BUDGET 2022 2023

[ghazi52]

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Estimated/projected budget 2022-2023​

Syed Shabbar Zaidi
07 Jun, 2022


The federal budget is expected to be presented on June 10, 2022. As a result of excessive politicisation of the subject, the real picture is being unnecessarily mutilated. In the following paragraphs, I have endeavoured to present an Accountant’s view of the budget for the Federal Government to help the people understand the real status of Pakistan’s fiscal position.
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PKR in billion
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Federal Budget .......................2021-2022 ............ 2022-2023
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Taxes Revenue ........................ 6129 6750
Non-taxRevenue...................... 2080 2100
(Provincial Shares-NFC)........... (3412) (3800)
Net Revenue............................ 4797 5050
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Expenditure
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Domestic Debt servicing............. 2800........ 3000
Foreign Debt servicing ................ 302........... 550
Defence............................. 1370 1500
Pension ........................... 480 520
Subsidies ......................... 682 750
Civil Government ............ 639 750
Grants & transfers........... 1167.............1600
Total expenditure ............ 7440,,,,,,,,,,,,,,, 8670
Deficit ........... ................... ......... 2643................3620
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This is a very optimistic position. Grants and transfers in the Federal Government expenditure includes BISP, losses of the State-Owned Enterprises (SOEs) and special grants to the provinces and projects. It also includes Kamyab Jawan Programme, etc.

As can be seen from the aforesaid estimate around seventy (70) percent of the total available resources of the Federal Government are consumed by debt servicing. With every year’s deficit, the liability further increases and the vicious circle multiplies. For us accountants this is an income statement where the entity is not a going concern with such huge liability and unless there is serious restructuring, this entity cannot sustain itself financially.

This effectively means that the hard-earned tax revenue is utilised to finance a debt that definitely needs restructuring or moratorium from the creditors.

The other item which is not seriously considered is the ever increasing bill for pensions. This has reached almost 10% of the net available resources and there is no apparent possibility to achieve any reasonable solution for it. It is strange that in Pakistan pensions without any threshold are exempt from tax whereas salary income is taxable above a certain threshold. This does not happen anywhere in the world.

The expenditure on BISP, Kamyab Jawan Programmes, etc., is totally unjustified at the federal level. It is not the job and liability of the Federal Government to undertake such activities.

I would even say that it is not in accordance with the Constitution. These steps are required to be undertaken at the provincial level as human development and other functions are devolved under the 18th Amendment. Gone are the days when the Prime Ministers used to act like Kings and dole out money from state coffers.

The federal government after the 18th Amendment is only responsible for Defence, Foreign Affairs, Foreign Trade Communication and certain other subjects. These 62 Divisions of the Federal Government, most of them pertain to devolved subjects, are not justified under the Constitution.

There can be valid and justified arguments from an accountant’s perspective, whether the Federal Government should be responsible for bearing the whole burden of debt servicing especially when the income from capital projects made from such debt is being reaped by the provinces. This will lead to another debate which I do not want to open at this stage. Nevertheless, as an accountant I am not able to match oranges with oranges.

When the actual budget is presented the nation and the media will engage itself in a blame game and discussion on unnecessary subjects.

The purpose of this article is to exhibit that there are certain constraints within which Federal Government has to operate and the reins of the engine of Pakistan’s economy do not lie on the right side of 3rd Floor of the Q Block, Pakistan Secretariat, but on the left side where there is the representative office of International Monetary Fund.

I, as a Chairman of the Federal Board of Revenue, had made a presentation to get approval even for a scheme or proposal which I consider did not require any such action. At that time I used to think whether we have actually attained independence in 1947 or is it still an illusion.
Copyright Business Recorder, 2022
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[ghazi52]

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BUDGET 2022-23: Comment: Revenue targets and how to achieve them​

Shahid Kardar | Dr Hafiz A. Pasha
June 8, 2022

THE estimated revenue collection of Federal Board of Revenue (FBR) in the first 11 months of 2021-22 is likely to be close to Rs5,350 billion. This represents an unprecedented jump of 28.5 per cent over the collection of Rs4,163bn in the corresponding period of 2020-21. This is probably the highest growth rate ever.

However, such an assessment should be viewed with some circumspection. The principal reason underlying this outcome is the extraordinary buoyancy in the import tax base. The rupee value of imports has increased by 58 per cent in the first 10 months of the current financial year. But, with import-based taxes like customs duty and the sales tax on imports having shown a combined growth rate of 35pc during this period, FBR needs to explain why the growth rate of revenue has been significantly less than the growth rate of the tax base.

A worrying development is the rising share of indirect taxes in FBR revenues, which is making the tax system more regressive. The share was 63.5pc in 2020-21 which is likely to rise to 65pc by the end of 2021-22, with more than 52pc of total tax revenues being collected at the import stage.

