Cash-strapped Pakistan on Friday increased defense spending by 15.5 percent, allocating more than Rs1.8 trillion, as the government unveiled a budget of R14.4 trillion for 2023-24 as it sought to fend off a looming insolvency due to dwindling foreign reserves.
Presenting the budget in the National Assembly, the lower house of parliament, Finance Minister Ishaq Dar said the government would target a growth rate of 3.5 percent in the coming fiscal year.
“This budget should not be seen as an ‘election budget’ – it should be seen as a ‘responsible budget’,” Dar said as political parties prepared for the next general election scheduled for later this year, amid political turmoil following the ouster of Imran Khan from function of Prime Minister in April last year.
Dar presented the budget in the National Assembly, the lower house of parliament, which is believed to be the government’s last budget before a general election this year.
He said an amount of 1,804 billion rupees is proposed for defence, which is more than the 1,523 billion rupees allocated last year. Defense spending is 15.5 percent higher than last year and accounts for about 1.7 percent of gross domestic product (GDP).
Defense sector spending is the second largest component of annual expenditure after debt repayments, which would be Rs 7,303 billion next year and is the country’s single largest expenditure.
The minister declared a GDP growth target of 3.5 percent for next year, which is a moderate target. “This budget should be treated as a development budget instead of an election budget,” he said.
He said the inflation target for the next fiscal year will be 21 percent, while the budget deficit will be 6.54 percent of GDP. He said the export target will be Rs 30 billion and remittance target Rs 33 billion. The minister said the tax collection target will be Rs 9,200 billion, of which Rs 5,276 billion will be given to the provinces as per the already agreed formula.
He said the government’s non-tax revenue target would be Rs 2,963 billion and with that, the federal government’s net revenue would be Rs 6,887 billion. He said the net expenditure would be Rs 14,460 billion and the deficit of Rs 7,573 billion would be bridged through external financing.
He said Rs 714 billion will be spent on civil administration and another Rs 761 billion on pension of retired civil and defense employees. The government also decided to set up a pension fund to cover rising pension costs.
The government has also decided to provide a historic Public Sector Development Program (PSDP) of Rs 1,150 billion and the provincial development budget will be Rs 1,569 billion, taking the net development expenditure to over Rs 2,700 billion.
He said the government has decided to allocate Rs 2,200 billion for agricultural loans and Rs 30 billion for solarization of water pumps. He also announced other measures to increase yield per hectare of various crops.
The Minister also presented several steps to increase IT exports and enable freelancers to strengthen the IT sector. He also stated that the IT sector will be treated as a small and medium industry and get access to better tax regimes.
Pakistan’s cash-strapped economy has been in freefall for the past many years, putting untold pressure on the poor masses in the form of rampant inflation, making it nearly impossible for large numbers of people to make ends meet. Their plight has increased manifold after last year’s catastrophic floods that killed more than 1,700 people and caused huge economic losses.
