On Friday, the Federal Government announced the Budget for the next fiscal year FY22, with a total budgeted outlay of PKR 8,487bn (up 19% compared to the budgeted outlay of FY21).
The government has allocated PKR 7,523bn for current expenditure (predominantly mark-up payments which are expected to be 10% YoY higher from FY21 target), and is up 15% YoY compared to FY21 revised estimates. Defence Budget is targeted at PKR 1,370bn (+6% YoY). Subsidies to different sectors would be PKR 682bn, 57% YoY higher than FY21’s revised estimate of PKR 430bn. Total National PSDP is budgeted at PKR 2.1trn of which the Federal PSDP is budgeted at PKR 900bn (38% YoY higher than the FY21 budgeted allocation of PKR 650bn).
Total Federal Revenue receipts are expected at PKR 4,497bn (less provincial share) – a jump of 22% YoY from FY21 revised estimates, contributed primarily by a 24% YoY jump in FBR taxes which are budgeted at PKR 5,829bn. Non-tax Revenue is envisaged at PKR 2,080bn which is 22% higher YoY.
Government has set GDP growth target at 4.8% for FY22. Agriculture is expected to grow 2.8% (target growth of livestock set at 3.7%). Industrial sector is expected to increase by 6.5% while Services sector is forecast to grow at 4.7%. LSM is estimated to display a growth of 6% compared to a provisional growth of 9.29% during FY21.
The fiscal deficit is budgeted at PKR 3,420bn, which forms 6.3% of GDP as compared to 7.1% for FY21 revised estimates. The government aims to finance the budget majorly through net external loans of PKR 1,246bn (net of repayments) and domestic financing of PKR 2,492bn which is slightly lower than FY21 budgeted domestic financing (-1% YoY). Bulk of the domestic financing is expected from Bank financing which is budgeted at PKR 2,417bn (+ 5% higher YoY) while remaining domestic financing is expected from non-bank financing of PKR 74bn (-67% YoY). Mark-up payments are only budgeted to be 7% higher despite a decline expected in the domestic borrowing for FY22.
PKR 100bn has been allocated specially to cater to any emergency requirement as a result of the COVID-19 pandemic. Moreover, social spending under various programmes such as the Ehsaas Programme, Sehat Card, and Kamyab Jawan have been protected. A provision of PKR 25bn has been kept aside for Contingencies and Fund while PKR 160bn will be provided for Pay & pension.
The government projects a current account deficit of USD 2.3bn for FY22 which would be less than 1% of the GDP.