Jul
Table of Contents
- Introduction
- Overview of the Federal Budget
- Key Objectives
- Economic Context and Challenges
- Revenue Generation Strategies
- Tax Revenue Breakdown
- Non-Tax Revenue Sources
- Measures to Enhance Tax Compliance
- Expenditure Allocations
- Overall Expenditure Analysis
- Sector-Specific Expenditure
- Development Expenditure
- Debt Servicing and Fiscal Management
- Key Priorities and Fiscal Policies
- Economic Stability and Growth
- Private Sector Revitalization
- Social Welfare and Pro-Poor Spending
- Climate Change and Sustainable Development
- Sector-Specific Reforms and Initiatives
- Education and Skill Development
- Healthcare and Social Security
- Infrastructure and Development Projects
- Energy Sector Investments
- IT and Digital Transformation
- Taxation Policies and Measures
- Income Tax Reforms
- Sales and Excise Duties
- Property and Withholding Taxes
- Penalties for Non-Compliance
- Austerity Measures and Public Spending
- Cost-Cutting Initiatives
- Efficiency in State-Owned Enterprises
- Reducing Administrative Costs
- Challenges and Opportunities
- Economic and Fiscal Challenges
- Potential for Substantial growth and Development
- Conclusion
- Summary of Budget Implications
- Future Outlook
- Introduction
Overview of the Federal Budget
The Federal Budget for ‘FY 2024-25’, with comprehensively extensive funding of Rs. 18.9 trillion, is widely considered to be a crucial fiscal plan for this year 2024 critically influencing Pakistan’s economic direction. It outlines clearly the government’s fiscal strategy to foster economic growth, ensure fiscal stability amid existing financial challenges, and boost and strengthen public welfare.
Table: budget allocation simplified overview
| Category | Details |
| Revenue generation | Non-tax revenue Tax-revenue target |
| Expenditure allocations | Total budget expenses, PSDP |
| Key priorities | Social welfare Healthcare Education |
| Sector-specific investments | Infrastructure Energy sector IT sector |
| Austerity measures | State-owned Enterprises Administrative costs |
| Taxation policies | Sales and excise duties Income tax reforms |
| Challenges | Inflation pressures IMF payback Public debt fiscal deficit overspending of gov expenditures |
| Opportunities | Investments in IT Infrastructure Energy sector |
Resource Allocation Key Figures:
- Total Budget Outlay: Rs. 18.9 trillion
- Tax Revenue Target: Rs. 13 trillion
- Non-Tax Revenue: Rs. 3.5 trillion
- Public Sector Development Program (PSDP): Rs. 1,400 billion
- Debt Servicing: Rs. 9.8 trillion
Impact of this budget: The budget’s key role is to lead the economy towards stability and growth, dealing with urgent fiscal needs while building the framework and setting the stage for long-term development. The allocation strategy strongly emphasizes the government’s dedication to fair and partial development and sustainable fiscal practices.
Key Objectives
The FY 2024-25 budget primarily concentrate on:
- Revenue Enhancement: Expanding the tax base and enhancing compliance to meet the Rs. 13 trillion tax revenue targets.
- Development Focus: Prioritizing infrastructure and social development with Rs. 1,400 billion for PSDP.
- Social Support: Increasing social welfare spending by 27% to uplift the vulnerable population.
- Austerity Measures: Implementing cost-cutting measures to manage the fiscal deficit.
Impact of budget’s key objective: These objectives are created or planned effectively to enhance public services, promote a sustainable growth rate, and address the fiscal deficit. The major aim behind this huge social spending and increased developmental rate is to pave the path to creating a more inclusive economy.
Economic Context and Challenges
Pakistan’s budget is formulated in the context of several economic challenges:
- High Public Debt: Managing debt levels effectively to avoid fiscal strain.
- Fiscal Deficit: Reducing the fiscal deficit through increased revenue and controlled spending.
- Inflationary Pressures: Addressing rising inflation through targeted fiscal measures.
- Global Economic Uncertainties: Navigating external economic factors affecting trade and investment.
Impact: The concentration of the budget is to boost revenue collection and managing the spending is critical to addressing these challenges. Effective management of public debt and fiscal deficit will significantly improve economic stability and investor trust.
- Revenue Generation Strategies
Tax Revenue Breakdown
The budget sets a target of Rs. 13 trillion particularly allocated for tax revenue, highlighting a huge 15% rise from the previous fiscal year budget. This notably includes:
- income tax
- sales tax
- excise duties.
