Federal Budget of Pakistan 2024-25: Mix of Disappointment and Hope

The Federal Budget of Pakistan 2024–25, titled Mix of Disappointment and Hope, provides estimates of expenditures and revenues for the upcoming fiscal year. Many individuals find it challenging to comprehend the numbers and figures associated with the budget. In this article, I aim to simplify the complexities of Pakistan’s federal budget, allowing everyone to grasp its key facts and figures easily.

The Federal Budget of Pakistan was presented on June 12, 2024, for the next fiscal year 2024-25. The total outlay/volume or expenditures target is 18,877 billion rupees(25% more than the expenditures target of the previous year). In comparison, the income target is 17,815 billion rupees (from tax and non-tax sources), 46 % more than the revenue target of the previous year’s budget.

 The tax collection target of the government is 12,970 billion rupees, while the non-tax collection target is 4,845 billion rupees (12,970 + 4,845 = 17,815 billion rupees) in the federal budget of Pakistan. From an income of 17,815 billion rupees, 7,438 billion rupees would be given to four provinces, according to the NFC (National Finance Commission) award. So, the remaining amount would be 10,377 billion rupees, or it can be said this amount is net revenue receipts.

Total expenditures would be 18,877 billion rupees, while total income target is 10,377 billion rupees. Additionally, the federal government will receive a provincial surplus of 1217 billion rupees (10,377 + 1217 = 11594 billion rupees). Provincial surplus means the amount of the province’s budget that they did not consume in the previous year. So, provinces return this amount to the federal government.

The difference between 11,594 billion rupees of income and 18,877 billion rupees of expenditures (11,594-18,877 = 7,283 billion rupees) would be the budget deficit, which formed 7,283 billion rupees. If we convert it in dollar terms, then this deficit amount is 24 billion dollars. This budget deficit is a very huge amount, which is -5.9% of GDP.

 Now the question is, from where would this huge amount be brought into the federal budget of Pakistan? This deficit amount will be taken as a loan from different internal and external sources. It also shows that the country will run based on loans. This monkey business has been functioning for the last many decades in Pakistan.

Before highlighting, how the government will fill this gap between income and expenditures means a budget deficit. Let’s look at the other side of the picture, which is different heads of expenditures.

 The biggest head of non-developmental expenditure is debt servicing/repayment of loans and interest into the federal budget of Pakistan, which is 9,775 billion rupees and is the total interest amount. This is 55 % of total income. If we make its breakup, then the domestic interest payment is 8,736 billion rupees, while the foreign interest payment amount is 1,038 billion rupees. It shows domestic interest payment amount is approximately eight times more than the foreign interest payment amount, approximately.

 The second largest head of expenditures is defense affairs and services in the federal budget of Pakistan with 2,122 billion rupees, which is 12 % of total income.

 The third non-development expenditure head is pension payment of 1,044 billion rupees for federal government employees and armed forces employees. Out of 1,044 billion rupees allocated for pension, civil federal employees will get 220 billion rupees, while 662 billion rupees will be given to employees of the armed forces, and 122 billion rupees have been increased for pension amount for both civil and military employees.

For the running of civil government, 839 billion rupees have been allocated. Subsidies of 1,363 billion rupees will be given to different sectors. An amount of 1,777 billion rupees has been allocated for grants and transfers to provinces and others. To combat emergencies and other such issues, 313 billion rupees have been allocated.

For development expenditures/PSDP (public sector development program), 1,400 billion rupees would be utilized and an additional amount of 100 billion rupees has been allocated as a public and private partnership. In this way, a huge amount of 1,500 billion rupees has been allocated to this budget. This amount is 101 % more than the previous budget’s development amount, and this raise is the first time in the country’s history.

Now, I see how a huge budget deficit of 7,283 would be accommodated into the federal budget of Pakistan. The government will borrow from non-bank sources the amount of 2,662 billion rupees, and through bank borrowing (T-Bills, PIBs, Sukuk-Federal Consolidated Fund), the amount of 5,142 billion rupees will be collected. Amounts of 666 billion rupees and 30 billion rupees would be expected from net external receipts and privatization, respectively.

For education, only 103 billion rupees have been allocated into the federal budget of Pakistan. which is a meager amount. It is 1.5 % of GDP. For health, 28 billion rupees would be spent, which is also a minimal amount. It is less than 1 % of Pakistan’s GDP. The federal budget of Pakistan for the fiscal year 2024-25 is also available in the form of a YouTube video mentioned below.

If you want to compare this budget with the previous year’s federal budget of Pakistan, then the link is below