Pakistan’s federal budget for the fiscal year 2023-24 was unveiled on June 9, heralding the commencement of another financial year with an anticipated deficit. Pakistan has grappled with persistent deficits throughout its budgetary history, with the previous two decades proving particularly arduous, as a balanced budget has eluded the nation.
Nevertheless, amidst this backdrop, Pakistan has achieved significant milestones over the years that have bolstered its revenue base. Notably, the country has undertaken substantial budgetary reforms geared towards fortifying fiscal management, bolstering transparency, and fostering sustainable economic growth. Key among these reforms is the focus on fiscal responsibility and debt management, which aims to curb fiscal deficits, reduce reliance on external borrowings, and exercise control over public debt. The implementation of fiscal responsibility legislation and the establishment of debt management offices have been instrumental in formulating prudent fiscal policies and ensuring debt sustainability. To enhance government revenue, Pakistan has introduced tax reforms designed to broaden the tax base and promote tax compliance. Crucial reforms in this regard include the introduction of a computerized tax system, automation of tax collection processes, and the documentation of the economy. These measures have played a pivotal role in augmenting tax revenues.
Budgetary reforms have also placed significant emphasis on social safety nets and poverty alleviation programs, such as the Benazir Income Support Program (BISP), which aims to reduce poverty and provide a safety net for vulnerable segments of society. Recognizing the pivotal role of infrastructure development in driving economic growth, increased allocations for infrastructure projects in sectors such as energy, transportation, and communication have been proposed. These endeavours seek to improve connectivity, attract investment, and generate employment opportunities. Additionally, the government has encouraged public-private partnerships and foreign direct investment to support infrastructure development.
Public-private partnerships should be fostered to leverage expertise, technology, and financial resources for successful project implementation.
For the Fiscal Year (FY) 2023-24, the total budget outlay amounts to Rs 14,460 billion, with an expected deficit of Rs 6.54 per cent of GDP. The budget anticipates tax revenue of Rs 9,200 billion and non-tax revenue of Rs 2,963 billion. A significant portion of the budget will be allocated to defence (Rs 1804 billion), flood relief projects (Rs 578 billion), and mega projects (Rs 161 billion). Moreover, the government has allocated Rs 2709 billion for development expenditures, including Rs 1150 billion for federal development and Rs 1559 billion for provisional development. The Public Sector Development Program (PSDP) has been allocated Rs 950 billion, with Rs 200 billion designated for public-private partnerships and Rs 89 billion allocated to the energy sector.
Regarding the energy sector, the current budget proposes an allocation of Rs 205.38 billion to enhance the electricity system in the country. This initiative aims to diversify the energy mix, thereby adding 1782 MW of electricity to the national grid. The plan includes the generation of 682 MW of solar power, 100 MW of wind power, 254 MW of hydroelectricity, and an additional 32 MW from bagasse, a byproduct of sugarcane processing. Despite concerns regarding the environmental implications of coal-based power plans, the budget for FY 2023-24 proposes the inclusion of 660 MW of power generated from imported coal.
The government has earmarked specific allocations for various energy projects, such as Rs 12 billion for the Jamshoro coal project, Rs 16 billion to strengthen the Pakistan-Tajikistan 500Kv power project, Rs 5 billion to update transmission lines of NTDC and Rs 59 billion for the Dasu Hydro project. Recognizing the importance of water resources, Rs 20 billion have been allocated for the Dia Mir Bhasha Dam, and Rs 12 billion for the Mahmand Dam. Additionally, solar panels and batteries are exempt from customs duty.
While the current budget has allocated a significant budget to the energy sector, Pakistan’s limited focus on renewable energy raises concerns in the face of global environmental challenges and Pakistan’s vulnerability to climate change. With ample solar and wind resources, Pakistan has the opportunity to present a positive image in terms of environmental conservation. Achieving this necessitates the adoption of a comprehensive approach that addresses various aspects of the investment landscape, with a view to encouraging renewable energy investment. Firstly, clear, and stable policies and regulations that support the development of solar and wind energy projects should be established. Measures like the exemption of solar panels and batteries from custom duty, as seen in the proposed budget for 2023-24, are steps in the right direction. Moreover, renewable energy targets should be set, and favourable permitting and licensing processes should be put in place. Implementing net metering and feed-in tariff mechanisms that enable individuals and businesses to sell excess electricity generated from solar and wind installations back to the grid at fair rates is crucial. Expanding the customer base for net metering can be achieved by facilitating the installation of solar panels through instalment-based payments and increasing customer awareness.
Financial incentives, including tax credits, grants, subsidies, and low-interest loans, should be allocated in the budget to reduce upfront costs and ensure a favourable return on investment for small-scale solar and wind energy projects. While many financial incentives have been proposed in the budget for 2023-24, they mostly target businesses. However, encouraging households to play an active role by installing solar systems and selling excess energy to the grid can be achieved through financial support programs, including low-interest loans. Establishing dedicated renewable energy funds that collaborate with financial institutions, international development banks, and private investors would further bolster household participation in solar and wind projects.
To address the limited awareness surrounding solar and wind energy systems, it is essential to initiate customer awareness programs through television and social media. Additionally, organizing workshops, seminars, and conferences to showcase successful projects and share best practices would enable informed decision-making and promote self-sufficiency. Collaborating with academic institutions to develop courses and certifications in solar and wind technologies would help build a skilled workforce capable of developing, installing, and maintaining these systems. The budget allocation of Rs 70 billion for the higher education commission in 2023-24 should be effectively utilized to promote research and development and foster collaboration among academia, industry, and researchers to introduce innovative technologies utilizing indigenous resources.
Finally, public-private partnerships should be fostered to facilitate investment in solar and wind energy projects. The budget for 2023-24 has already allocated significant investment expenditure for public-private partnerships, particularly in the energy sector. By leveraging expertise, technology, and financial resources through joint ventures and partnerships, Pakistan can harness the benefits of renewable energy and propel its energy transition forward. In conclusion, Pakistan’s fiscal landscape has been marked by deficits, but the country has made significant strides in implementing budgetary reforms aimed at improving fiscal management, enhancing transparency, and fostering sustainable economic growth. While the current budget allocation demonstrates a commitment to the energy sector, there is a need to prioritize renewable energy investment to address environmental concerns and showcase Pakistan’s dedication to environmental conservation.
To achieve this, a comprehensive approach is required. Clear and stable policies, along with favourable regulations, must be developed to support the growth of solar and wind energy projects. Financial incentives, such as tax credits and low-interest loans, should be provided to reduce upfront costs and ensure a favourable return on investment. Customer awareness programs, educational initiatives, and collaborations with academic institutions are essential to disseminate information, build a skilled workforce, and encourage public engagement in renewable energy projects. Public-private partnerships should be fostered to leverage expertise, technology, and financial resources for successful project implementation. By embracing these measures, Pakistan can harness the benefits of its indigenous renewable energy sources, attract investment, and present a positive image as an environmentally conscious nation. With a steadfast commitment to renewable energy and the implementation of comprehensive strategies, Pakistan can not only bolster its energy sector but also contribute to global efforts in combating climate change. The path to renewable energy investment is within reach, and Pakistan has the opportunity to embrace a sustainable and prosperous future.
The writer serves as a Lecturer in the Economics Department of Government College Women’s University, Sialkot, and can be reached at iqra.mushtaq@gcwus.edu.pk