This is an unwelcome development and the federal budget for 2022-23 will have to focus on the restoration of progressivity by more revenue-yielding proposals in the income tax.

Another development which requires a more careful review is the falling trade-weighted average effective duty on imports. It is likely to be close to 8pc this year. According to the World Trade Organisation publication, World Tariff Profiles, it was almost 11pc in 2015. This drop in the effective rate of import duty is one of the factors contributing to the growth in the volume of imports and thereby the worsening of the trade deficit. Here again, the forthcoming federal budget will need to consider the scaling up of the import tariff in different slabs, as a short-term measure.

Having indicated the direction of reforms that should drive the proposals for the next federal budget, we turn now to an examination of the potential target for FBR’s revenues for 2022-23.

The IMF, being a key player in the determination of such a target, has proposed it at Rs7,255 billion in the staff report issued after the completion of the sixth review of the programme. This implies a growth rate of close to 19pc on the projected level of revenues, as per the target of Rs6,100bn for the year coming to a close. Based on a likely shortfall of Rs100 billion, the targeted growth rate for 2022-23 translates to 21pc.

So, what is the likelihood of achieving revenues of Rs7,255bn in 2022-23? How much is the likely normal increase in revenues and what will be the required quantum of revenues that can be generated from taxation proposals to achieve this target? To begin with, there is a need to take some special factors into account.

First, the sales tax on petroleum products has been withdrawn. This implies an average monthly revenue loss of more than Rs 40bn. If the revenue up to February 2022 of close to Rs 300bn from this tax is excluded, then the effective base year revenues for the purposes of assessing the feasibility of the target fall to Rs 5,700bn. Hence, if the withdrawal of the sales tax on petroleum products is to continue in 2022-23 then the achievement of the revenue target of Rs 7,255bn will effectively require a growth rate of over 27pc.

Second, the buoyancy of the import tax base in 2021-22 is obviously unsustainable. And through strong policy steps, the likely import level this year of close to $78bn will have to be brought down to near $70bn next year if the pressure on the already-rather low level of foreign exchange reserves is to be eased. In effect the import tax base in rupees may either remain unchanged or show only modest growth in rupee terms
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There are other factors which will also limit the growth in FBR revenues in 2022-23. First, among the withholding taxes in income tax the two big revenue sources are on contracts and imports, with shares in total income tax revenues of 16pc and 13pc respectively. The likely restriction in the size of the PSDP will reduce the growth rate in revenues from contracts. Similarly, the constraint to growth in imports will limit the increase in withholding tax on imports.

Third, 24pc of income tax revenues accrue from the advance tax on companies. Revenues from this source will be limited by the reduction in taxable profits due to the big increase in interest rates and fuel and energy prices, the contribution of inflation to the increase in cost of other manufacturing inputs and lower demand due to the squeeze that will be experienced by households in their disposable incomes.

The domestic tax base is likely to grow by close to 18pc next year, equivalent to the real growth rate of the GDP plus the rate of inflation. Therefore, the combined normal growth of domestic and import-based taxes is projected at close to 10 percent, suggesting that without any taxation proposals, the likely level of FBR revenues in 2022-23 will be neighbouring Rs 6,270bn; on the assumption that there will be no sales tax on petroleum products. As such, the revenue required from additional taxation proposals is very large, at Rs 985bn, for meeting the IMF target.

The government needs to evaluate the implications of bringing back the sales tax and petroleum levy on petroleum products by the 1st of July 2022. This will have to be preceded by the third round of price increases to fully eliminate the subsidy. In effect, this will imply a jump in petroleum prices of at up to 50pc over the level prevailing in February 2022, prior to the announcement of the decrease in petroleum prices by Rs 10 per litre.


There is fortunately, as highlighted above, scope for enhancement in import tariffs. This should be the preferred policy measure rather than the imposition of import bans on luxury and non-essential imports, which will actually imply a loss of revenues. Appropriate upward adjustment in the import duty slabs could yield an additional Rs 250bn. This will largely compensate for the loss in revenues from the sales tax on petroleum products or alternatively require fewer taxation proposals in other tax bases.

The suggested feasible target is Rs 6,900bn. In the absence of the sales tax on petroleum products this will imply a growth rate in FBR revenues of 21pc. With normal growth at 10pc, the quantum of revenue from taxation proposals in the federal budget of 2022-23 will involve substantial additional taxation of Rs 630bn. A higher target is considered infeasible given the likely state of the economy in 2022-23. Beyond the enhancement in import tariffs, the focus will have to be on resource mobilization from direct taxes. Some very progressive proposals are identified below:


· Reforms in the proposal income tax whereby the eleven slabs are reduced to six. The exemption limit is enhanced from Rs 600,000 to Rs 1,000,000. The maximum marginal tax rate will apply on income above Rs 25m, as compared to the present level of Rs 75m.

