Shehbaz govt presents budget for FY25 with Rs18.87tn outlay amidst IMG guidelines

   Key Points: 

•     Finance Minister Aurangzeb stated that the Federal Board of Revenue (FBR) has a target of Rs12.97 trillion, which is a 38% increase compared to the previous fiscal year
•   "Rs1.5 trillion has been allocated for the Public Sector Development Programme (PSDP), reflecting a 101% increase from the previous year"
•    "Rs4 billion has been allocated for 'e-bikes,' and an additional Rs2 billion for fuel stations aimed at promoting energy conservation"
•     Rs86.9 billion has been designated to encourage remittances in Pakistan
•     Rs79 billion has been allocated for the IT sector
•     An IT park in Karachi will receive an allocation of Rs8 billion, according to the finance minister

Islamabad: Finance Minister Muhammad Aurangzeb presented the federal budget for fiscal year 2025 with a total outlay of Rs18.877 trillion, representing a 30pc increase from the previous year’s budget.

The minister presented his first federal budget in the National Assembly amid slogans from the opposition benches.

PPP Chairperson Bilawal Bhutto Zardari skipped the budget speech and left the National Assembly. The NA session was chaired by Speaker Ayaz Sadiq with Prime Minister Shehbaz Sharif also in attendance.

Delivering his budget speech on the floor of the lower house, he thanked Prime Minister Shehbaz Sharif, his elder brother and PML-N leader Nawaz Sharif as well as various other leaders of the coalition government for their guidance in preparing the budget.

The FinMin said Pakistan was engaging with the International Monetary Fund (IMF) on a bigger programme, adding the government was working on a homegrown reform to accelerate the economic growth of Pakistan.

He said the inflation had reduced to 12 per cent in May. “We have prepared a three-pronged strategy to reduce pension burden, and discussions on this has started,” Aurangzeb said, adding the government was going to increase the pays of government employees by 25 per cent.

The government proposed Rs17,203 billion for current expenditure in the FY25 budget, a substantial 29pc increase from the previous year, he said, adding interest payments, or debt servicing, have surged 34pc to Rs9,775 billion, consuming more than half of total budget outlay and becoming, like last few years, the government’s single largest expense.

The PPP's parliamentary party, led by Bilawal Bhutto Zardari, voiced concerns about the budget and chose not to attend the session due to a lack of briefing on the details. PPP leader Syed Khurshid Shah remarked, "We are unaware of the nature and specifics of the budget being presented. We have no knowledge of the agreements with the IMF and China. In the past, the opposition was consulted, but now an ally is being left out."

The federal government introduced its first growth-oriented budget for 2024-25, with an estimated expenditure exceeding Rs18,900 billion. Although the cabinet approved the budget, the National Assembly session was delayed due to the Pakistan Peoples Party's boycott. The budget presentation was initially scheduled for 4 PM.

The PML-N made efforts to bring the PPP on board for the budget session. Deputy Prime Minister Ishaq Dar met with PPP Chairman Bilawal Bhutto Zardari to address their concerns. In addition, the Sunni Ittehad Council (SIC) also announced their decision to boycott the session.

Federal Minister for Finance and Revenue Muhammad Aurangzeb is set to present the budget for the fiscal year 2024-25 in the National Assembly. The budget has been formulated with an awareness of the current economic challenges on both domestic and international fronts.

Focus Areas

The budget aims to alleviate people's hardships, transform the agriculture sector, promote Information Technology (IT), boost exports and industrial growth, and support businesses. The government is committed to presenting a pro-people, business-friendly, and progressive budget, focusing on fiscal consolidation to contain the budget deficit. Key areas include revenue mobilization, economic stabilization and growth measures, reduction in non-development expenditure, job creation, and policies for socioeconomic prosperity.

Defence Allocation

An allocation of Rs2,100 billion for defence reflects a 19.29 percent increase from the Rs1,804 billion allocated in fiscal year 2023-24.

Social Sector and Governance

The budget will emphasize social sector development and introduce reforms to improve governance and boost private sector investment.

Revenue Measures

The government will introduce improvements in the tax collection system, broaden the tax base, and facilitate taxpayers. Given the robust revenue growth during the current fiscal year (2023-24), the government is likely to set a revenue collection target of over Rs1,200 billion for 2024-25.

Preparations for the federal budget announcement are in full swing, with coordination among all departments and ministries involved in the budget process, including its presentation in parliament and the launch of the Economic Survey.

Budget Overview

The federal budget will exceed Rs18,900 billion.

Interest Payments

An amount of Rs9,700 billion has been earmarked for interest payments on loans.

Development Projects

The government has allocated Rs1,500 billion for development projects for the next financial year.

GDP Growth Target

The budget sets a GDP growth target of 3.6 percent.

Sector Allocations

Rs253 billion for the energy sector

Rs827 billion for infrastructure

Rs800 billion for energy sector subsidies

Rs206 billion for water resources

Rs279 billion for transport and communication

FBR Targets and Revenue Sources

The Federal Board of Revenue (FBR) has a tax collection target of Rs12,970 billion for the coming financial year, including an additional revenue target of Rs3,720 billion, Rs3,452 billion in direct taxes, and Rs267 billion in customs duty. The land revenue tax volume will be Rs11,379 billion, with direct taxes accounting for Rs5,512 billion, and income tax at Rs5,454 billion. An additional target of Rs1,773 billion has been set for income tax.