Federal Budget for FY 2024-25 with Focus on Economic Growth and Stability

Pakistan moves towards economic resilience and growth as the federal government presents the fiscal year budget ending June 2025, in accordance with International Monetary Fund guidelines. The budget sets forth a GDP growth target of 3.6% and aims to address the challenges of a struggling economy while balancing the requirements of international financial institutions and the public’s needs.

Fiscal Framework and Economic Targets

The budget outlines a fiscal deficit target set at 6.9% of GDP for 2024-25, reflecting the government’s commitment to fiscal discipline despite challenging economic conditions. The total expenditure is estimated at Rs18.9 trillion ($67.84 billion), marking a significant increase in spending aimed at stimulating economic activity and supporting various sectors.

Expenditure Breakdown

A substantial portion of the budget is allocated to debt servicing, which is expected to reach Rs9.8 trillion, indicating the government’s focus on managing its financial obligations. Defence expenditure is projected at Rs2.1 trillion, maintaining a consistent share of GDP as in previous years. Pension payments are anticipated to be Rs1 trillion, while total subsidies are projected at Rs1.4 trillion, demonstrating the government’s support for vulnerable segments of society.

The budget also projects a 27% increase in cash handouts under income support programs, totaling Rs600 billion, as part of efforts to alleviate poverty and provide social safety nets.

Revenue Goals and Tax Policy

On the revenue front, the government has set an ambitious tax revenue target of Rs13 trillion for the Federal Board of Revenue (FBR), indicating a push towards enhancing tax collection efficiency. Non-tax revenue is expected to contribute Rs3.5 trillion, with additional funds aimed to be secured through privatization efforts amounting to Rs30 billion.

The tax policy focuses on expanding the tax base and documenting the economy through digitization initiatives. A progressive taxation regime is proposed to increase the tax burden on high earners while safeguarding low-income groups from the impact of inflation.

Investment in Development and Infrastructure

The Public Sector Development Programme (PSDP) has been allocated Rs3,792.2 billion, reflecting a 40% increase from last year’s allocation. This investment underscores the government’s commitment to infrastructure development and public services enhancement.

Support for Renewable Energy

In a notable move towards sustainable development, imports of raw materials used in manufacturing solar panels, inverters, and lithium-ion batteries have been zero-rated. This policy aims to promote renewable energy sources and reduce reliance on fossil fuels.

Current Expenditure and Federal Revenue

The current expenditure proposed for FY25 stands at Rs17,203 billion, with interest payments or debt servicing surging by 34% to Rs9,775 billion. Defence expenditure constitutes Rs2,122 billion, making up 1.71% of GDP.

Pakistan’s total revenue for fiscal year 2025 is budgeted at Rs17,815 billion. After accounting for provincial transfers, the net revenue is projected at Rs10,377 billion.

Key Financial Targets and Projections:

  • Economic Growth: The government targets a 3.6% GDP growth rate for 2024-25.
  • Fiscal Deficit: A fiscal deficit of 6.9% of GDP is projected for the same period.
  • Total Expenditure: An estimated total spending of Rs18.9 trillion ($67.84 billion) is anticipated.
  • Debt Servicing: Debt servicing costs are expected to reach Rs9.8 trillion.
  • Defence Spending: Defence expenditure is projected at Rs2.1 trillion.
  • Pension Payments: Pension payments are seen at Rs1 trillion.
  • Subsidies: Total subsidies are projected at Rs1.4 trillion.
  • Income Support: A 27% increase in cash handouts under income support, totaling Rs600 billion.

Revenue Goals:

  1. Tax Revenue: The government has set an ambitious tax revenue target of Rs13 trillion for the Federal Board of Revenue (FBR).
  2. Non-Tax Revenue: A non-tax revenue target of Rs3.5 trillion is in place.
  3. Privatisation: The government aims to secure Rs30 billion from privatisation efforts.
  4. External Receipts: External receipts are targeted at Rs666 billion.

The federal budget for FY25 represents a strategic blueprint designed to navigate Pakistan through economic uncertainties while laying down a foundation for sustainable growth. With its focus on fiscal discipline, revenue generation, social welfare, and infrastructure development, the budget aims to position Pakistan on a path towards economic stability and prosperity.

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