Federal Budget 2024-25: In a significant and politically charged event, Finance Minister Muhammad Aurangzeb presented his first federal budget for the fiscal year 2024-25. This budget is crucial as Pakistan seeks a long-term bailout from the International Monetary Fund (IMF).
Budget Presentation Amid Protests
Aurangzeb presented the budget in the National Assembly, facing a noisy protest by opposition lawmakers from the Pakistan Tehreek-e-Insaf (PTI)-backed Sunni Ittehad Council. They stood on their desks, raised anti-government slogans, and tore copies of the Finance Bill 2025. Despite this, Aurangzeb highlighted the government’s economic progress over the past year, describing it as “impressive.”
He emphasized the importance of unity and cooperation for the country’s economic progress. Aurangzeb recalled the previous economic difficulties, mentioning that the State Bank’s reserves were barely enough for two weeks of imports, the rupee depreciated by 40%, economic growth was stagnant, and inflation was driving people below the poverty line.
Economic Stability and IMF Agreement
Aurangzeb praised the previous government’s efforts in securing a short-term standby agreement with the IMF, which he said brought economic stability and ended uncertainty. This agreement was crucial as the previous IMF program was ending, and reaching a new agreement was uncertain.
Economic Targets and Projections
The Federal Budget 2024-25 aims for a GDP growth rate of 3.6% in the next fiscal year. Inflation is expected to decrease to 12%. The budget deficit is projected at 6.9% of GDP, and the primary surplus is expected to remain at 1% of GDP. The Federal Board of Revenue (FBR) aims to collect Rs12,970 billion, a 38% increase from the current fiscal year. Consequently, the provinces’ share in federal tax collection will be Rs7,438 billion. Non-revenue targets are set at Rs3,587 billion, with the Centre’s net income estimated at Rs9,119 billion. Total federal expenditures are projected at Rs18,877 billion, with Rs9,775 billion allocated for interest payments.
Key Economic Indicators and Projections
The finance minister outlined key economic indicators for the Federal Budget 2024-25:
- GDP growth rate expected to be 3.6%.
- Inflation expected to reduce to 12%.
- Budget deficit projected at 6.9% of GDP.
- Primary surplus expected to be 1% of GDP.
- Federal Board of Revenue (FBR) tax collection estimated at Rs12,970 billion, a 38% increase from the current fiscal year.
- Provinces’ share in federal tax collection will be Rs7,438 billion.
- Non-revenue target set at Rs3,587 billion.
- Centre’s net income estimated at Rs9,119 billion.
- Total federal expenditures projected at Rs18,877 billion, with Rs9,775 billion allocated for interest payments.
Public Sector Development Programme (PSDP)
Aurangzeb emphasized the significance of the Public Sector Development Programme (PSDP) in national development. The Federal Budget 2024-25 includes the largest PSDP in history, worth Rs1,500 billion, a 101% increase from the previous year. Key allocations include Rs100 billion for Pakistan Peoples Party (PPP) projects. The budget focuses on infrastructure, transportation, energy, IT, and water resources. Priority is given to ongoing projects, with 83% of resources allocated to them.
Aurangzeb stated that the PSDP plays a key role in the country’s development, prosperity, and social welfare. He highlighted the government’s commitment to infrastructure development, transportation, energy, IT, and water resources. The PSDP for 2024-25 is valued at Rs1,500 billion, the largest in history, representing a 101% increase from last year’s revised volume.
The development budget is designed to address challenges in infrastructure development, transportation, energy, IT, and water resources. The focus is on completing ongoing projects, with 83% of resources allocated to them and only 17% for new projects. The federal government proposed allocating 59% of PSDP funds to basic infrastructure, 20% to the social sector, and 10% to districts merged into Azad Jammu and Kashmir, Gilgit Baltistan, and Khyber Pakhtunkhwa. Additionally, 11.2% of resources are earmarked for IT, telecommunication, science and technology, governance, and production sectors.
Tax Reforms
In the Federal Budget 2024-25, several tax reforms were proposed. The finance minister highlighted Corporate Income Tax reforms from 2019-2023 and emphasized the need for personal tax reforms to align with international standards. The minimum tax slab remains unchanged at Rs600,000 (annual income), and the maximum tax slab also remains unchanged.
Changes in tax slabs were proposed, with the maximum tax rate at 45% for non-salaried individuals. The government aims to support the export sector, which will now fall under the normal tax regime. To increase tax collection from the real estate and securities sectors, a 15% tax will be imposed on filers, and up to 45% on non-filers, under different slabs. This measure aims to document the economy. Different tax slabs will be introduced for filers, non-filers, and late return filers for the purchase of immovable properties. Tax will be imposed based on the car’s value instead of its engine capacity. The government also plans to end zero rating, exemptions, and reduced rates.
The finance minister highlighted the government’s consideration of several exemptions and concessions, deciding to end some of them. Taxes on TIER-I Retailers will be increased from 15% to 18%.
Benazir Income Support Programme (BISP)
The Federal Budget 2024-25 increases the allocation for the Benazir Income Support Programme (BISP) by 27%, up to Rs593 billion. This program is crucial for providing cash assistance to millions of families. Key components include:
- Kafalat programme: Beneficiaries will increase from 9.3 million to 10 million. Cash assistance will also be hiked to protect deserving families from inflation impacts.
- Benazir Taleemi Wazaif: An additional 1 million children will be registered in the conditional cash transfer programme aimed at promoting education.
- Benazir Nashonuma: 500,000 more families will receive nutritional support to prevent “stunting” of children during the first 1,000 days after birth.
- New BISP programmes: The government plans to launch new poverty graduation and skills development programmes to promote economic inclusion and improve the financial status of citizens. A hybrid social protection programme will also be introduced to promote financial self-sufficiency.
Salaries and Pensions
The Federal Budget 2024-25 addresses salaries and pensions with a three-pronged strategy to reform the pension scheme in line with international best practices. The government faces an increasing unfunded pension liability each year. The reforms aim to reduce this liability considerably over the next three decades.
For fresh employees, a contributory pension scheme will be introduced, with the government depositing its share every month. A pension fund will also be created to manage the liability.
Salaries will see a 20-25% increase on an ad-hoc basis, with a 15% pension enhancement for federal employees. Despite financial constraints, the government decided to give 25% ad-hoc relief in salaries to employees from Grade 1-16 and 20% to Grade 17-22 employees. This measure aims to increase their purchasing power. Additionally, the minimum wage will rise from Rs32,000 to Rs36,000 per month.