· Conversion of fixed and final taxes on dividends, interest, rental income, etc., to be converted into advance taxes. Income from these sources to be reported in the tax return for determination of the total tax liability minus the advance taxes paid.

· Taxation of long-term real capital gains on property and shares at 10pc. The provision of exemption beyond the specified holding period should be withdrawn, with the real capital gain in the case of real estate being estimated through appropriate indexation, to factor in higher rates of inflation.

· Reintroduction of the wealth tax in the form of the capital value tax initially at the rate of 1pc.
· Careful review of exemptions in the Second Schedule of the Income Tax Ordinance and exemptions withdrawn from corporate entities and from NGOs not operating in the areas of health or education.

· Minimum tax on rental incomes from commercial properties, equivalent to 3pc of the market value as reported by FBR on valuation of properties in various neighborhoods in different cities.
· Enhancement in the withholding tax rates on electricity bills of commercial consumers and residential consumers where the consumption is more than 1,000 units per month. This is considered essential to reduce the import demand for fuel used in power generation.

· Pitching the tax on commercial banks at 45pc. This, admittedly, is the second best option. In view of the inability of the public finances, even in the medium term, to generate surplus of close to 5.2pc of GDP to service the interest payments on domestic debt, the first best option is to write-off some of the face value of the debt. However, since it would be challenging, for a variety of reasons, to adopt this route in the short term, the second best option is being proposed as a measure to get something back from the commercial banks some of the massive profits that they have made.

· Strong exhortation on the provincial governments to develop the agricultural income tax and the urban immoveable property tax in their respective budgets of 2022-23.
Overall, the finalisation of the federal budget for 2022-23 represents a formidable challenge to the new coalition Government. There is need for a persuasive dialogue with the IMF for agreement on the proposed revenue target Rs 6,900bn in 2022-23.

The writers are a former federal minister and a former governor of the State Bank of Pakistan, respectively
Published in Dawn, June 8th, 2022

 

[ghazi52]

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[Jango]

Perhaps the first conference on the FY economic survey that has almost no mention about economic facts and figures and is just another political press conference.

 

[Jango]

I feel for Miftah...he had to give out a briefing on the economic survey of the previous govt with generally encouraging facts and figures. He tried his best to make it a political conference, and kind of succeeded as well, by ignoring the survey itself.

 

[ghazi52]

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Budget 2023: Confessions of a common Pakistani man​

Citizens hope for some respite as the coalition govt is set to announce the next fiscal year's budget after talks with the IMF.

Maaz Aleem
June 9, 2022

Amid political chaos and the country’s economy in free fall, the Shehbaz Sharif-led government is set to present the next fiscal year’s budget in the National Assembly on Friday.

The announcement will come in the wake of a series of talks with the International Monetary Fund (IMF) in Doha, where the lender has strongly urged the government to reduce subsidies and increase taxation. While blaming the PTI regime for the country’s economic turmoil, Finance Minister Miftah Ismail has said the government will aim to reduce the fiscal deficit in the upcoming financial year.

Meanwhile, Prime Minister Shehbaz has announced a Rs28 billion relief package for lower income households in the upcoming budget and is hoping for foreign aid from allies — China, Saudi Arabia, and the UAE — to stop the economy from haemorrhaging. However, his government's latest move of increasing fuel prices by Rs30 — not once but twice in as many weeks — and speculations of a rise in taxes for the salaried class, in addition to a hike in electricity and gas tariffs is reflective of the Fund’s instructions.

Accounting for talks with the IMF and the prevalent economic conditions, economists predict that the new budget will be stringent and heavy on the common man’s pocket.
The prices of goods and services have already skyrocketed due to the global economic downturn caused by the Covid-19 pandemic. Moreover, Pakistan also faces a massive debt burden, further exacerbated by the rapidly devaluating rupee, all of which are causes for the latest economic crisis in the country.
Considering a situation where a nuclear family with an average size of five to six members and has only one bread earner, survival in such testing times has become a challenge to say the least. People from all socio-economic backgrounds are feeling the pinch due to skyrocketing inflation, which has severely hampered their purchasing power and spending trends.

Roti, Kapra, Makaan​

The political chant Roti, Kapra, Makaan went places when former prime minister Zulfikar Ali Bhutto advocated for basic rights in his political campaigns back in the 1970s. Today, that rallying cry has grown ever louder — but there’s no one to shout it from the front.

The most basic form of a meal, the naan bread — a staple for all socio-economic classes, be it the richest CEOs or daily-wage labourers — has seen a substantial price hike in recent times. Sold for Rs8 to Rs10 in 2019, the naan has seen a 120 per cent rise in its price over the last three years alone and is now being sold for Rs20 to Rs25, depending on where you live. Tandoor owners say they have no choice but to increase the prices, blaming the government for increasing wheat prices and gas tariffs.

