By Staff Reporter
ISLAMABAD: The federal budget 2022-23 comes at a time when the country’s foreign exchange reserves are depleting, credit ratings are down, and the pressure on the out-of-options government to get a new lease on the IMF loan is increasing exponentially, economists said on Saturday.
The participants at the seminar titled “SDPI’s Response on Budget 2022-23”, organised by Sustainable Development Policy Institute (SDPI), were unanimous that the government should ration all resources as the times ahead would be extremely tough.
“The federal budget is already in deficit as more than half of it has been allocated for the non-discretionary expenditures, including debt servicing and defense,” said Dr Abid Qaiyum Suleri, Chairman Sustainable Development Policy Institute (SDPI) addressing the moot.
He was of the view that the government would have to arrange an additional Rs4.6 billion in loan to meet the fiscal year’s expenditures.
“An impending food crisis where food commodities prices will increase and an overall increase in inflation of nearly 15 percent was expected as an aftermath of the Russia-Ukraine crisis,” Dr Suleri predicted.
Dr Vaqar Ahmed, SDPI Joint Executive Director, said that according to independent economists, inflation was projected to exceed 18 percent instead of 11 percent as projected by the federal government.
“At the same time, the Rs7 trillion tax collection goal set by the Federal Board of Revenue (FBR) was also less likely to be achieved,” Dr Ahmed said.
He said that the country might get into hot waters with the IMF over the issue of petroleum tax levy, which might have to be revised later.
“The government has not demonstrated ingenuity to improve the redistribution of wealth by bringing the self-employed persons in the higher tax net,” he said, adding, “The overall impact of taxation in textile, automobile, construction, chemicals, food processing, fertilisers, and IT sector will be negative due to regressive taxation”.
However, the paper, pharmaceutical, solar energy as well as film and entertainment industry would experience positive impact of the tax exemptions, Dr Ahmed said.
Dr Sajid Amin, SDPI Deputy Executive Director, remarked that the current federal government had its hand tied as we are currently facing an unprecedented economic crisis.
“The social sector development might have to be sacrificed to meet the revenue targets and decrease expenditures,” he added.
“The government has announced the PM’s Petroleum Relief Programme to provide relief to families earning less than Rs40,000, but the duration of the programme has not been revealed.”
Moreover, according to Dr Amin, as per the estimates presented in the budget speech, it seems that it will be executed for three and half months only.
“In order to satisfy the IMF regarding revenue generation of Rs540 billion, the government will have to eventually make significant increase in petroleum levy, which will inevitably hike inflation to 15 percent,” Dr Amin said and added, “It was is not inclusive of other domestic and global influences, which have significant impact on inflation”.
Elaborating on the State Bank’s Inflation rate, he said the current interest rate would slow down economic growth by 1.5 percent and make it more difficult to achieve the set targets for revenue generation.
Dr Razia Safdar, SDPI Research Fellow, said cuts in the Sehat Sahulat Programme budget meant that money to be spent on the common man would be reduced.
The government was also urged to target taxation of wealth and not just limit it to income and salary to improve redistribution of wealth, provide social security and relief to low-income families which fall in the threshold of Rs40,000-70,000 monthly family income.
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