Budget in Brief

FEDERAL BUDGET 2023-24 GOVERNMENT OF PAKISTAN FINANCE DIVISION ISLAMABAD

PREFACE

Budget in Brief is a synopsis of the federal budget for FY2023-24. It provides aggregated information on revenues, capital and external receipts and on the current and development expenditures of the Federal Government for the upcoming fiscal year. Details of this information are available in relevant budget documents like the Annual Budget Statement, Explanatory Memorandum on Federal Receipts, and the Demands for Grants and Appropriations. These books are available on Finance Division’s website www.finance.gov.pk after presentation of the annual budget in the National Assembly.

This document contains a concise overview of key priorities and objectives of the Federal Government, the budgetary position for FY2023-24, and the budget estimates and revised estimates for FY2022-23. The part ‘Budget at a Glance’ offers a quick and simple overview of the federal budget, followed by fiscal deficit and its financing. Details are also available on divisible pool taxes and their province-wise shares, function-wise expenditures, grants and subsidies and the distribution of the Public Sector Development Program.

It is hoped that the document will be of use to those desiring a brief and clear understanding of FY2023-24 budget.

IMDAD ULLAH BOSAL

Secretary to the Government of Pakistan

Finance Division, Islamabad, the 9^th June, 2023

CONTENTS

PART - I

Key Priorities of the Federal Government for FY 2023-24

FY 2023-24 will be a year of economic stability and revival for Pakistan. The Government is pursuing policies to optimize resource generation, both tax and non-tax, for public welfare and development. PSDP is being increased to Rs. 950 billion to accelerate growth and generate employment opportunities in the country. Investments in agriculture, IT and industrial sectors will be key for sustainable and inclusive growth. Business friendly and facilitatory policies are being introduced for rejuvenating the private sector. Primary focus of the Government will remain on pro-poor measures, and substantial enhancement in allocation for BISP has been ensured to alleviate the distress of common man. Sufficient allocation has also been kept for provisioning of essential food items on subsidized rates at Utility Stores. Austerity measures introduced by the Government will continue to ensure fiscal discipline by curtailing non-essential expenditures.

The Budget Strategy for FY 2023-24

FY 2023-24 budget is embedded in the principles of sound fiscal and debt management. It gives a roadmap for economic revival and stability, and a strategic direction for revenue generation and spending priorities of the Government. FY2023-24 budget lays the foundation to address fiscal deficit and curtail inflationary pressures over short to medium-term. Fiscal consolidation, strengthening the country’s external account and improve the balance of payments position are also key features of FY2023-24 budget strategy. Protecting the vulnerable segments of the society by expanding social safety nets and ensuring targeted subsidies is the cornerstone of this budget.

Main Objectives of FY 2023-24 Budget

1. Economic revival and stability, curbing inflationary pressures and moving towards sustainable and inclusive growth

2. Addressing fiscal and current account deficits, and improving the country’s balance of payments position

3. Enhancing pro-poor spending, introducing targeted subsidies and provisioning of essential food items at subsidized rates

4. Ensuring optimal resource generation both tax and non-tax, taxpayers’ facilitation and broadening of tax net

5. Introducing business facilitatory and friendly policies

PART - II

Table - 1

Budget 2023-24 at a Glance Table-1 presents position of overall Resources and Expenditure for the FY 2023-24.

(Rs. in Billion)

Table - 2

Fiscal Deficit & Financing of Budget 2023-24

Table-2 shows Fiscal Deficit and Financing for FY 2023-24.

(Rs. in Billion)

Table - 3

BE & RE of FY 2022-23 and BE of FY 2023-24 Table-3 presents important percentages of Budget & Revised Estimates of FY 2022-23 and Budget Estimates of FY 2023-24.

(Rs. in Billion)

PART - III

DETAILED BUDGET ESTIMATES Budget Estimates 2022-23 Revised Estimates 2022-23 Budget Estimates 2023-24

TABLE - 4

REVENUE RECEIPTS

Table-4 presents the detail of Revenues collected by FBR as given in Table1, Part-II.

(Rs in Million)

TABLE - 5

NON TAX REVENUE RECEIPTS

Table-5 shows the Non Tax Revenues details realized by the other government functionaries.

