Govt to allocate Rs450bn for subsidies in next fiscal budget

Subsidies for households, agricultural sector to be rationalised

ISLAMABAD: The government is likely to allocate Rs450 billion for subsidies in the next fiscal budget (FY22).

Sources said that the Ministry of Finance’s (MoF) budget strategy paper, which will be presented to the Cabinet on today, proposes Rs450 billion for subsidies including, circular debt and payment of  independent power producers (IPPs).

It may be noted here that the government has been working on a ‘target subsidies plan’ for the last year on the International Monetary Fund’s (IMF) recommendation whereas the economic team has estimated to save billions of rupee from streamlining of subsidies.

The government has also planned to finalise cross-subsidy reforms in the energy sector by June this year.

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Under this plan, the ministry would shift its efforts to rationalise subsidies for households and the agricultural sector while protecting the most vulnerable.  

A report by the IMF has pointed out that the stock of gas arrears grew by 0.1 per cent of gross domestic product (GDP) to 0.5pc of GDP in the FY20, steadily fueled by Unaccounted for Gas (UFG), often delayed sales price adjustments, uncovered subsidies, especially for export and zero-rated industry, and collection shortfalls. 

It is pertinent to note that IMF has projected Rs459 billion subsidies for the ongoing year wand Rs530 billion for FY22.

The MoF has also proposed Rs720 billion for the Public Sector Development Programme (PSDP) in FY22. 

In its fifth review of Pakistan’s economy, the Washington based international financial institution had projected Rs503 billion in federal PSDP for FY21 and Rs627 billion for FY22.

Further, the MoF has also proposed an ambitious target for the Federal Board of Revenue (FBR) at Rs6 trillion, which is a Rs1,272 billion more than the revised target of the current fiscal year. “The ministry has proposed Rs1,900 in non-tax revenue,” they added.

The Cabinet meeting would be held under the chair of Prime Minister (PM) Imran Khan wherein twenty-seven matters including the budget strategy paper would be presented for approval.

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Shahzad Paracha
The writer is a member of Pakistan Today's Islamabad bureau. He can be reached at [email protected]

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