Under public and IMF’s watchful eyes, Ishaq Dar set to present federal budget shortly

ISLAMABAD: Pakistan will present the federal budget for the coming fiscal year (2023-24) today, looking to balance requirements of its International Monetary Fund (IMF) programme with those of the public that is getting increasingly agitated over record inflation.

Finance Minister Ishaq Dar will become the fourth finance minister to announce the budget in four years, a time span that covers the governments of Pakistan Tehreek-e-Insaf (PTI) followed by the Pakistan Muslim League-Nawaz (PML-N)-led coalition that ousted Imran Khan through a no-confidence vote last year.

Dar, who himself took over from fellow party member Dr Miftah Ismail last year, has hinted at offering relief through increase in salaries for government employees and raising minimum wage at a time of economic distress, but his moves will be closely watched by the IMF.

The government, which has seen the IMF programme stalled since November last year, will need to satisfy the Washington-based lender to have any chance of securing the release or more bailout money. At the same time, with elections around the corner, Dar will also keep a close on PML-N’s political capital that has suffered in the face of meeting IMF conditions for programme revival.

Govt says 3.5pc growth target quite realistic

With foreign exchange reserves at a precarious level, Pakistan also faces the risk of default – Dar has ruled this out on several occasions – with the economy creaking under twin deficits and political turmoil.

The economy could also slide further as elections near.

Some key elements the markets and public are going to look at in the budget include:

• Pakistan is likely to announce a GDP growth target of 3.5%. It announced a 0.3% growth rate for the outgoing fiscal year (2022-23)

• Development expenditure has been proposed at Rs1,150 billion

• Inflation target for coming fiscal year will reportedly be set at 21%. In the outgoing fiscal year, it stands at over 29% with May’s figure clocking in at a record 38%

• The IMF wants a budget consistent with programme objectives. “The focus of discussions over the FY24 budget is to balance the need to strengthen debt sustainability prospects while creating space to increase social spending,” said Esther Perez Ruiz, the IMF’s resident representative for Pakistan, on Thursday

• There is little space on the fiscal side to offer tax exemptions and subsidies

• Salaried group will want to look at income tax rates for the next fiscal year after being on the losing side in 2022

• Defence budget is of special interest among both policymakers and public

• The markets would be closely watching whether the government increases/decreases corporate tax rates, especially Super Tax, and whether the proposed tax on corporate reserves is imposed

• Minimum wages