A proposed federal budget containing a deficit of over Rs6 trillion is set to be presented to the cabinet and subsequently to the parliament today.
The draft budget proposes new taxes amounting to Rs700 billion, and an overall budget outlay of around Rs14.5 trillion is expected. A potential 30% increase in ad hoc relief allowances and a 20% increase in pensions for government employees are also proposed.
The draft also suggests doubling the medical and conveyance allowance for government workers. The fiscal deficit target is aimed at 7.7% of the GDP.
Revenue collection has an anticipated target of Rs9.2 trillion, with the Federal Board of Revenue (FBR) aiming to produce Rs2.8 trillion in revenue, of which 55% will be distributed to the provinces.
Development expenditure by the federal government is expected to be Rs950 billion, with Rs200 billion allocated for new projects under public-private partnerships.
Provincial development budget allocation stands at Rs1.55 trillion, and a proposed sum of Rs1.8 trillion is planned for defense. In addition, FBR aims to collect an extra Rs1.9 trillion in the next fiscal year.
Sources reveal that new taxes on the property sector and company profits are expected. An increased levy on petroleum products, a standard sales tax of 18%, and a 25% sales tax on luxury items are also likely.
The budget proposal also outlines an increased duty on imported vehicles over 1,000cc, a 30% tax on mutual funds and real estate trusts for non-filers, and an increased withholding tax on imported luxury goods and property transactions by non-filers.
There are three budget considerations regarding the salaries and pensions of government employees. The first proposes a 100% increase in medical and conveyance allowances and a 10% salary increase as ad hoc allowance. It also proposes a pension increase of 10% and a doubling of pensioners’ medical allowances.
The second suggests a 25% salary increase for all government employees from Grade-one to Grade-22, along with hikes in their medical and conveyance allowances. Pensions and medical allowances for pensioners are also suggested to be increased.
The third proposal considers a 30% salary increase for employees from Grade-one to Grade-16 and a 20% raise for officers of Grade-17 and above. It also proposes a 50% increase in their medical and conveyance allowances and a 20% increase in pensions.
Proposals to increase the Employee’s Old-Age Benefits Institution (EOBI) pensions and minimum wages are also on the table.
The budget is under intense scrutiny as the government navigates a delicate balance between implementing fiscal reforms prescribed by the International Monetary Fund (IMF) and providing relief to citizens before the national elections in early November.
