CRITICAL ANALYIS ON

BUDGET 2022-23
PREPARED AN PRESENTED BY:
 MARYAM AMEEN
 MURTAZA
 SANA GUL
 KANCHAL KUMARI
WHAT IS FEDERAL BUDGET?
 It is technically the document that includes the government’s expenditure and revenue proposals
throughout the fiscal year.

 Government revenue is defined as the total income gained by government at all levels through tax
policies including: income taxes, excise taxes, and regulatory taxes.

 Government expenditure is defined as the total spending by government at all levels including
discretionary and non-discretionary purchases.

 The budget is also known as the Annual Financial statement of the country.

 It is used to set the government’s spending priorities, such as social security, national defense, and
education, among many items, and to identify how it will pay for those priorities with tax revenues.

 The practice of presenting budgets to parliament was initiated by Sir Robert Walpole as Chancellor
of the Exchequer of United Kingdom.
DIFFERENT CONDITIONS OF FEDERAL
BUDGET
 Budget surplus: it exists when government revenues exceed government expenditures in a fiscal year. It
exists when government spends within its means.

 Budget deficit: it exists when government expenditures exceed government revenues in a fiscal year.
Government is spending beyond its means. This usually means the government has to borrow money to fund
its budget expenditures.

 Balanced budget: it exists when government revenues equals government spending. However it’s incredibly
difficult to achieve balanced budget cause there is a part of federal budget that is actually uncontrollable.
Every fiscal year, the federal government must repay interest and principal on the national debt. There is a
portion of government revenue that must be allocated to pay interest on the debt and pay down principal on
the debt itself. This means that government has less available revenue for discretionary spending which
moves the federal budget towards a deficit annually.
HOW STRUCTURAL AND CYCLICAL DEFICITS
AND SURPLUSES AFFECT FEDERAL BUDGET?
 Cyclical changes: At the lowest point in the business cycle, there is a high level of
unemployment. This means that tax revenues are low and expenditure (e.g., on social
security) high. Conversely, at the peak of the cycle, unemployment is low, increasing tax
revenue and decreasing social security spending. The additional borrowing required at
the low point of the cycle is the cyclical deficit. By definition, the cyclical deficit will
be entirely repaid by a cyclical surplus at the peak of the cycle.

 Structural changes: A structural budget deficit arises irrespective of the business cycle. It
will exist whether the economy is in the boom or recession phase of its business cycle.
In short, the government is spending beyond its means on a consistent basis, meaning
that it has to borrow regularly in order to finance its expenditure. . For instance: Long-
term budgetary pressures – e.g. rising spending commitments on pensions, health care.
An ageing population can make a structural deficit problem more likely.
IMPORTANCE OF PREPARING FEDERAL BUDGET
 Affects economy and individual: Federal spending, who gets taxed at what levels, and the
borrowing the government does to make up the difference between spending and taxes, all impact
the growth of the economy. This process creates a drag on the economy that can lead to lower
wages and living standards.

 Public goods and services: Federal spending, who gets taxed at what levels, and the borrowing the
government does to make up the difference between spending and taxes, all impact the growth of
the economy. This process creates a drag on the economy that can lead to lower wages and living
standards.

 Economic policies: government influence the economy by changing the level and types of taxes,
the extent and composition of spending, and the degree and form of borrowing.

 Affects production, distribution and income: The Budget impacts the economy, the interest rate
and the stock markets. This decrease in demand will translate into a decrease in production,
therefore affecting economic growth. Similarly, an increase in indirect taxes would also decrease
BUDGET MAKING PROCESS IN
PAKISTAN
 Budget call circular(starts as early as October)

 Budget Proposals (from November to February)

 Scrutiny by Ministry of Finance (in March and April)

 Preparation stage (May and June)

 Approval stage (takes 12 to 17 days)

 Implementation stage

 Audit stage
SALIENT FEATURES OF
BUDGET 2022-23
RESOURCES OF
REVENUE
Tax Revenue : Earned by collecting taxes from residents of the
country in different forms such as income tax,duties and sales
tax.

