Federal Finance Minister, Ishaq Dar, is perhaps one of the most unenviable people on the planet. On one hand, he is trying to please the International Monetary Fund (IMF), meanwhile attempting to win the hearts and minds of Pakistanis who are reeling from historically high inflation. All the while, he is striving to increase revenue while cutting down on expenditure, which means there is not enough budget for development projects and subsidies.
Having said this, these are the most important highlights of the federal budget 2023-24:
Autos
- The custom duty on the import of HEVs (CBU) is reduced to 1%.
- The customs duty on lithium-ion batteries is now 0%.
- 35% customs duty on the import of car parts/components.
- Customs duty reduced from 10% to 5% on non-localized (CKD) of Heavy Commercial Vehicles (HCVs).
Salary/Pensions
- Government officers of grade 1 – 16 grade salary increment of 35%.
- Government officers of grade 17 – 22 grade salary increment of 30%.
- An increment of 17.5% in pension.
- Minimum salary increased from Rs.25,000 to Rs.32,000.
Social Services
- Rs.450 billion allocated for the Benazir Income Support Programme.
- Rs.10 billion allocated for 100,000 laptops for youth.
- Rs.5 billion allocated for women empowerment.
Properties/Real Estate
- Tax relief of 10% or Rs.5 million on the business income of builders for the next three years.
- Tax relief of 10% or Rs.1 million for the next three years for construction projects that start after July 1, 2023.
Miscellaneous
- Withholding tax on card transactions outside Pakistan increased from 1% to 5%.
- Exemption of customs duties on the import of machinery, equipment, and inputs of solar panels.
- Removal of regulatory duty on IT-related equipment.
- Services tax for restaurants, such as cafes, food parlors (including those serving ice cream), coffee houses, coffee shops, eateries, resorts, and similar establishments that offer cooked, prepared, or ready-to-eat food services, is 5% when customers opt to make payments through debit or credit cards, mobile wallets, or QR scanning.
- 0.6% Withholding tax on cash withdrawals over Rs.50,000 for non-filers.
- FED on telecommunication services reduced from 19.5% to 16%.
- Over 15% increase in the Defense budget – Allocation increased from Rs.1,563 billion to Rs.1,804 billion.
Is this budget any good? Like all previous budgets, it has its pros and cons. Let’s examine them quickly.
Pros
- 3.5% GDP growth target.
- Measures for clean and green energy.
- Measures for the revival of the construction sector.
- Sales tax exemption on contraceptives.
Cons
- Unrealistic growth target.
- Not enough relief provided to the people due to debt servicing and IMF restrictions.
- No out of the box solutions to bring people out of poverty.
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Quick Analysis
Pakistan’s government has admitted that the country’s economic growth for the fiscal year 2022-23 was 0.3%. However, this figure is disputed by many international financial institutions (IFIs) that claim Pakistan’s real growth rate was negative. It seems unrealistic to expect a jump from 0.3% to 3.5%. Additionally, considering Pakistan’s population growth rate of around 2%, achieving 3.5% economic growth would still fall short of making a significant impact on the average Pakistani’s life.
The main concern for an average Pakistani is to survive the current economic meltdown, which is being felt in the form of historic levels of inflation. However, the government’s primary focus seems to be appeasing the IMF and its voters, two opposing forces. Therefore, this budget cannot be considered completely people-friendly or entirely in accordance with the dictates of the Fund.
As they say, the devil is in the details, and the mini budget, expected anytime soon in the coming weeks, will reveal more information. So stay tuned, as we will cover that event as well.
In the meanwhile, let us know what you think of this budget. Do you consider it good for you?
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