Federal budget lacks insight, seems unrealistic: Experts
ISLAMABAD – Economic experts have noted that the proposed federal budget is lacking insight and unrealistic to achieve the sustainable growth saying the government needs to ensure it does not spend more than the budgeted amount. The expert opinions and research on the next federal budget were expressed during an interactive post-budget roundtable arranged by an independent economic think tank Policy Research Institute of Market Economy (PRIME) in collaboration with Economic Advisory Group (EAG) here on Monday.
Representatives from government, think tanks, academia, private sector, and media participated and contributed to the discussion on the budget 2022-23.
On the occasion, a research paper prepared by the PRIME was presented that noted that the proposed federal budget is lacking insight and unrealistic to achieve the sustainable growth. The PRIME proposed the adoption of broad-based flat tax rates to promote compliance and voluntary registration as higher tax rates, which the current budget proposed, only contribute to higher tax evasion and avoidance. The exclusion of credit inflow from China and IMF makes the efficacy of the entire budget unquestionable. The dependence on higher petroleum revenues at the time of rising global prices and soaring inflation at home is also not a wise strategy for fiscal sustainability.
The government remains incapable to cut losses by privatizing bleeding SOEs just for political aspirations but business as usual is not possible now; therefore, the government needs to set aside political motivations and ease the unnecessary financial burden. According to the PRIME, the government needs to ensure it does not spend more than the budgeted amount. The government has kept expenditures at Rs9.502 trillion for the next fiscal year as against budgeted expenditures for FY 2022 were Rs. 8,487 billion and actual spending increased by Rs. 1,015 billion to Rs. 9,502 billion.
| Say govt needs to ensure spending doesn’t exceed budgeted amount
Rs699b allocated for subsidies are higher than the budget for running a civil govt
It noted that inflation would significantly increase due to passing on the prices of electricity and petroleum products. Average inflation in FY 2022 remained at 11.2 percent and the government has set a target of 11.5 percent for FY 2023.
In the FY 2023, the government has allocated Rs. 699 billion in terms of subsidies, which is higher than the budget for running a civil government. The power sector will receive a major proportion of subsidies amounting to Rs. 570 billion and allocation for the petroleum sector is Rs. 71 billion. The continuity of subsidies without any analysis of the outcome of subsidies poses a serious threat to the financial stability of the country. With an expected rise in inflation, there is a possibility of a slowdown in aggregate demand and a subsequent fall in expected sales tax revenues. The tax to GDP ratio proposed in FY 2023 is 9.2 percent, which is a manifestation of a dismal performance of our tax administration. The government should strive for bringing more people into the tax net and restrict tax evasion through an overhaul of the country’s taxation system.
The think tank noted that every year government includes the privatization of loss making enterprises but remains unable to carry them out. Resultantly, the government had to provide funds to bleeding enterprises to keep them afloat.