(Rs in Million)

Distribution of Resources Among Federation and Provinces

1. Pakistan is a Federal democracy. In order to maintain inter-governmental fiscal relationship, Article 160 of the Constitution provides for setting up of a National Finance Commission (NFC) with intervals not exceeding five years. The mandate of NFC is to make recommendations to the President for the distribution of resources between the Federal and Provincial Governments. The recommendations of the NFC are given legal cover through a President's Order No. 5 of 2010. The relevant provisions of President's Order No. 5 of 2010 as amended vide No. 6 of 2015 are as under:

(i) Distribution of Revenues.- (1) The divisible pool taxes in each year shall consist of the following taxes levied and collected by the Federal Government in that year, namely:─

• (a) taxes on income;

• (b) wealth tax;

• (c) capital value tax; (d) taxes on the sales and purchases of goods imported, exported, produced, manufactured or consumed;

• (e) export duties on cotton;

• (f) customs duties;

• (g) federal excise duties excluding the excise duty on gas charged at well-head; and

• (h) any other tax which may be levied by the Federal Government.

(2) One percent of the net proceeds of divisible pool taxes shall be assigned to Government of Khyber Pakhtunkhwa to meet the expenses on war on terror.

(3) After deducting the amounts as prescribed in clause (2), of the balance amount of the net proceeds of divisible pool taxes, fifty-six percent shall be assigned to provinces during the financial year 2010-11 and fifty-seven and half percent from the financial year 2011-12 onwards. The share of the Federal Government in the net proceeds of divisible pool shall be forty-four percent during the financial year 2010-11 and forty-two and half percent from the financial year 2011-12 onwards.

(ii) Allocation of shares to the Provincial Governments.- (1) The Province-wise ratios given in clause (2) are based on multiple indicators. The indicators and their respective weights as agreed upon are:-

(2) The sum assigned to the Provincial Governments under Article 3 shall be

distributed amongst the Provinces on the basis of the percentage specified against each:─

(3) The Federal Government shall guarantee that Balochistan province shall receive the projected sum of eighty-three billion rupees from the provincial share in the net proceeds of divisible pool taxes in the first year of the Award. Any shortfall in this amount shall be made up by the Federal Government from its own resources. This arrangement for Balochistan shall remain protected throughout the remaining four years of the Award based on annual budgetary projections.

(iii) Payment of net proceeds of royalty on crude oil. ─Each of the provinces shall be paid in each financial year as a share in the net proceeds of the total royalties on crude oil an amount which bears to the total net proceeds the same proportion as the production of crude oil in the Province in that year bears to the total production of crude oil.

(iv) Payment of net proceeds of development surcharge on natural gas to the Provinces.─ (1) Each of the Provinces shall be paid in each financial year as a share in the net proceeds to be worked out based on average rate per MMBTU of the respective province. The average rate per MMBTU shall be derived by notionally clubbing both the royalty on natural gas and development surcharge on Gas. Royalty on natural gas shall be distributed in accordance with clause (1) of Article 161 of the Constitution whereas the development surcharge on natural gas would be distributed by making adjustments based on this average rate.

(2) The development surcharge on natural gas for Balochistan with effect from 1st July 2002, shall be re-worked out hypothetically on the basis of the formula given in clause (1) and the amount, subject to maximum of ten billion rupees, shall be paid in five years in five equal installments by the Federal Government as grants to be charged on the Federal Consolidated Fund.

(v) Grants-in-Aid to the Provinces.- There shall be charged upon the Federal Consolidated Fund each year, as grants-in-aid of the revenues of the province of Sindh an amount equivalent to 0.66% of the provincial share in the net proceeds of divisible pool as a compensation for the losses on account of abolition of octroi and zilla tax.

(vi) Sales tax on services.- NFC recognizes that sales tax on services is a Provincial subject under the Constitution of the Islamic Republic of Pakistan, and may be collected by respective Provinces, if they so desired.

(vii) The President has constituted 10th NFC on 21st July, 2020 for consideration on distribution of resources afresh. Detail of Provincial share of Federal Taxes for budget estimates and revised estimates of 2022-23 and budget estimates of 2023-24 are given below:-

TABLE - 6

DETAILS OF DIVISIBLE POOL TAXES (TRANSFERS TO PROVINCES)

(Rs in Million)

TABLE - 7

CAPITAL RECEIPTS (NET)

Table-7 explains Capital Receipts (Net) and their sources. It comprises of Net Lending of PSEs, (Table-1) which is the difference between disbursement minus recovery of loans by PSEs (Others).

