2023-24: Finance Minister Ishaq Dar says 3.5% growth targeted in ‘responsible budget’

Finance Minister Ishaq Dar said Pakistan’s economy will target a growth rate of 3.5% in the coming fiscal year, as he delivered his speech to unveil the Rs14.5-trillion federal budget 2023-24 in the National Assembly on Friday.

“This budget should not be seen as an ‘election budget’ – it should be seen as a ‘responsible budget’,” he said.

GDP growth over the years

Inflation target set at 21%

17.5% increase in pensions of retired federal govt employees

Dar said a flat increase of 17.5% will be implemented in the pensions of retired government employees.

“They are not taxed, but keeping in view inflation, this increase is appropriate,” said Dar.

Ad-hoc relief allowance raised for federal govt employees

Dar announced a massive 35% increase in the ad-hoc relief allowance for federal government employees in grades 1-16, and 30% for those in grades 17-22.

Other allowances, which were frozen earlier, have been increased by 50%, said Dar.

Tax on bonus shares

A flat 10% tax has been imposed on the issuance of bonus shares of listed companies, Dar said.

Cash withdrawals by non-filers

The government has re-imposed the withholding tax on cash withdrawals by non-filers of income tax returns.

Health insurance card for journalists and artists

Dar said the government would issue working journalists and artists a ‘Health Insurance Card’.

PSDP allocation

The finance minister said the Public Sector Development Programme (PSDP) has been set at Rs1,150 billion, which would include Rs200 billion as public-private partnerships.

Defence affairs and services allocation

Exports and remittances target

Dar said the government projects exports at $30 billion and remittances at $33 billion for the coming fiscal year.

Duty exemption on raw material used for solar panels, batteries

Dar said customs duty on the import of raw material used for solar panels and batteries is now being removed.

REITs

Tax exemption extended for Real Estate Investment Trusts, said Dar.

‘Diamond card for overseas Pakistanis’

Dar said in addition to the remittance card, a diamond card is also being proposed for overseas Pakistanis who send back over $50,000 to the country.

Youth scheme

Dar said an allocation of Rs10 billion has been made for 100,000 laptops for deserving youth.

IT services and freelancers

The income tax, which is at 0.25%, has been extended till 2026, said Dar.

Professionals from this sector have been allowed to import equipment at zero duty up to 1% of their exports, the finance minister said. The limit for import is set at $50,000 per year.

Separately, those IT professionals that make up to $24,000 a year have been exempted from filing income tax returns.

“The government will also establish a Rs5-billion Venture Capital Fund to facilitate business capital in the IT sector,” said Dar.

Agriculture

Dar said the government has allocated Rs30 billion for the conversion of 50,000 tubewells to solar power.

On hybrid seeds, import taxes and duties are proposed to be removed.

“It has been decided that agri-based industrial units in rural areas with a yearly turnover of Rs800 million would be exempted from taxes for five years,” he said.

No new taxes on industries

Dar said Pakistan’s large-scale industrial sector has suffered due to low growth.

“There will be no new taxes on industries.”

Current account and trade deficits

Dar projected outgoing fiscal year’s current account deficit at $4 billion. It stands at $3.4 billion in the period between July 2022 and April 2023.

Similarly, trade deficit is expected to be $26 billion this fiscal year as compared to $48 billion in last fiscal, said Dar.

Allocation for education sector

Allocation for health sector

The senator started his speech by reviewing the economic performance during 2013-18, the last time Pakistan Muslim League-Nawaz (PML-N) was in power through votes.

“In 2016-17, Pakistan’s economic growth reached 6.1%, whereas inflation was 4%, food inflation at only 2%, policy rate at 5.5% and PSX was among the top five bourses in the world,” he said.

“As per projection of PricewaterhouseCoopers, Pakistan was expected to become a member of G20 by 2030.”

Slamming the previous government of Pakistan Tehreek-e-Insaf (PTI), Dar said Pakistan was the 24th largest economy in 2017, but declined to 47th place in 2022.

“Pakistan economy is passing through its most difficult time in history. The previous government of PTI is responsible for the current crisis,” he said.

“The PTI government deliberately worsened the economic situation, and took measures that were against commitments made to the International Monetary Fund (IMF). These measures were like laying landmines for the new government.

“The incumbent government adopted a policy of saving the country at the cost of political capital.”

Header image design: Hussain Afzal

Infographics: Hussain Afzal & Omar Qureshi