Sabir Ali, a cashier at a local tandoor in Nazimabad, Karachi, told Dawn.com that he has observed a marked shift in the buying patterns of his customers. A significant number who used to buy naan have found a cheaper alternative in chapati which is sold for Rs12 at his shop. “It is becoming increasingly difficult for us to manage the shop with the increased flour prices, gas and electricity bills, besides the employees’ salaries,” he says.

Meanwhile, finding a shelter in overpopulated metropolitan cities of the country is a task in itself. The rise in property values has made it impossible for the average Joe to even think of buying a home of their own. The only possible option left for a family is to search for properties to rent, which in turn keeps increasing due to the rise in demand and the steady increase in property values.
The Imran Khan-led government patted itself on the back for providing benefits to the real estate and construction sector, but these only proved beneficial for the already-minted real estate developers and construction magnates. Their claim of building five million homes under the Naya Pakistan housing scheme went down the drain too, as they could only build 21,980.
Finding a shelter and maintaining it comes with a list of supporting expenditures. The incumbent government has already increased tariffs on utilities, further burdening citizens.
Tayyab Tariq, an accountancy professional in Karachi, shared how his family’s expenditures have risen in the past few years. “My savings have gone to zero due to inflation,” he said. "My expenses on rent, utility bills, and fuel have gone up by almost 60pc to 70pc compared to last year."

Shop till you drop!​

They say ‘shop till you drop’. In Pakistan, grocery shopping can make your balance drop faster than you can say stop.

To start off, a 10kg flour bag that was sold for Rs350 to Rs420 in 2019 is currently priced at Rs800 to Rs900. Then there is sugar, which was sold for Rs45 to Rs50 rupees in 2019, but now costs Rs100 to Rs120 in different markets across the country.

Milk prices have also risen, with suppliers blaming the government for fuel price hikes and a rise in the cost of feeding their animals.

Oil and Ghee prices have seen a massive jump as well. Cooking oil was sold for Rs180 to Rs200 in 2019 and saw a sharp increase by 150pc in the PTI regime in 2020. The current regime has recently increased cooking oil and ghee prices by more than Rs200 rupees in one go, making ghee available at a whopping Rs600 per kg.

Even the prices of pulses have seen a Rs30 rise, while Basmati rice, which was sold for Rs70 to Rs80 per kilogramme in 2019, now goes for between Rs150 to Rs200.
Besides these essential food Items, there are several other commodities in the average household’s grocery basket. The prices of toiletries and personal care products have seen a hike too with a rise in import duties and the cost of production.

Aisha Moiz, a mother of four and a housewife, said her grocery bill has increased exponentially over the past few months alone. She recounted how her family’s expenditures on groceries before the pandemic were at least 40pc to 45pc less than where they currently stand. “Beef was sold for Rs450 to Rs500 back then and is now past Rs900 per kg. The price hikes have had an overall impact on our monthly budget, which is now mainly spent on household and grocery expenditures,” she lamented.

Hot wheels​

Fuel is one of the major drivers of the economy. An increase in fuel prices has a cyclical effect on the prices of all other goods which require transport, which in turn drives up inflation. Last month, inflation clocked in at 13.76pc — the highest in two years.

In Pakistan, as is the case across the world, the prices of petroleum products have seen an exponential rise over the last few years. In 2019, the price of petrol ranged from Rs81 to Rs95 per litre. After the latest price hikes by the government, petrol has seen an over 100pc jump in its retail price and is currently being sold at almost Rs210.

Moreover, public transport across the country is in absolute shambles. With a few mass transit projects operational in larger cities, smaller cities and even Karachi still lack basic public transport infrastructure. Moreover, rising fuel prices have forced authorities to reevaluate their costing models and increase their fares. The Punjab Mass Transit Authority is finalising a plan to introduce a distance-based fare system rather than a uniform rate for all routes.

Shanze Moin, a freelancer and a student pursuing her bachelor's degree in Karachi, shared her experience of using online cab services on which she spends over Rs10,000 a month going to and from her home to university. She added that these travel expenditures take away the biggest chunk of her monthly budget which is financed by her pocket money and her earnings through freelance projects. Asked about her hopes for the upcoming budget, she said that "instead of further burdening citizens who are already paying taxes, the government should crack down on tax theft and increase the taxpayers' base through a better tracking system".

Abdul Khaliq, who works at a towel factory in Karachi and commutes daily by bus, shared that after the fuel price hike, the A3 bus in Karachi was charging him Rs30 instead of Rs20 to travel from the bus stop at Liaquatabad flyover till Nipa Chowrangi. He added that the rise in bus fares have caused his daily expenditure to go up which adversely impacted his overall monthly expenses. He hoped the government would take effective measures to mitigate the effects of the back-breaking inflation that has gripped the country.