Income Tax
Income tax reforms aim to make taxation more progressive:
Salaried Individuals:
- Rs. 600,000 to Rs. 1,200,000: 5% tax rate will be imposed.
- Starting Up from Rs. 600,000: Tax-exempt, supporting low-income earners.
- Starting from Rs. 1,200,000 to about Rs. 2,400,000: 10% tax rate.
- Starting from Rs. 2,400,000 to Rs. 4,800,000: 15% tax rate.
- Above Rs. 4,800,000: 35% tax rate, targeting high-income groups.
- Non-Salaried Individuals:
- Up to Rs. 600,000: Tax-exempt.
- Starting from Rs. 600,000 to Rs. 1,200,000: 15% tax rate will be imposed.
- Starting from Rs. 1,200,000 to Rs. 2,400,000: 20% tax rate will be imposed.
- Starting from Rs. 2,400,000 to Rs. 4,800,000: 30% tax rate will be imposed.
- Above Rs. 4,800,000: A 45% tax rate will be imposed.
Impact: all-inclusively, the progressive tax structure is anticipated to make substantial improvements in revenue collection from upper-income groups belonging to wealthier societies. Additionally, the progressive tax structure also seems to be providing relief to lower-income taxpayers, resulting in promoting tax equity and compliance effectively.
Sales Tax
Sales tax adjustments are made to balance revenue generation with consumer affordability:
- Mobile Phones:
- Up to $500: 18% ad valorem sales tax.
- Above $500: 20% ad valorem sales tax.
Impact: The sales tax has been revised especially for mobile phones and this revised sales tax on mobile phones will definitely create additional revenue. Additionally, it will help in promoting the buying of affordable mobile phones. This measure focuses on hitting a neutral and balanced approach between consumer affordability and revenue requirements.
Property Taxes
Enhanced property tax measures are strongly integrated to expand the tax base:
- Purchase Tax:
- Filers: 3% to 4% for filers.
- Late Filers: 6% to 8% for late filers.
- Non-filers: 12% to 20% especially for non-filers.
- Sales Tax:
- Filers: 3% to 5% for filers.
- Late Filers: 6% to 8% for late filers.
- Non-filers: 10% flat rate for non-filers.
Impact: Higher rates on taxes especially for non-filers are planned out, and are anticipated to effectively foster compliance with tax regulations and escort more properties into the tax net, to heighten all-inclusive property tax revenue.
Non-Tax Revenue Sources
Non-tax revenues are concentrated to Rs. 3.5 trillion, including:
- Privatization Proceeds: Rs. 30 billion from the sale of enterprises that are under the control of the state, and the state owns them.
- Regulatory Levies: Charges from regulatory bodies for compliance and services.
- Petroleum Levy: Increased charges on petroleum products.
Impact: These non-tax revenue sources are accurately anticipated to ensure a consistent flow of income, effectively minimizing the over-dependence on tax revenues. Besides this, it will help diversify the income sources of the government.
Measures to Enhance Tax Compliance
The budget incorporates various measures effectively to make relevant improvements in tax compliance:
- AI Integration: Using AI to detect tax evasion patterns and enhance collection efficiency.
- Compliance Risk Management System: Automated system for better tax law adherence.
- Penalties for Non-Filers: Enhanced penalties for late or non-filing.
- Blocking Mobile SIMs and Utility Connections: Measures to enforce compliance.
- Travel Restrictions: Limits on international travel for non-compliant taxpayers.
Impact: These measures aim to improve tax compliance and expand the tax base, potentially increasing revenue by up to 20% over the next fiscal year. The use of technology in tax administration is expected to make tax collection more efficient and transparent.
- Expenditure Allocations
All-inclusive Expenditure Analysis
The aggregate forecasted expenses for FY 2024-25 are Rs. 18.9 trillion, shedding a strong concentration on current and development costs:
- Current Expenditures: Rs. 12 trillion, encompassing operational costs and public services.
- Development Expenditures: Rs. 1,400 billion, allocated for development projects.
- Debt Servicing: Rs. 9.8 trillion, fulfilling interest payments and principal repayments.
Impact: The expenditure allocation plan is adopted and implemented to strike a neutral ground for immediate expenditure requirements aligned with long-term development plans. The strong focus on development expenditure is considered to make a strong impact on economic stability by boosting economic growth, additionally, sensible debt management and handling strikes to uphold economic stability significantly.
