Islamabad: Experts have termed the Federal Budget 2024-25 tabled in Parliament as targeting fiscal consolidation, a strengthened social safety net, structural reforms and further talks by the International Monetary Fund (IMF) to capture another bailout package to support the struggling economy.
The Sustainable Development Policy Institute (SDPI) organized a Post Budget Seminar here to provide its analysis of the budget.
Dr. In his opening remarks, Vaqar Ahmed, Joint Managing Director of SDPI, informed that the institute has its first response in the late evening which underlined three main messages that the budget aims at fiscal consolidation and keeping the IMF negotiations on track, the authorities of the Government of Pakistan. ensured that the impact of increased inflation on low-income groups would be mitigated through an increased social safety net, infrastructure development jobs and government structural reforms.
He added that in the area of taxation, tax incentives would be given to the export sector and import subsidies withdrawn, while the government adopts a uniform tax regime that treats all incomes equally in taxation, including exports, imports and retail income.
Dr. Abid Qaiyum Suleri, Executive Director of SDPI said in his message that budget formulation has always been a challenging task for the country while conventionally, annual income was projected on an upward trajectory and expenditure on a downward trajectory.
Dr. Suleri pointed out that the positive thing about the budget was that all the figures depicted were realistic along with the provincial surplus accurately reported. “The government is trying to show its commitment to economic reforms so that negotiations with the IMF in July will bring favorable results. However, positive impacts can be seen in the improvement of the social protection sector, which increases incomes,” he added.
He mentioned that the finance minister had repeatedly announced that he would continue to privatize state-owned enterprises (SOEs), which was a cautious approach. “The government resisted the taxation of medicines and pensions, granted entry exemptions for the installation of solar panels and introduced pension reforms. However, the personal income tax rates may have been worked out but not improved in the budget,” said Dr Suleri.
He noted that retailers and agriculture are supposed to come under the tax net, but there has been no progress in this regard and not enough tax reforms have been implemented in the real estate sector.
“The success of the budget is conditional on the implementation of the recommendations and reforms presented in the budget. The federal government would have to reduce its spending after paying a share of the NFC award to the provinces to meet both monies,” he said.
Dr Khalid Waleed, a research fellow at SDPI, said the budget tabled in parliament depicts the government’s vision of sustainable development to introduce a market-driven economy rather than a government-driven economy.
He mentioned that the government has allocated a total of Rs 253 billion for the power sector with Rs 85 billion for two hydro dam projects along with additional funding of Rs 5 billion to improve transmission infrastructure.
In addition, the proposed budget provided for total subsidies increased by 28% for the power division, bringing the total share of power subsidies to 88% along with subsidies for the merged districts of Khyber Pakhtunkhwa (KP).
He informed that significant funding has been allocated to the Climate Change Division along with a strategy to target public sector spending on gender-based interventions. Dr. Khalid added that around R45 billion was earmarked for pre- and post-disaster resilience efforts, while structural reforms were targeted, but more could be done for transmission and energy supply infrastructure.
He praised the federal government’s preference for local production of solar panels and is not backing down from its renewable energy targets.
Dr. SDPI researcher Fareeha Armughan said social sector allocations are logical and are based on income, equity, poverty and digitalisation. She said it was an unprecedented budget with Rs 593 billion allocated for the Benazir Income Support Program (BISP) with a 27% increase over the last budget.
She added that expanded fiscal space for social protection initiatives would further strengthen the country’s case in negotiations with the IMF, as the fund reiterated its focus on the social protection sector.
She added that the government is also stepping up efforts to increase BISP beneficiaries from the current 9.3 million to 10 million, adding 500,000 more beneficiaries to its undernourished children project.
Dr. Sajid Amin, deputy executive director of SDPI, said the government should have set the budget according to IMF targets and conditions, while the main idea was to meet the revenue targets of Rs 12.97 trillion. However, the government missed the 26% average inflation that prevailed this year, he added.
The budget lacked reforms that would increase the tax net and improve the tax structure, while the increase in the salaries of civil servants is less than the money taken after entering the new tax rate,” he said.
Dr Sajid highlighted that the high earners emerged as net gainers while the low earners were to enter the new tax rates, adding: “The government has sought to keep the confidence of the IMF and its political capital intact with this decision.
He called the budget a stabilization budget that offers nothing more to the common masses. The revenue target of 12.97 trillion was not enough to meet the target growth rate of 3.6%, while the rise in oil prices would trigger a 1.5% increase in inflation, said Dr. Sajid.
