The budget roll out is likely to be pro-growth with an overall focus on increasing expenditures. Until recently, expectations were more dim towards consolidation of a growth focused budget given that Pakistan had just resumed the previously stalled IMF programme. The government has been holding discussions with the IMF to maintain its growth-centric policies
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The overall outlay of the budget is expected at Rs8 trillion with an expected fiscal deficit of 5.5 per cent to 6pc of GDP for FY22 compared to an estimated deficit of 6pc of GDP during FY21.
The revenue collection target for FBR has been set at Rs 5.8tr for FY22, which will be lower than IMF’s target of Rs 6tr. Still, the target seems to be ambitious, as it is likely to be 23pc higher compared to the estimated collection of Rs4.7tr in FY20-21. Additional revenue measures worth Rs350 billion are also expected. The non-tax collection target will be set at Rs1.42tr.
For FY22, the government is expected to earmark Rs900bn for federal PSDP, an increase of 38pc from the previous budget. A key element is total development outlay, which includes provincial spending. It is expected that the government will set a provincial spending target of Rs1tr, taking the total development outlay to Rs1.9tr compared to last year’s budgeted outlay of Rs1.3tr (up 44pc).
The government is likely to set mark-up interest and defence expenditure targets at Rs3.1tr and Rs1.4tr, up 4pc and 9pc from last year’s budget, respectively. The government also intends to increase salaries and pensions by 15-20pc.
The fiscal deficit is expected to be around Rs2.9tr in FY22, which could be 5.6pc of the GDP.
For subsidies, the government is expected to set a target of Rs530bn for FY22.
The current account deficit for FY22 is projected to be around $2.3bn which would be less than 1pc of the GDP.
The cotton bales output expected for FY22 would be around 10.5m bales.
The government may also earmark funds for Covid-19 to procure more vaccines in the upcoming year. According to a government statement, it has spent $250m for procuring vaccines in FY21 and the upcoming budget will see an enhanced amount for this purpose
Government is targeting a GDP growth of 4.8pc for FY22, compared to 3.9pc achieved in FY21; and if achieved, this will be the highest GDP growth since FY18
Maintaining fiscal stability and improving fiscal health while adopting a pro-growth and expansionary fiscal policy will be a real challenge for the government