Budget 2024-25: NEC approves Rs3.5 trillion development budget

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Rs932 billion or 27% of the total national outlay will be funded by taking foreign loans

ISLAMABAD:
The National Economic Council on Monday approved one-fourth higher national development budget outlay of Rs3.5 trillion amid support by the four provinces, including Khyber-Pakhtunkhwa, for the International Monetary Fund (IMF) programme.

In a baby step towards federal fiscalism and consensus decisions on major national economic matters, Prime Minister Shehbaz Sharif also set up a committee under his trustworthy Economic Affairs Minister Ahad Cheema to prepare a mechanism under the NEC to involve provinces in major decisions.

However, the NEC revived the budget for the parliamentarians’ schemes and allocated Rs75 billion for the next fiscal year in addition to setting aside more financial resources for provincial nature projects in the federal budget 2024-25.

These decisions were in contradiction to the decisions made by the NEC in January this year when the parliamentarians schemes had been discontinued and the provincial nature new projects were banned from the federal Public Sector Development Programme (PSDP).

Headed by Prime Minister Shehbaz Sharif, the NEC – the constitutional body mandated to approve the nation’s financial policies, also endorsed next fiscal year’s economic growth rate target of 3.6% and the inflation target at 12%. The NEC approved a five-year macroeconomic plan including a target to increase the country’s exports of goods and services to $63 billion by 2029.

Some members objected to projecting negative growth in the important crops in next year including in wheat and rice. But subsequently the NEC approved the annual plan after Deputy Prime Minister Ishaq Dar urged the forum to approve these numbers subject to the condition that these would be again reviewed by the NEC.

The NEC approved a Rs3.5 trillion budget for the federal and four provincial governments – a sum that is Rs663 billion or 24% higher than the original allocations for the outgoing fiscal year. Out of the Rs3.5 trillion, an amount of Rs932 billion or 27% of the total national outlay will be funded by taking foreign loans.

The NEC approved Rs1.4 trillion worth federal PSDP, which is higher by Rs450 billion or 47% over this fiscal year’s budget. The federal government has estimated receiving Rs316 billion worth project loans in the next fiscal year to finance its bloated development programme. Earlier, the Finance Ministry had indicated Rs1.5 trillion PSDP, which it cut by Rs100 billion.

Four provincial chief ministers attended the NEC meeting and assured Prime Minister Shehbaz Sharif of their support for the IMF bailout package, including providing the cash surpluses equal to 1% of the GDP, a federal minister told The Express Tribune.

The provincial governments also assured their support for the National Fiscal Pact, which the IMF is asking Pakistan to implement as part of the conditions for the next programme.

As per the IMF condition, the National Fiscal Pact has to be concluded by end September and the deadline can only be achieved if the Finance Ministry sits with the provinces, said Muzammil Aslam, the Advisor to CM KP on Finance.

Under the National Finance Pact, the province will share spending on the Benazir Income Support Programme, Higher Education Commission and provincial infrastructure projects.

The provincial governments would also have to throw a Rs1.219 trillion cash surplus for the next budget under the IMF condition. Punjab’s share is Rs630 billion, Sindh Rs300 billion, Khyber-Pakhtunkhwa Rs178 billion and Balochistan’s share is Rs111 billion.

Finance Minister Muhammad Aurangzeb will formally announce the budget on Wednesday.

The NEC approved Rs2.1 trillion provincial annual development plans – higher by Rs216 billion or 12% over this year’s original budgetary allocations. The four provincial governments would take Rs616 billion worth foreign loans to finance their schemes.

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