Businesses, policymakers, and the public alike have shown considerable interest and anticipation in the recently announced Budget 2023-24. As announced by finance minister Ishaq Dar, with a total outlay of PKR 14.5 Trillion, budget 2023-24 aims at overcoming various economic and developmental challenges, addressing social challenges, and fostering a progressive economy.
Budget 2023-24 at a Glance:
Development Initiatives Announced in FY 2023-24:
A total budget of PKR 1,150 billion has been allocated for the ADP (Annual Development Program) while PKR 90 billion have been allotted for the PSD (Public Sector Development Program).
Key takeaways from the development initiatives announced in FY 2023-24 are as follows.
- An allocation of PKR 170 billion has been made for the Prime Minister’s Special Initiatives and the development schemes of lawmakers.
- The Dasu Hydropower Project has been allocated PKR 58.59 billion in funding.
- For the Karachi Greater Water Supply Scheme, an amount of PKR 17 billion has been earmarked.
- PKR 17.63 billion will be utilized to procure railway freight wagons and passenger bogies.
- The Karachi Coastal Power Project has been granted a budget of PKR 14.86 billion.
- Merged districts of Khyber Pakhtunkhwa will receive PKR 26 billion in funding.
- A 10-year development plan for the former tribal areas will be supported with PKR 31 billion.
- The Mohmand Dam Hydropower Project has been allotted PKR 10.5 billion.
- An amount of PKR 12 billion has been reserved for the Jamshoro Coal Power Project.
- The Pakistan-Tajikistan transmission line will receive an allocation of PKR 16 billion.
- PKR 6 billion has been set aside for the rehabilitation of areas affected by floods.
- The Hyderabad-Sukkur Motorway project has been granted a budget of PKR 5.70 billion.
- A budget of PKR 5 billion has been allocated for the construction of the New Gwadar International Airport.
- The Lahore-Sialkot Motorway, from Narang Mandi to Narowal, will be supported with an allocation of PKR 5 billion.
Top of Form
Growth Targets Set for Various Sectors in FY 2023-24:
In the fiscal year 2023-24 budget, various sectors have been assigned growth objectives. The aim for the GDP growth rate stands at 3.5%, mirroring the anticipated expansion of 3.5% for both the agriculture sector and major crops. A growth target of 3.4% has been set for industrial production, with manufacturing aiming for a more robust growth rate of 4.3%. Furthermore, a growth projection of 3.6% has been outlined for the services sector.
Additional growth targets encompass diverse sectors as follows:
- 3.6% for the livestock sector
- 7.2% for cotton canning
- 3% for forestry and fisheries
- 3.2% for large-scale manufacturing
- 2.2% for electricity generation and gas distribution
- 2.8% for the wholesale and retail sector
- 5% for the transport and communication sector
- In the domain of education, a growth rate of 3% is envisioned
- The private sector’s production is anticipated to elevate by 5%
- The real estate sector is aimed at a growth of 3.6%
- The financial and insurance sector is aimed at achieving a 3.7% growth
The budget is set at Rs 14.6 trillion for the fiscal year, showing the government’s plans for different areas. However, the government faces a challenge in finding a balance between making popular budget choices and meeting the requirements of the International Monetary Fund (IMF).
Meeting the timeline of the IMF program seems unlikely since it has been delayed since November. The budget for FY2023-24 aims to boost business activities in Pakistan during tough times. With elections expected this year, the government will likely present a budget to gain votes.
Experts say the focus will be on increasing revenue, considering various tax measures. It is also worth noting that receiving the next IMF fund depends on the government’s commitment to meeting financial goals.
Key Takeaways From Budget 2023-24:
- Economic Growth Target: The goal is a 3.5% growth in the fiscal year 2023-24.
- Inflation Forecast: Expect an average of 21% inflation.
- Tax-to-GDP Ratio: Aiming for a ratio of 8.7%.
- Current Account Deficit Projection: Predicting a deficit of USD 6 billion by FY 2023-24.
- Defence Spending Allocation: The government set aside PKR 1.8 trillion for defense purposes.
- Subsidies Earmarked: PKR 1.1 trillion for subsidies.
- Pensions Allocation: PKR 761 billion for pensions.
- Public Sector Development: Government to spend PKR 950 billion.
- Health Sector Funding: PKR 22.7 billion allotted.
- Agricultural Credit Increase: Credit limit raised from PKR 1,800 billion to PKR 2,250 billion.
- Solarization of Agriculture Tube Wells: Budgeting PKR 30 billion for 50,000 tube wells.
- Import Duty Exemption: All duties and taxes waived on seeds, harvesters, dryers, and rice planters.
- Youth Business and Agriculture Loans: PKR 10 billion earmarked.
- Subsidies on Imported Urea: PKR 6 billion in subsidies announced.
- Targeted Subsidies: Announcing subsidies on wheat flour, ghee, pulses, and rice.
- Government Servant Salary Increase: 35% increase for grades 1-16, 30% for grades 17-22.
- IT Sector Benefits: Tax-free software and hardware imports, linked to exports (up to USD 50,000).
- Freelancer Tax Exemption: Freelancers exporting USD 2,000 per month are exempt from sales tax returns.
- Social Support Increase: Benazir’s Income Support allocation was raised from PKR 400 billion to PKR 450 billion.
- Pension Revision: Higher pensions and minimum pension set at PKR 12,000.
- Student Laptops Provision: PKR 10 billion for 100,000 laptops.
- Customs Duty Exemption: Raw material for batteries, solar panels, and inverters are exempted from customs duty.
Budget 2023-24 and Real Estate:
Budget 2023-24 has brought multiple good news for the real estate sector. From the tax exemption for real estate investors to relief for the construction sectors, budget 2023-24 seems to be hugely in favor of the real estate industry.
Key takeaways of the impositions of budget 2023-24 for the real estate industry are as follows;
- No new taxes on real estate businesses
- FBR tax exemption for overseas Pakistanis
- Proposal of the launch of “Diamond Cards” for large-scale investors belonging to the real estate industry
- As part of the extension, the construction amnesty scheme, which gives incentives to developers and contractors, will last until 2024. Looks like the construction industry will be busy for the next two years!
- During the next three years, construction companies and developers will receive a 10% tax relief on their income. his is similar to adding fuel to a fire, providing the oxygen necessary to keep it burning longer and more brightly. With the additional relief, the construction industry is sure to be in full force for the next few years.
- Tax relief for developers and building material suppliers
- Establishment of tax-free zones in multiple cities across Pakistan
What to Conclude?
Budget 2023-24 as proposed comes with its own gains and setbacks. While the budget seems quite promising in terms of facilitating industrial growth, promoting the agricultural sector, and boosting the economy, its prominent setbacks include the lack of any strategy or proposal to help the textile industry overcome its challenges, implications for non-filers, and impact on Pakistan Stock Exchange Policy.
While it cannot be said, whether the budget will be a success or failure, our future greatly depends on its implication as per the IMF demands. However, one thing can be said for sure and that is the future of real estate and construction industry seems bright according to the proposed budget and it is right time for you to invest.