Where daily commuters pray for fares to go down, their commutes are expected to become even dearer as the government, on the IMF’s directions, plans to raise the fuel prices further in the months to come.

“The budget and the fuel hike may not take a huge toll on my family or me yet, but it is a certain shock for those who are struggling financially,” said Malik Umar, a 20-year-old resident of Multan. But the latest hike has certainly made him reevaluate his spending patterns. “Now, I often take the Multan metrobus instead of my car,” he said.

“Using the Metro helps me save Rs600 to Rs700 from my daily fuel expense and I am able to cover the same distance in Rs80 to Rs100 via the metro.” However, he expects the fares of the metro to go up based on a conversation he overheard between the bus captain and one of the fellow passengers.

In such testing times, if you dream of owning a motorcycle or a car of your own, a quick look at the latest prices will give you a stark reality check. Atlas Honda’s all-time famous CD 70 was being sold for between Rs 65,000 to 70,000 in 2019. It is now priced at over Rs 105,000.
The cheapest locally assembled car, the Suzuki Alto, was being sold for between Rs1 million and Rs1.3m just three years ago. The depreciation in the rupee's value and the global economic recession has affected the automobile industry drastically, due to which the same car is now being sold in different variants ranging from Rs Rs1.5m to Rs2m.
Ebad Abdullah, a textile trader, was looking to buy a new car, but due to the ever increasing prices of automobiles, he settled on a used one. This, he said, also helped him avoid paying extra charges and taxes for vehicle registration. “The import bans will result in further price hikes in the local automobile industry due to a supply deficit," said the 31-year-old. "But I still hope that the high taxes imposed by the PTI regime on vehicles are relaxed during this budget, and I expect the coalition government to do so as people-friendly budget policies will help them improve their political position for the next elections.”

We do not receive education and healthcare — we buy it!​

Education is a basic need and a number of countries in the Western world provide free education to its citizens. In Pakistan, however, educational institutes — the good ones anyway — are in the hands of the private sector, which is often accused by parents of pillaging students and their parents with fee hikes. An average family with three to four children going to schools and colleges takes the major chunk of their family’s income.
Aman Ullah, a father of four and a Quran instructor at a school, said he struggles every month to pay his children’s school fees along with covering his other expenses. The 43-year-old added that almost 40pc of his monthly income goes towards his children's school and van fees. The other 35pc to 40pc is spent on groceries and healthcare for his ailing mother, leaving him with very little to meet his utility bills.

Universities charge millions and the dilemma is that when students graduate, the job market is not very kind to them either. Even if the graduates land a job, the salaries that they receive are so low that it wouldn’t even cover their monthly transport expenses.
Muhammad Daniyal, a Lahore-based mechanical engineer, who graduated in 2021 from a university in Lahore, landed a job right after his graduation but struggles to meet his expenses. The 24-year-old, who initially planned on saving part of his income to purchase a laptop, told Dawn.com: “My starting salary was quite less and left me with hardly Rs 3,000 to Rs 4,000 as savings, which I eventually spent on sundry expenses after paying for my travel costs and after contributing minimally towards the family’s expenses.”
Amid all this, the Higher Education Commission (HEC) too fears a budget cut this year, as the Finance Ministry reports said that it would allocate only Rs30 billion to the commission.
Although the concerns were allayed by PM Shehbaz, the HEC still believes that their demand of Rs104 billion will not be met. The previous government allocated a Rs 66.25 billion budget to the commission which only catered to 28pc of the its needs.
A similar quandary continues when it comes to healthcare. Pakistan spent $39.5 per capita on healthcare in 2019 — even lesser than the prescribed $44 by the World Health Organisation. Moreover, the figure is far less than what our neighbouring countries spent on the sector.


Quality healthcare is only available in private hospitals. Moreover, the state of public hospitals and healthcare is going downhill with each passing year, with many tertiary care public hospitals across the country failing to provide adequate services.

The mental toll​

The budget document presented and passed by the National Assembly each year contains details of the allocations and expenditures from the country's treasury under different heads. What the numbers do not account for is the toll these inflationary trends exact on the mental health on the bread-winner of each household.
Most Pakistani families rely on a single earner, who must ensure they are able to afford sending the children to school, meeting the family’s day-to-day expenditures, account for health emergencies, among other sundry expenditures listed above. All of these pressures can cause severe depression, which eventually has an effect on the overall domestic environment. Families who used to be able to set aside some savings or keep a budget for recreation, now use that same money to fulfill their needs.
According to Aman Ullah, the financial stress has had an impact on his mental health as he's always thinking of ways to increase his income to make ends meet. “I used to give Rs3000 to Rs4000 to my wife so that the family could use the money to buy food from the nearby restaurant once or twice a month. That money is now spent on my mother's medical bills," he lamented, adding that inflation had taken away what little recreation the family could afford and "now we just pray in despair for a miracle".
Ahmad Ali, a wellness counsellor in Karachi, said that inflation is a major cause of stress, especially among lower- and middle-income families. "Financial issues, joblessness and inflation have a profound negative impact on people's mental health,” he said, adding that when stress levels exacerbate, it leads to distress and can lead to mental disorders such as anxiety and depression, and even suicide.
According to Ali, stress also causes people to take to substance abuse as a coping mechanism.