Sector-Specific Expenditure
Development Expenditure
The Public Sector Development Program (PSDP) allocation of Rs. 1,400 billion focuses on infrastructure and social development:
- Energy: Rs. 400 billion for energy projects to address power shortages and enhance capacity.
- Water Sector: Rs. 250 billion for irrigation and water management.
- IT Sector: Rs. 150 billion for technological advancements.
- Special Areas: Rs. 200 billion have been allocated for development in Azad Jammu and Kashmir, merged districts of Khyber Pakhtunkhwa and Gilgit Baltistan.
Impact: Investment specifically in sector-specific areas like the water sector, IT sector, and others sectors is guaranteed to boost regional development, improve infrastructure, give training to the managing authorities, and multiply the energy supply. Making improvements in the water sector to manage the water effectively and IT infrastructure will significantly support boosting agricultural productivity and digital transformation.
Social Welfare
The social welfare budget is increased to support vulnerable segments:
- BISP: Rs. 350 billion for cash transfers to the poorest families.
- Healthcare: Rs. 200 billion for public health improvements.
- Education: Rs. 500 billion for educational enhancements.
Impact: This social welfare budget focuses on many things for the welfare of society including:
- Poverty reduction
- improve healthcare access
- enhance education quality, thereby fostering the concept of inclusivity and social equality.
The raised allocation for BISP will massively prove to be advantageous for vast numbers of households, pulling them out of poverty.
Debt Servicing and Fiscal Management
Debt servicing of Rs. 9.8 trillion is a major component of the budget:
- Interest Payments: Rs. 6.5 trillion.
- Principal Repayments: Rs. 3.3 trillion.
Impact: Prudent debt management is essentially vital for maintaining fiscal stability and guaranteeing that debt levels stay manageable. This significantly huge rate allocation for debt servicing reinforces the value of managing public debt effectively to get rid of future budgetary strain and financial crisis.
- Key Priorities and Fiscal Policies
Economic Stability and Growth
Economic Stability: fiscal policies are effectively implemented and executed to stabilize the economic health including managing inflation, steady growth rate, controlling and monitoring public debt, improving stable exchange rates, and advancing revenue collection strategies.
- Debt Management: Strategies to reduce the fiscal deficit and manage debt.
- Inflation Control: Targeted measures to keep inflation under 7%.
Impact: These fiscal policies’ key indicators are likely to create a strong and efficient gov that is economically stable by minimizing fiscal insecurities, and budgetary risks, and creating a favorable thriving ground for growth.
Growth Enhancement beyond normal levels: Policies aimed at increasing economic growth by investing in these sectors:
- Infrastructure Development: Focus on roads, energy, and technology to boost economic activity.
- Private Sector Incentives: Tax breaks and subsidies to stimulate private investment.
Impact: These initiatives focus on stimulating a dynamic economic environment, encouraging investment and innovation, which in turn will effectively facilitate and foster job creation economic development, and prosperity.
Private Sector Revitalization
Investment Incentives: Providing financial incentives like regulatory reforms, subsidies, access to financing, and tax incentives especially to promote the growth of the private sector:
- Tax Breaks: For investments in priority sectors such as IT, agriculture, and manufacturing.
- Subsidies: For research and development in innovative sectors.
Impact: These investment incentive measures are bound and predicted to draw investment, enhance industrial output, and create employment opportunities by creating jobs and workforce employment, consequently promoting economic expansion and diversification.
Ease of Doing Business: Streamlining regulations and reducing bureaucratic obstacles effectively:
- Regulatory Reforms: Simplifying procedures for business registration and operations.
- Support for Startups: Facilitating access to financing and mentoring for startups.
Impact: Simplified regulations are expected to improve the business environment, especially facilitating entrepreneurs and other business mindsets people to initiate and expand businesses, thereby fostering economic diversification and job creation.
Social Welfare and Pro-Poor Spending
BISP Expansion: Increased funding to support the poorest families:
- Cash Transfers: Rs. 350 billion for direct financial support.
- Program Expansion: Reaching an additional 1 million families.
Impact: improved and raised funding for BISP will provide instant financial aid to the poorest households who live below the poverty line, helping to alleviate poverty and enhance living standards effectively.
Healthcare and Education: Investments in these sectors to enhance access and improve quality of life:
- Healthcare: Rs. 200 billion for public health improvements.
- Education: Rs. 500 billion for educational enhancements.
Impact: These investments are anticipated to significantly improve access to quality healthcare and education, thereby improving societal well-being by contributing to social equality and human capital development like skill enhancements and talent development.
