Cash-strapped Pakistan on Friday hiked defence spending by 15.5 per cent and allocated over Rs 1.8 trillion, as the government unveiled a Rs 14.4 trillion budget for 2023-24 as it battled to fend off a looming default due to shrinking foreign reserves.

Finance Minister Ishaq Dar, who presented the budget in the National Assembly, the lower house of parliament, said the government will target a growth rate of 3.5 per cent in the coming fiscal year.

“This budget should not be seen as an ‘election budget’ – it should be seen as a ‘responsible budget’,” Dar said as the political parties were getting ready for the next general elections scheduled for later this year, amidst political turmoil following the ouster Imran Khan as the prime minister in April last year.

Dar presented the budget in the National Assembly, the lower house of parliament, which is being deemed as the last budget of the government before the general elections later this year.

He said that a sum of Rs 1,804 billion has been proposed for defence, which is higher than Rs 1.523 billion allocated last year. The defence expenditure is 15.5 per cent higher than last year, making up about 1.7 per cent of the Gross Domestic Product (GDP).

The defence sector expenses are the second biggest component of the annual expenditure after the debt payments, which for the next year would be Rs 7,303 billion and is the biggest single expense of the country.

The minister declared a 3.5 per cent GDP growth target for the next year, which is a moderate target.

“This budget should be treated as a development-oriented budget instead of an election budget,” he said.

He said that the inflation target for the next fiscal year would be 21 per cent while the budget deficit would be 6.54 per cent of the GDP. He said that the export target would be Rs 30 billion and the target of remittances would be Rs 33 billion.

The minister said that the tax collection target would be Rs 9,200 billion, out of which Rs 5,276 billion would be provided to the provinces under an already agreed formula.

He said the non-tax revenue target of the government would be Rs 2,963 billion and with this, the net income of the federal government would be Rs 6,887 billion.

He said the net expenditure would be Rs 14,460 billion and the deficit of Rs 7,573 billion would be bridged through external financing.

He said the Rs 714 billion would be spent on civil administration and another Rs 761 billion for a pension of retired civil and defence employees. The government also decided to set up a pension fund to meet the increasing pension expenses.

The government also decided to provide a historic Rs 1,150 billion Public Sector Development Program (PSDP) and the provincial volume of the development budget will be Rs 1,569 billion, taking the net volume of the development spending to over Rs 2,700 billion.

He said the government decided to allocate Rs 2,200 billion for agri loans and Rs 30 billion for the solarisation of water pumps. He also announced other measures to increase the per-acre yield of various crops.

The minister also unveiled several steps to increase IT exports and enable freelancers to boost the IT sector. He also declared that the IT sector will be treated as a Small and Medium size industry and will get access to better tax regimes.

He also offered incentives for overseas Pakistanis to send more money to the country as the government set a USD 33 billion target for foreign remittances.

The government also announced major relief for government employees by increasing the 30-35 per cent increase in salaries.

Earlier, he lashed out at the previous government of Khan for “laying economic landmines” for the next government by destroying the economy of the country.

“The former Pakistan Tehreek-e-Insaf government is responsible for the current difficulties faced by the common people,” he said. The new budget comes as the chances for revival of a stalled International Monetary Fund (IMF) are fading fast, as the USD 6.5 billion assistance package agreed in 2019 is set to end on June 30. The fund has insisted that the government should meet tough conditions before releasing USD 1.1 billion.

There is growing consensus among the experts that without a revival of the IMF programme or a new bailout package in the next fiscal year, Pakistan will find it almost impossible to ward off default.

Prime Minister Shehbaz Sharif is still hopeful that the donor will release the expected tranche of the existing loan and enable the country to get access to different multilateral and bilateral loans.

The economic situation has never been so grim in a country which since independence has thrice seen military coups and the ouster of elected governments.

Cash-strapped Pakistan’s economy has been in a free fall mode for the last many years, bringing untold pressure on the poor masses in the form of unchecked inflation, making it almost impossible for a vast number of people to make ends meet. Their woes increased manyfold after last year’s catastrophic floods that killed more than 1,700 people and caused massive economic losses.

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