Is there a way forward?​

Pakistan has a long history of economic crises, further exacerbated by one political crisis after another. The country’s ruling elite have consistently failed to live up to its promises.
Pakistan is still dependent on obsolete energy resources, industries, transport infrastructure and educational systems. In addition to these failures, politically motivated economic policies have made good flashy headlines, but failed to provide relief to the common man in the long term.
What is especially worrying is that the prevalent economic crisis is here to stay — at least for a while. The prices of goods and services are certainly not going down. With two massive fuel price hikes already breaking backs, the government is rumoured to drop another petrol bomb soon. Promising a relief package on the one side, the Shehbaz-led coalition regime is expected to increase tariffs and taxes via the budget on Friday.
The country’s economy is in dire need of reforms and for that, certain tough calls will have to be made if we are to come out of the crisis. But with a family to feed, rent to pay, increased tuition fees, transport expenses, grocery bills, and unpredictable health expenditures, the common man is more worried than ever about how to make ends meet.

 

[ghazi52]

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Pakistan to raise salaries of govt employees in Budget 2022-23: Miftah Ismail​

Ali Ahmed
09 Jun, 2022

The government will raise salaries of its employees when it announces the federal budget 2022-23 on Friday, said Finance Minister Miftah Ismail on the sidelines of the launching ceremony of the Economic Survey 2021-22.

Economic Survey 2021-22: Miftah hopeful forex reserves will rise to $12bn after China payment

"We should understand that government employees have to run their households as well," said Miftah when asked the question by a journalist on Thursday.

The statement comes as the government on Tuesday announced its austerity measures, agreeing on a 40 percent reduction in the fuel usage of its officials and Cabinet members along with a ban on the procurement of cars, overseas tours and treatments of officials abroad, and buying of furniture and machinery for government offices.

The federal government also reinstated the weekly Saturday holiday in order to save energy and improve load-shedding management.

These measures raised the question if salaries of government employees would also see a freeze.

However, Miftah said that as inflation rises, employees also need a raise.

"It cannot be the case that as the country sees 12-15% inflation we don’t raise the salaries of government employees," added Miftah.

Pakistan is currently in the midst of an economic crisis with foreign exchange reserves held by the State Bank of Pakistan (SBP) having dropped below the $10-billion mark.
Talks with the International Monetary Fund (IMF) are ongoing, but Pakistan's $6-billion bailout programme has yet to be revived.

Meanwhile, Consumer Price Index inflation for the current fiscal year increased to 11.3% as against 8.8% during the same period last year. Other inflationary indicators like Sensitive Price Indicator was recorded at 16.7% as against 13.5% last year. Wholesale Price Index was recorded at 23.6% compared to 8.4% same period last year.

Miftah said that the government has cut petroleum expenses besides other measures to reduce expenditure.

"We have also tried to bring austerity and would also take other measures to curtail the budget expenses," he added.

 

[ghazi52]

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Reforms in Budget 2022-23 will please IMF, says Miftah Ismail​

Ali Ahmed
09 Jun, 2022

Finance Minister Miftah Ismail on Thursday said reforms that will be introduced through the Budget 2022-23, set to be announced on Friday, will please the International Monetary Fund (IMF), taking the country closer to revival of the stalled Extended Fund Facility (EFF). Miftah's statement came on the sidelines of the Economic Survey 2021-22's launching ceremony.

“Our negotiations with the IMF are ongoing,” said Miftah at the press conference held to review the government's economic performance during the outgoing fiscal year, a day before it announces the federal budget.

“We believe that after the Budget 2022-23, we would move closer to a staff-level agreement with the Fund,” he added.

The finance minister, who took over in mid-April, said that the government has shared the "relevant information and details" with the international lender.

Earlier, Miftah had expressed hope that Pakistan would reach a staff-level agreement with the IMF by next week which will help strengthen the rupee and the economy.

Pakistan faces several economic battles including a precarious balance of payments' position, rising inflation, and remains in talks with the IMF for revival of its $6-billion EFF. It is also seeking an extension in the programme duration as well as enhancement of its size by $2 billion.