Budget allocated for Climate Change and Sustainable Development
Green Energy Investments: Budget Allocations for renewable energy projects for promoting sustainable development:
- Renewable Energy: Rs. 150 billion for solar, wind, and hydro projects.
- Energy Efficiency: Rs. 50 billion for energy-saving technologies.
Impact: Investments in green energy are expected to bring the following impacts:
- minimize dependence on fossil fuels
- lower carbon emissions
- promote sustainable energy solutions,
- Fostering environmental sustainability and energy security.
Climate Adaptation: Funding and financial support for projects intended and directed at combating climate change consequences
- Climate Resilience: Rs. 75 billion for climate adaptation projects.
- Disaster Management: Rs. 25 billion for enhancing disaster response capabilities.
Impact: Financial support for climate adaptation will effectively help in combating the adverse effects of climate change, safeguarding adverse populations, and enhancing capacity to handle environmental hazards.
- Sector-Specific Reforms and Initiatives
Education and Skill Development
In the education sector sees significant reforms and investments are crucially needed for massive advancements and improvements in providing education:
- Higher Education: Rs. 500 billion for universities and research institutions to enhance higher education quality.
- Skill Development Programs: Rs. 100 billion for vocational training to improve workforce skills.
Impact: Investments in higher education and skill development are likely to yield a more skilled workforce significantly, improve educational outcomes, and support economic development by adequately lacing individuals with the skills required for contemporary industries.
Healthcare and Social Security
Healthcare reforms intend to expand access and improve quality:
- Public Health Investments: Rs. 200 billion for upgrading hospitals and health facilities.
- Health Insurance for Media Personnel: Initial coverage for 5,000 individuals, expanding to 10,000.
Impact: These reforms are likely to improve healthcare access and quality, resulting in improved health outcomes and enhanced social security. Expanding health insurance coverage will be better at affording financial protection and significantly improving the prosperity of media personnel and their families.
Infrastructure and Development Projects
Investments in infrastructure are vital for economic growth:
- Energy Projects: Rs. 400 billion for energy infrastructure to address the power shortage.
- Transportation: Rs. 300 billion for road and rail network improvements.
Impact: Enhanced infrastructure investments are likely to:
- improve connectivity
- reduce transportation costs
- address energy shortages,
thereby supporting economic growth and fostering improvements in the quality of life for citizens. These measures will enhance the livelihoods of citizens and their well-being.
Energy Sector Investments
The energy sector sees focused investments to enhance capacity and efficiency:
- Energy Infrastructure: Rs. 400 billion allocated for power generation and distribution improvements.
- Renewable Energy: Funding for solar, wind, and hydro projects to diversify energy sources.
Impact: These energy sector investments are likely to:
- improve energy security
- reduce power outages
- and promote sustainable energy development
- Fostering economic growth and environmental sustainability.
IT and Digital Transformation
The IT sector is prioritized for digital transformation:
- Digital Infrastructure: Rs. 150 billion for IT infrastructure and digital services.
- Tech Startups: Support for innovation and growth in the technology sector.
Impact: Investments in IT and digital infrastructure are likely to:
- accelerate technological advancements
- promote digital inclusion
- support the growth of tech startups, fostering economic dynamics and tech innovation.
- Taxation Policies and Measures
Income Tax Reforms
Income tax reforms intend on progressive taxation and equitable distribution:
- Salaried and Non-Salaried Individuals: Tax rates designed to balance revenue generation with fairness.
- Tax Relief for Lower Income Groups: Measures to reduce the burden on low-income taxpayers.
Impact: Progressive tax reforms are likely to:
- enhance revenue collection from wealthier communities having a high income
- while providing relief to lower-income taxpayers, enhancing tax equity and tax compliance.
Sales and Excise Duties
Adjustments in sales and excise duties aim to optimize revenue:
- Luxury Goods: Higher taxes on luxury items to increase revenue without affecting essentials.
- Non-Essential Items: Increased rates to discourage consumption and generate additional revenue.
Impact: Adjustments in sales and excise duties are expected to optimize revenue collection, discourage consumption of non-essential items, and contribute to fiscal stability.
Property and Withholding Taxes
Enhanced property and withholding taxes to improve compliance:
- Higher Rates for Non-Filers: Increased rates to incentivize filing and compliance.
- Incentives for Filers: Reduced rates to promote tax compliance.
Impact: Enhanced property and withholding taxes are likely to:
- improve compliance
- broaden the tax base
- increase revenue collection, fostering fiscal sustainability.