Non-Tax Revenue : These includes all the revenues a

government can earn other than taxes such as fines imposed
on violation of law or the profits of government organizations
etc.
BUDGETED REVENUES
FEDERAL BOARD OF REVENUE (FBR’S) COLLECTION : RS. 7470 BILLION

NON-TAX REVENUE : RS. 1935 BILLION

GROSS REVENUE COLLECTION : RS. 9405 BILLIION

PROVINCIAL SHARE : RS. 4373 BILLION

NET REVENUE : RS. 5032 BILLION

Source : [finance.gov.pk]
EXPENDITURES OF GOVERNMENT
TWO TYPES OF EXPENDITURES:

 CURRENT EXPENDITURE : EXPENSES TO RUN STATE

MACHINERY SUCH AS SALARIES OF GOVERNMENT
EMPLOYEES AND UTLITIES OF GOVERNMENT INSTITUTIONS.

 NON-CURRENT EXPENDITURES : ALSO KNOWN AS

DEVELOPMENT EXPENDITURES WHICH A GOVERNMENT
SPENDS ON THE INFRASTRUCTURE AND LONG TERM
DEVELOPMENT OF ECONOMY SUCH AS ROADS,DAMS AND
FUTURE PLANS.
BUDGETED CURRENT
EXPENDITURES
 INTEREST PAYMENTS : RS. 3950 BILLION
 PENSION: RS. 609 BILLION
 DEFENCE AFFAIRS : RS. 1563 BILLION
 GRANTS AND TRANSFERS TO PROVINCES : RS. 1174 BILLION
 SUBSIDIES : RS. 664 BILLION
 RUNNING OF CIVIL GOVERNMENT : RS. 553 BILLION
 PROVISION FOR EMERGENCY AND OTHERS : RS. 195 BILLION

TOTAL CURRENT EXPENDITURE : RS. 8708 BILLION

BUDGETED DEVELOPMENT
EXPENDITURES
PUBLIC SECTOR DEVELOPMENT PROGRAMME (PSDP):
RS. 727 BILLION

NET LENDING : RS. 144 BILLION

TOTAL DEVELOPMENT EXPENDITURES : RS. 871

Source : [finance.gov.pk]
BUDGETED FISCAL DEFIFCIT
What is Fiscal Deficit ?
Fiscal deficit (also known as budget deficit) is the difference between
government’s revenues and expenditres.

Fiscal Deficit = Net Revenue – Total Expenditure

= 5032 billion – 9579 billion
= RS. 4547 billion
Source : [finance.gov.pk]
DEFICIT FINANCING PLANS
Deficit financing is a plan made to arrange money for the fiscal
deficit to meet the budgeted expenditures.
Pakistan’s budget plans this in three ways :
 Net External Financing : These are financing through foreign
mediums such as multilateral or bilateral borrowing such as
borrowing from IMF/World bank.
 Net domestic financing : These are borrowning from the
residents of the country by giving them bonds and securities of
government.
DEFICIT FINANCING
PLANS (CONT..)
TOTAL BUDGET DEFICIT = RS. 4547 BILLION
FINANCING PLANS :
EXTERNAL :
 MULTILATERAL AND BILATERAL BORROWING : RS. 548 BILLION
 COMMERCIAL AND EURO BONDS : RS. 1064 BILLION
DOMESTIC :
 BANK (GOVT. SECURITIES) : RS. 2839 BILLION
 PRIVATIZATION PROCEEDS : RS. 96 BILLION
Source : [finance.gov.pk]
IMPORTANT TARGETTED
ECONMIC INDICATORS
 PROJECTED GDP GROWTH : 5.1 %
 Targetted inflation : 11.75%
 Tax to GDP ratio: 9.2%
 Budget Deficit: 4.95% of GDP
Source : [dawn.com/news/1694213]
COMPARISION OF BUDGET 21-
22 AND BUDGET 22-23
 COMPARATIVE POSITION OF
BUDGET 2021-22 AND 2022-23
SOURCE: [FINANCE.GOV.PK]