The government is set to present the federal budget for FY23 in parliament on Friday, with special focus on fiscal management, revenue mobilisation, and measures for economic stabilisation and growth.

The government is expected to present a Rs9.5 trillion budget for fiscal year 2022-23 including Rs8.79 trillion in current expenditures and Rs800 billion for the federal Public Sector Development Program (PSDP).

Reports suggest the IMF has sought an enhancement in tax rates while also seeking removal of energy subsidies. The latter condition prompted the government to increase petrol prices twice in less than two weeks.

 

[ghazi52]

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[Jango]

This has got to be the most cursory and superficial budget ever, with the budget speech becoming a political speech.

It's like Miftah sat one night, and decided to do whatever he could think in an hour and be done with it.

Most of the policies are somewhat in a similar direction to PTI. No overhaul of the system or direction change...this is in effect an acknowledgment of the PTI budget of the preivous year. So, does N league not disagree with the economic direction of PTI? Do they believe PTI was indeed taking the right steps?

One bad policy is to again remove the POS provisions for large retailers and have a fix tax for everyone, appeasing the segment for votes here.

One good policy though is to tax those who have a second property of valuation greater than 2.5 crore. The tax value on that property is not as much as I would have wanted, but it's still a start. I have been calling for this since long.

Baki sab is same old...but N wants to slow down the economy to control the deficit and try and get tax by squeezing the salaried people even more, that's the initial impression I got.

 

[JamD]

This has got to be the most cursory and superficial budget ever, with the budget speech becoming a political speech.

It's like Miftah sat one night, and decided to do whatever he could think in an hour and be done with it.

Most of the policies are somewhat in a similar direction to PTI. No overhaul of the system or direction change...this is in effect an acknowledgment of the PTI budget of the preivous year. So, does N league not disagree with the economic direction of PTI? Do they believe PTI was indeed taking the right steps?

One bad policy is to again remove the POS provisions for large retailers and have a fix tax for everyone, appeasing the segment for votes here.

One good policy though is to tax those who have a second property of valuation greater than 2.5 crore. The tax value on that property is not as much as I would have wanted, but it's still a start. I have been calling for this since long.

Baki sab is same old...but N wants to slow down the economy to control the deficit and try and get tax by squeezing the salaried people even more, that's the initial impression I got.

First of all, I would've thought that there'd be more debate on this thread. I had to search for a budget thread to talk about it. I thought economy had become a talking point but I guess it is not the economy but just the petrol prices.

On the budget. Yes, I mostly agree with your assessment of the budget. Like I said in the other thread as well, PTI, PMLN, PPP, all give very very similar policies/budgets and this was the reason for my disillusionment with the change promised by IK - but I will not go into that in this budget thread.

The POS thing is bad. Given that this is a first-year and an election budget im not totally surprised that they did things like this. I had very low expectations lol. Which is why I was pleasantly surprised by the property tax. There's also a tax on unused plots of lands which is great. I think there is a widespread consensus among the people that property needs to be taxed so I guess this is a reflection of that pressure.

The inflation target is kind of dumb but hey let's hope they achieve it, Pakistanion ka hi bhala hoga lol.

The removal of tax on import of solar panels and their associated equipment is good. I envision a Pakistan where people rely less and less on the grid - kind of like Pakistanis rely less and less on the government to provide education and healthcare. Depressing but the least worst scenario considering our power woes.

The exact numbers on income tax haven't crossed my eyes but I hear that has been increased for middle class earners so this is just the old habit of extorting the existing tax base for more.

Like I said, I had low expectations. I hope and pray some political stability can come to our country so that there can be an economic consensus, which allows the government (PTI or PMLN or PPP) to do the structural reforms that Pakistan needs (which currently no government can do even if they wanted to because they have very weak legs again PTI or PMLN or PPP).

 

[ghazi52]

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[ghazi52]

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[Jango]

First of all, I would've thought that there'd be more debate on this thread. I had to search for a budget thread to talk about it. I thought economy had become a talking point but I guess it is not the economy but just the petrol prices.

On the budget. Yes, I mostly agree with your assessment of the budget. Like I said in the other thread as well, PTI, PMLN, PPP, all give very very similar policies/budgets and this was the reason for my disillusionment with the change promised by IK - but I will not go into that in this budget thread.

The POS thing is bad. Given that this is a first-year and an election budget im not totally surprised that they did things like this. I had very low expectations lol.

This was done mainly to appease the trader voter base that N has...plain and simple. Now no matter how much of a trader you are, you are paying a measly 100,000 on annual tax. That is peanuts.

POS was actually a robust and data driven approach to the problem, which has been foregone to take a token action.

Which is why I was pleasantly surprised by the property tax. There's also a tax on unused plots of lands which is great. I think there is a widespread consensus among the people that property needs to be taxed so I guess this is a reflection of that pressure.

