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Operating under large financial constraints and a recovering economy, the Pakistani Government has embarked on an ambitious journey to collect unprecedented revenue, enlarge social security, and ramp up development spending under the new budget, in the fiscal year (FY) 2024-2025.

The budget also envisions a paradigm shift in the trajectory of the national economy by shifting from a consumption-based and state-controlled economy to an investment and savings-based one. The government aims to reduce its economic footprint and push the economy toward a market-driven model based on neoliberalism.

Short of some structural changes, the budget is undoubtedly a step in the right direction. On June 12, the newly elected coalition government presented the cumulative budget outlay of Rs.18.9 trillion in the national assembly for FY 2024-2025.

Broad contours of this ambitious and aggressive budget encapsulate a growth rate of 3.6 % of GDP, an aggressive tax revenue of Rs.13 trillion, and an inflation target of 12% in the following year.

Amidst talks with the IMF for a long-term “Extended Fund Facility” of $6 billion, the government has trodden a careful path by placating the valid demands of the institution, particularly through widening and increasing tax revenue.

In line with IMF’s demands and working under tremendous financial constraints, the budget looks inward at domestic revenue sources to break the cycle of dependency on foreign loans in the long term.

The breakdown of the budget in different heads and allocations for the next fiscal year is as follows:

Unfortunately, Pakistan is struggling to escape a classic debt trap. Under a spiraling debt cycle, interest payments comprised a major chunk of the budget.

Due to this stark reality, the federal government has allocated Rs.9,775 billion for debt servicing. Pakistan’s debt obligations cover domestic and foreign borrowing including external, circular, and government-to-government debts.

An undeclared arms race with India—presses the need to sustain a large army and a modern military. Many experts argue that “the military spending in Pakistan has been at the cost of development expenditure.” This regional calculus puts Pakistan in a precarious position in the classic guns vs butter curve.

Defense analysts also point to the asymmetry with India’s ambitious plans for military upgradation as a justifiable rationale for huge defense spending. For instance, India’s defence budget was more than five........

© Paradigm Shift