The second part shown at Sr. No.II of this table relates to the Non Bank Borrowing as indicated at Sr. No.II of Table-1 of Part-II.

(Rs in Million)

TABLE - 8

PUBLIC ACCOUNT (NET)

Table-8 indicates the position of Public Account of Federation (Net):

(Rsin Million)

TABLE - 9

EXTERNAL RESOURCES

Table-9 indicates the details of Net External Receipts and shows details of inflow minus repayments.

(Rs in Million)

Contd….

(Rs in Million)

TABLE - 10

CURRENT EXPENDITURE*

Table-10 contains Current Expenditure, already given at A in Table-1, in summarized form.

(Rs in Million)

Contd…

(Rs in Million)

*RE 2022-23 as of 25th May 2023

TABLE - 11

FUNCTION WISE CURRENT EXPENDITURE

Table-11 shows details of Current expenditure which is divided into Ten (10) functional items as per Charts of Accounts i.e. how much is utilized of the Government.

The detail of Expenditure under above Ten Functions (10 Tables) are as under:-

(1) GENERAL PUBLIC SERVICE

(2) DEFENCE AFFAIRS AND SERVICES

(Rs in Million)

(3) PUBLIC ORDER AND SAFETY AFFAIRS

(Rsin Million)

(4) ECONOMIC AFFAIRS

(5) ENVIRONMENT PROTECTION

(Rsin Million)

(6) HOUSING AND COMMUNITY AMENITIES

(Rsin Million)

(7) HEALTH AFFAIRS AND SERVICES

(Rsin Million)

(8) RECREATION, CULTURE AND RELIGION

(9) EDUCATION AFFAIRS AND SERVICES

(10) SOCIAL PROTECTION

(Rsin Million)

In addition to the above allocations under the Current Budget as per ten classification heads, the Federal Govts provides funds for various purposes.

In order to alleviate the impact of inflation on citizens, especially the poor segments of society, the Federal Government spends a fairly large sum on providing power and food subsidies.

TABLE - 12

SUBSIDIES

Table-12 shows detail of subsidies. A single figure is given in Table-1, Part-II.

(Rs in Million)

(Rsin Million)

Contd…

(Rs in Million)

TABLE - 13

GRANTS AND TRANSFERS

Table-13 gives details of Grants and Transfer to provinces and other entities as provided by the Federal Government. A single figure is given in Table-1, Part-II.

(Rs in Million)

(Rsin Million)

Contd…

(Rs in Million)

(Rs in Million)

TABLE - 14

CURRENT LOANS & ADVANCES

Table-14 shows Current Loans & Advances as provided by Federal Government to Govts. of AJK, GB and various institutions as well as Govt. Servants to enable them to meet their financial requirements. The details are as under:

Contd…

(Rsin Million)

TABLE - 15

CURRENT INVESTMENTS

Table-15 shows detail of Current Investments through equity. The Federal Government invests funds in various Companies, Banks etc, to earn Dividends which results an increase in Government's Revenues:

(Rsin Million)

TABLE - 16

DEVELOPMENT LOANS AND ADVANCES

Table-16 shows Development and External Development Loans & Adcances as made by Federal Government to Provinces, AJK & GB, PSEs, Financial / Non-Financial Institutions, District Governments / TMAs and others to assist them in carrying out their Development Programmes.

Development Loan and Advances are part of project aid disbursed by foreign donors and are used to Finance PSDP. The loans are re-lent by the Federal Government to Provincial Governments and PSEs.

(Rsin Million)

Public Sector Development Programme (PSDP)

The Public Sector Development Programme (PSDP) is the main instrument for improving the socio-economic conditions in the country and achieving the macroeconomic & development objectives and targets set by the government, which yield maximum benefits for the society in the shortest possible time.

TABLE - 17 PSDP 2023-24

Table-17 shows the details of PSDP size for FY 2023-24 in respect of Ministries / Divisions / Departments / Corporations and for Special Packeges / Relief, explaining the figures of PSDP given in Table-1, Part-1.

(Rsin Million)

Contd…

(Rs in Million)

(Rs in Million)

*RE 2022-23 is based on PSDP approved by National Economic Council