ITEM 2021-2022 2022-2023 PENSION 525 530

(BILLION) (BILLION)
FUNDS GIVEN TO THE 3411 4099
NET INCOME 7909 9004
PROVINCES
FEDERAL 4497 4904
PETROLEUM LEVY 610 750
REVENUE
EXPENSES 8487 9502 LAW & ORDER 191 209
BUDGET 3990 4598 EDUCATION 87 90
DEFICIT
DOMESTIC 2770 3439 SUBSIDIES 1515 699
DEBT PAYMENT
RAMZAN PACKAGE 8 5
FOREIGN DEBT 373 511
REPAYMENT NAYA PAKISTAN 30 50
DEFENCE 1480 1523 HOUSING SCHEME
BUDGET
 Budget 2022-23 was presented by federal minister for finance and revenue Miftah Ismail

 Total expenditure in 2021-22 budget was 10,623,689 and in envisaged budget of 2022-23 it is 12,421,170
million

 Development expenditure in revised budget 2021-22 is 433,664,4 million and in 2022-23 envisaged budget
it is 1,023,867 million

 Current expenditure in 2021-22 envisaged budget were 9,124,459 million but in revised budget it was
10,190,025(10.2)million

 Current expenditure in envisaged budget of 2022-23 are 11.4 billion.

 Total revenue receipt in 2021-22 were 6 billion and in envisaged budget of 2022-23 are 7 billion.
Source : [finance.gov.pk]
SUMMARY OF COMPARISION
Miftah Ismail, Federal Minister for Finance and Revenue, has presented the first federal budget of the Pakistan Muslim
League-N-led coalition government at the centre for the fiscal year 2022-2023. A general overview of this budget in
comparison to the previous government's revised budget estimates for 2021-2022 is as follows: The total expenditures of
the budget 2021-2022 were Rs 10,262,309 million, that were increased to Rs 10,623,689 million in the revised estimates,
based on the budgetary document 2022-2023. Total expenditures for 2022-2023 were increased to Rs 12,421,170 million,
an Rs 1,797,481 million increase over the previous year's revised estimates.
Development expenditures will be Rs 1,023,867 million in 2022-2023, which is Rs 590,203 million more than the Rs
433,664 million spent in the revised budget for 2022-2023. It is worth noting that the previous PTI-led government had
budgeted Rs 1,137,850 million for development but spent only Rs 433,664 million in 2021-2022, which was Rs 704,186
million less than what was initially sanctioned for development purposes. Current expenditures in the 2022-2023 budget are
expected to be Rs 11,397,303 million, which is Rs 1,207,278 million higher than the previous year's revised estimates of Rs
10,190,025 million, which is Rs 1,065,566 million higher than the initial budget of Rs 9,124,459 million in 2021-2022.
As stated above the current expenditure in 2021-22 budget was 10.2 billion and in 2022-23 envisaged budget it is 11.4
billion. Out of these 11.4 billion current expenditure 4 billion are for debt servicing, 0.53 billion for pensions, 0.77 billion for
administration and general services, 1.53 billion for defence, 0.09 billion for education, 0.37 billion for social protection and
0.2 billion for health. In comparison of 2021-22 and 2022-23 budgets there is an increase of 12.5% in general public
services, 3.38% increase in defence and 0.08% increase in education.