This was the only good thing I saw in the budget. Again as I said, should have been more, but hey, it's a start.

The removal of tax on import of solar panels and their associated equipment is good. I envision a Pakistan where people rely less and less on the grid - kind of like Pakistanis rely less and less on the government to provide education and healthcare. Depressing but the least worst scenario considering our power woes.

This is actually a bad step. The tax was on import of solar panels, and local assemblers were now coming up in numbers and the local industry was propping up. I know a friend who is in the solar business, and I had a discussion about this a fair while ago. He said that the import taxation (it was actually a ban if I remember correctly) has given incentive to local industries. The local industry is just bringing in the same components and only assembling here, quality is broadly the same.

Anyone who has more experience with solar can better comment on this.

This is kind of similar to the mobile phone tax, and you see how local assemblers were now being set up.

The exact numbers on income tax haven't crossed my eyes but I hear that has been increased for middle class earners so this is just the old habit of extorting the existing tax base for more.

I am also trying to find the exact rates and how much they differ from the previous year...although those earning 100,000 have been made exempt from income tax.

Like I said, I had low expectations. I hope and pray some political stability can come to our country so that there can be an economic consensus, which allows the government (PTI or PMLN or PPP) to do the structural reforms that Pakistan needs (which currently no government can do even if they wanted to because they have very weak legs again PTI or PMLN or PPP).
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[ghazi52]

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The coalition government headed by the Pakistan Muslim League-Nawaz (PML-N) on Friday presented its “growth and investment-oriented” budget for Financial Year 2022-23 in the National Assembly.

Miftah Ismail, while presenting the budget proposals, said that out of total Rs9.502 trillion budget, an amount of Rs3,950 billion had been allocated for debt servicing and Rs800 billion earmarked for the Public Sector Development Programme (PSDP 2022-23).

He said an amount of Rs1,523 billion had been earmarked for defence expenditures, Rs550 billion for civil administration and Rs530 billion for pensions. Similarly, Rs699 billion had been proposed for providing targeted subsidies to the poor segments of society.

Miftah said that owing to the high petroleum prices, people earning less than Rs40,000 will be given relief of Rs2,000 per month, which will continue in FY23 budget as well.

• Total budget outlay Rs9.5 trillion
• Govt employees’ salaries increased by 15%
• Subsidies on sugar and wheat flour proposed
• Taxes on over 1,600CC cars will be increased
• Taxes on cigarettes increased
• Remittances of $33.2 billion expected
• Pensioner tax reduced to 5% from 10%
• Rs24 billion allocated for health sector

He said that taxes will be imposed on goods that are mainly consumed by the rich to provide relief to the common man.

The finance minister said that the federal government has established pension fund and released Rs10 billion for it.

Miftah Ismail said that Prime Minister Shehbaz Sharif wanted to extend maximum relief to the people, especially the poor during these difficult times.

“For this purpose, the government has taken several steps to provide subsidy and assistance. However, the continuation of this (relief) will require more resources,” he added.

He emphasised on the need to impose special tax on higher income earnings in order to divert the resources to the poor people.

“Our budget philosophy is to enhance agriculture production, especially the edible oil in order to reduce agricultural imports. We need to promote industries to bolster exports and earn valuable foreign exchange,” he added. This, he said, will help address the issue of balance of payments on permanent basis.

15pc increase in salaries of govt employees

The finance minister announced that owing to the high inflation in the country, the government has increased salaries for its employees by 15 per cent, adding that the pensions have also been raised by 5 per cent.

The minister said that FBR revenue has been estimated at Rs7,004 billion for the next fiscal year. “This includes Rs4,100 billion share of provinces. The net revenue with the federal government will be Rs4,904 billion. The non-tax revenue will be Rs2,000 billion.”

The finance minister said that austerity is the top priority of the present government. “Reducing government's expenditure is part of this budget and we are taking concrete steps in this regard.”

He said that the petrol quota of cabinet members and government officials will be reduced by 40 per cent. “There will also be ban on foreign tours under government expense, except the important ones.”

Tax exemption slab for salaried class increased from 0.6m to Rs1.2m

Miftah said that the tax exemption slab for salaried class has also been increased from Rs600,000 to Rs1.2 million. “This step will benefit the salaried people and enhance business activities,” he added.

He said that tax on profit of Saving Certificates, Pensioners Benefit Accounts and martyrs family welfare accounts has been slashed from 10 to 5 per cent.

According to the vision of the premier, the finance minister said that a medium term macro economic framework has been prepared to put the economy on the path of development.

Also read: Ministries face steep budget cut

He expressed the confidence that the government will be able to put the economy in the right direction through the framework. “Our biggest challenge is to achieve growth without Current Account Deficit. Therefore, at least five per cent will be achieved without disturbing the balance,” he added.