Federal cabinet meeting approves Budget 2023-24

The federal cabinet approved on Friday the budget proposals for the coming fiscal year (2023-24).

Prime Minister Shehbaz Sharif chaired the meeting in which Finance Minister Ishaq Dar, Minister for Planning, Development, and Special Initiatives Ahsan Iqbal among others were also present.

Speaking after the meeting, the PM said that the first challenge was to get the International Monetary Fund (IMF) deal, inked by the previous government, back on track.

The PM said all conditions of the IMF were met, adding that he was hopeful that by the end of this month the staff level agreement would be signed.

He also spoke about how last year’s devastating floods affected the economy.

“Pakistan faced a loss of nearly Rs30 billion, he said, adding that the prices of commodities also increased worldwide due to the Ukraine war.

“There are no more hindrances coming in the way of the IMF agreement,” the PM said.

He expressed his gratitude to China, Saudi Arabia and UAE for their financial support during Pakistan’s trying times.

Shehbaz said the current account deficit had improved in the past few months, saying that it reduced to only $3.4 billion, which was “a big relief”.

“If Pakistan invests in agricultural reforms and brought value-added change with storage facilities, it could produce export worth billions.”

Meanwhile, 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.

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

• 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