Assessing Pakistan's Budget 2024-25: Vision and Impact

According to recent budget announcements, it has been confirmed that the current government is incapable. This appointed government lacks vision and does not possess the necessary literacy to analyze and prepare a budget that supports economic development.

Given Pakistan's existing economic crisis, this government relies heavily on foreign aid and loans to sustain itself and provide subsidized benefits to government officials, forces, and authorities.

This directionless government has crafted a budget that threatens to exacerbate poverty, leaving the poor to suffer from hunger while further enriching the wealthy. Let's examine the key points of the 2024-25 budget:

  • An additional Federal Excise Duty (FED) of Rs1,000 per ton has been imposed on cement, increasing the total FED to Rs3,000 per ton on dispatched cement. This will raise construction costs and increase expenses for development projects.
  • Sales tax exemptions totaling Rs30 billion from the health sector and Rs47 billion from the poultry sector have been revoked.
  • The government has proposed significant changes to taxable income, expected to generate an additional Rs75 billion, which will directly impact salaried individuals. This could lead to reduced salaries and increased prices, causing widespread disruption.
  • The sales tax rate for point-of-sale (POS) retailers dealing in leather and textile products has been increased from 15% to 18%.
  • Similarly, a 10% sales tax has been introduced on bakery items, sweets, and cooking oils, increasing the cost of meals for the average consumer and reducing affordability.
  • Additionally, a 10% sales tax has been imposed on stationery, books, and paper (excluding brochures, leaflets, and directories), potentially increasing the cost of education while leaving marketing materials tax-free. These priorities highlight concerns about the government's vision; ideally, education should be tax-free while marketing materials could face higher taxes.
  • The maximum limit for petroleum levy on petrol and diesel has been raised to Rs80 per litre.
  • A standard 18% sales tax has been imposed on medical treatment, diagnostic kits/equipment, medicine, and medical supplies, potentially increasing healthcare costs by 25% to 30%. This decision could make medical services and surgeries more expensive and less accessible for lower and middle-class citizens.
  • Custom duties exemptions on imports of hybrid vehicles have been removed, along with concessions on electric vehicles valued over US$ 50,000. This decision, amid inflation, overlooks potential benefits of reducing duties on hybrid and electric vehicles to promote lower gasoline consumption and address environmental concerns. Conversely, taxes and duties on petrol and diesel vehicles could be increased to discourage their use.
  • Advance tax on registration of motor vehicles above 2,000 cc will be proportionate to the vehicle's value, although this decision should consider different vehicle types, with lower advance tax rates for hybrid or electric vehicles.
  • Iron and steel scrap will be exempt from sales tax, a decision favoring Steel Mills owned by PMLN. However, applying taxes to iron and steel scrap, as with other construction materials, could promote fairer taxation practices.
  • Rs253 billion has been allocated for the development of the energy sector, with a need to prioritize maintaining existing grids for efficient transmission. Removing taxes on solar power and reducing import duties on solar panels and inverters could encourage more households to adopt solar power generation, contributing to energy sustainability.
  • The IMF has emphasized the removal of tax exemptions and subsidies as crucial for the country's economic recovery, underscoring their importance in the budget.
  • Air travel costs are set to rise significantly, affecting economy, business, and club class travelers alike.

The government unveiled the national budget on June 12, setting a formidable tax revenue target of Rs13 trillion ($46.66 billion) for the upcoming fiscal year starting July 1. This target represents a significant increase of approximately 40% compared to the current year, aimed at bolstering efforts to secure a new IMF rescue deal.

The increase in the tax target comprises a 48% rise in direct taxes and a 35% hike in indirect taxes compared to revised estimates of the current year. Non-tax revenue, which includes petroleum levies, is expected to rise by 64%. Additionally, there will be an increase in direct taxes on income, affecting workers.

The State Bank of Pakistan has cautioned about potential inflationary impacts stemming from the budget. It highlighted that limited progress in structural reforms aimed at expanding the tax base necessitates revenue increases through tax hikes.

The growth target for the upcoming year has been set at 3.6%, while inflation is projected at 12%.

Opposition parties have outright rejected the budget, arguing that it would significantly fuel inflation. Omar Ayub, Leader of the Opposition in the National Assembly, criticized the budget as "anti-industry and anti-people," emphasizing his party's rejection of its proposals.

Pakistan’s finance ministry claimed in a report on Friday that the budget aims to steer the country toward "an era of sustainable and inclusive growth." However, critics argue that this government lacks vision. They believe that the budget will further destabilize the economy, alleging that it primarily serves to enrich government officials through taxes and subsidies, while ordinary people struggle with hunger and financial burdens.


A VISIONLESS GOVERNMENT 

A government without vision relies heavily on foreign aid and loans to maintain short-term stability, often limited to their term in office. Their priorities in development projects often prioritize offering free benefits to a select few rather than establishing industries and sustainable revenue streams. Such governments may resort to selling national assets to gather funds, which are then often squandered on subsidies for government officials rather than investing in national development.


A VISIONARY GOVERNMENT 

A visionary government, before imposing taxes on the general public, would prioritize discontinuing subsidized facilities for government officials. This includes ending privileges such as free electricity, gas, and fuel. Government departments should be streamlined to minimize the consumption of national resources, with reductions or eliminations of unnecessary facilities. Salary increments for government staff should be halted, as the current economic challenges are largely attributed to poor governance. These steps are crucial for promoting fiscal responsibility and equitable distribution of resources.

Reducing defense budgets and addressing the disparity between military wealth and public resources are important issues for national balance and equity. Nationalizing businesses owned by military officials could promote transparency and fairness, ensuring resources benefit the entire population rather than a select few. These measures could contribute to a more equitable distribution of wealth and resources in Pakistan. Pakistan is the only country in the world who has an Army which is 3 times richer than public. 

The budget saved from cutting subsidies and facilities could be effectively utilized to develop and establish industries aimed at boosting exports. A strategic approach would involve increasing duties and taxes specifically on foreign imports, while providing tax exemptions to strengthen local industries. This would encourage domestic production, stimulate economic growth, and enhance Pakistan's competitiveness in international markets.

PAKISTAN SPORTS

Reducing the budget of the Pakistan Cricket Board (PCB) and implementing performance-based Key Performance Indicators (KPIs) for cricketers is essential. Players who consistently perform well should receive benefits, while those who do not perform should not receive the same benefits. Implementing a policy where non-performing players face penalties, such as loss of benefits and tax exemptions after consecutive poor performances, could incentivize better performance. Additionally, non-performing players should be released from the team to make way for more promising talent. The budget saved from the PCB could then be redirected towards developing Pakistan's national sport, hockey, thereby promoting broader participation and excellence in multiple sports. The Pakistan Cricket Board should be transformed into the Pakistan Sports Board, ensuring that the allocated budget is equally distributed among hockey, cricket, and other sports. This would prevent excessive spending on cricket alone and promote the development and support of a wider range of sports across the country. The government has approved an 80 billion rupee budget for renovating Gaddafi Cricket Stadium, sparking controversy due to the neglect of other sports. National hockey players, in particular, face inadequate financial support and job opportunities. Critics call for a more balanced sports policy to ensure equitable support for all athletes.


Author

Sajid M.Qureshi

Email: sajid.mq@outlook.com
Blogs: https://sajidmq.blogspot.com
Linkedin: https://linkedin.com/in/sajidmq

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