Source : [finance.gov.pk]
Total revenue collected in revised budget of 2021-22 is 6 billion and in envisaged budget of 2022-
23 is 7 billion hence there an increase of 1 billion. Out of 7 billion revenue 2.57 billion will be from
direct taxes (mostly income tax) and 4.43 billion from indirect taxes (include sales tax, custom
duties and federal exercise).
According to this amount collected from indirected taxes will be higher than that of direct taxes.
This coalition government will transfer the burden on general public (mostly poor people). As
indirect taxes are regressive in nature hence it will negatively affect consumer’s purchasing power
which will reduce aggregate demand. As a result the demand for firm’s production will reduce and
producers will be reluctant to produce more therefore overall investments will decrease in the
country.
A comparison with last year’s budget shows that the present government has increased
expenditures on general public servicing (debt servicing) from Rs 5.6 billion to Rs 6.3 billion. On
defense from Rs 1.48 bullion to Rs 1.53 billion; on public order and safety from Rs 191.5 million to
208.8 million; and housing from Rs 5.5 million to 7.85 million. Kept almost constant the spending
on education at Rs 90.6 million; social protection at Rs 370 million, but reduced expenditures on
health drastically from Rs 155.0 million to Rs 1.6 million and on economic affairs from Rs 0.45
billion to Rs 19.6 million.
CRITICAL ANALYSIS OF
BUDGET 2022-23
OBJECTIVES OF SHORT TERM PLANNING
 Collect revenue to meet current expenditures.
 Collect revenue to meet development expenditures.
 Economic Growth.
 Price Stability.
 Maintain balance of payment deficit.
IDEAL,PROBLEM AND CRISIS ECONOMIES
Ideal Economy: The economy which achieves all five objectives. This is
not realistic
Problem Economy: The economy which achieves some of the five
objectives.
Crisis Economy: Which achives non of the objectives.
Pakistan’s econmy is an example of crisis economy.
SHORT TERM ISSUES PAKISTAN’S
ECONOMY IS FACING
Huge amount of current expenditure (Expected
budget deficit : 4.9% of GDP)
Increasing import prices
Increase in Agriculture prices
Balance of payment deficit
STEPS TAKEN BY THE GOVERNMENT
 Deficit Financing
 Cutting out of development expenditures
 Foreign borrowing
 Shifting the pressure of increasing import
prices onto the rich people
 Ban on imports
 Export Promotion
IMPACT OF BUDGET ON
AGRICULTURE,INDUSTRY
AND SOCIAL SECTOR
SUBSIDIES
SOURCE: [FINANCE.GOV.PK]
SOCIAL AFFAIRS
SOURCE: [FINANCE.GOV.PK]
ECONOMIC AFFAIRS
SOURCE: [FINANCE.GOV.PK]
AGRICULTURE SECTOR
 Kept budget for Rs. 7000 million for PASSCO which takes the extra
stock of farmers at procurement price to protect them from losses.
 Withdrawl of GST on the supply of tractors, agriculture implements
and seeds including wheat, rice, maize, sunflower, canvola and rice.
 Other than these there were no measure steps to promote agriculture.
Source :
[dawn.com/news/1694213]
INDUSTRIAL AND SERVICE SECTOR
 Reliefs for textile,pharmatuetical and film industries.
 Exempt custom duties of 30 pharmtuetical
companies.
 For small retailers, fixed income and sales tax
schemes have been introduced ranging between
3000 to 10000 rupees after full settlement
Source : [dawn.com/news/1694213]
BANKING AND PRIVATE SECTOR
 The tax rate on bank’s profit is increased as they can easily
make more profit by investing in government bonds and
securities
 Taxes have been increased on real estate sector to discourage
the increase on people interest in this non-productive sector.
Source : [dawn.com/news/1694213]
CONCLUSION
 Government have tried it’s best to cut the budget deficit from 7.9% of
GDP at the moment to 4.9% of GDP by cutting out the important
expenditures such as subisidies and health.
 Pakistan has opt to go for a balanced growth instead of going for
industrial/agriculture led growth.
 Pakistan’s economy is in crisis and they need to be consistent with the
policies they have been trying to impose or else it won’t be able to come
out of this deficit trap.
 Pakistan’s policies are heavily influenced by IMF’s programmes as it’s
measure goals seems to be revive the IMF’s programmes.