Penalties for Non-Compliance
Strict penalties to improve tax compliance:
- Increased Sanctions: For non-filers and late filers to encourage timely compliance.
- Enforcement Mechanisms: Measures like SIM blocking and travel restrictions for non-compliance.
Impact: Strict penalties or sanctions for non-compliance are likely to:
- enhance tax compliance
- reduce tax evasion
- increase revenue
to aid the government in attaining fiscal goals.
A table highlighting Income Tax rate Structure
| Category | Details |
| Salaried individuals | Tax rates depend upon the income streams |
| Non-salaried individuals | Tax rates will be imposed upon measuring income brackets |
| Sales Tax | Rates for various types of goods |
| Property Taxes | Rates and tax conditions for both filers and non-filers |
| Non-Tax Revenue | Sources and other expected contributions |
| Compliance measures | Ai integration, sanctions for non-compliance, risk management system |
- Austerity Measures and Public Spending
Cost-Cutting Initiatives
Austerity measures aim to reduce non-essential government spending:
- Administrative Cost Reductions: Measures to reduce administrative expenses and streamline operations.
- Efficiency in State-Owned Enterprises: Reforms to improve profitability and reduce losses.
Impact: Cost-reduction initiatives and cost-control measures are likely to:
- reduce the fiscal deficit
- enhance government efficiency
- free up resources to allocate for useful public services and development projects to fulfill specific gov goals and interests.
Efficiency in State-Owned Enterprises
Efforts to improve efficiency in state-owned enterprises include:
- Privatization: Reducing fiscal burden through privatization of non-performing enterprises.
- Management Reforms: Enhancing performance through better management practices.
Impact: Enhancing the efficiency and capacity of state-owned enterprises is likely to:
- reduce losses
- increase profitability
- minimize the fiscal burden on the government, fostering fiscal stability and economic growth and stability.
- Challenges and Opportunities
Economic and Fiscal Challenges
Highlighting key challenges is pivotal for economic stability:
- High Public Debt: Managing debt levels through sustainable practices and fiscal discipline.
- Fiscal Deficit: Reducing the fiscal deficit through enhanced revenue and controlled spending.
Impact: Addressing these challenges is expected to improve fiscal stability, enhance investor confidence, and create a conducive environment for economic growth.
Potential for Growth and Development
Finding growth opportunities to drive development:
- Investment in Key Sectors: Infrastructure, energy, and IT sectors offer significant growth potential.
- Social Development: Focused investments in social welfare to support the vulnerable segments.
Impact: Investment in key sectors like IT, energy, and infrastructure is likely to:
- offer and promote massive economic growth
- create jobs, and improve living standard
- Social development investments will enhance human capital and alleviate poverty, fostering sustainable development goals.
Table highlighting the allocation of resources and Pakistan’s federal budget 2024-2025
| Category | Allocation in Rs trillions |
| Total budget outlay | 18.9 |
| Revenue generation | |
| Tax Revenue | 13.0 |
| Non-Tax Revenue | 3.5 |
| Expenditure | |
| Current expenditures | 12.0 |
| Developmental expenditures PSDP | 1.4 |
| Debt servicing | 9.8 |
| Sector-specific Allocations | |
| Education | 500 billion |
| Healthcare | 200 billion |
| Infrastructure | 1400 billion |
| Energy | 400 billion |
| IT and Digital Transformation | 150 billion |
| Social welfare and others | |
| BISP | 350 Billion |
- Conclusion
Summary of Budget Implications
The FY 2024-25 budget is an integrated financial plan intended to achieve economic stability, developments, advancements, and advancing social well-being boosting community welfare. With an overall budget of Rs. 18.9 trillion, the budget directs attention to revenue enhancement, development spending, and fiscal discipline. Major strategies encompass progressive tax reforms, increased social welfare allocations, and infrastructure investments to boost economic activity. Regardless of challenges such as high public debt and inflationary pressures, the budget strives to resolve and work to deal with these through responsible fiscal management and targeted and strategic investments.
Future forecast
The prospects for Pakistan’s economy under the “FY 2024-25 budget” are tentatively hopeful. The execution of fiscal policies is intended to improve revenue, minimize budget or fiscal deficits, and foster sustainable development intended for positive outputs.
Ongoing changes and reforms in taxation, governance, and public expenditure are essential for attaining and enduring long-term economic stability and stimulating inclusive growth. The government’s steadfast dedication to fiscal discipline and strategic investments will prove to play a necessary role in effectively steering economic challenges and unleashing Pakistan’s full growth capacity and potential.