- By: MUHAMMAD UMAIR ZEB (Tax and Financial Consultant)
Federal & Provincial Ministers for Finance and Revenue will unveil the much-needed federal & provincial budget for the next fiscal year 2022-23 in June,2022. With dismal economic situation of the country currently, the stakes are high.
As the budget comes amid an economic growth of 6% (provisional), all eyes are on the new coalition government to see how it prioritises its spending to get the crisis-hit nation back on track.
With just a few more days to go till the provincial and federal government unveils budget 2022-23, here’s a one-stop guide for all the financial terms that will help you understand the contours of the finance bill.
Gross domestic product or GDP is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period.
The Public Sector Development Programme (PSDP) is an important public intervention to spur private investment by way of developing human capital and improving the infrastructure. The PSDP is aligned with the overall long-term development objectives of the government.
The revenue budget gives the details of the sources from where the government’s revenue is coming. Revenue receipts can be further classified into tax revenue and non-tax revenue.
• Tax revenue — all the revenue collected from taxes on income and profits, social security contributions, taxes levied on goods and services, payroll taxes, taxes on the ownership and transfer of property, and other taxes
• Non-tax revenue — it is the recurring income earned by the government from sources other than taxes; these include royalties, dividends on government investments in state-owned enterprises, etc.
Government spending or expenditure includes all government consumption, investment, and transfer payment. It can be further classified into capital expenditure and revenue expenditure.
• Capital expenditure — the amount spent on creating assets, basically long-term expenses. It is a cause for a reduction in the government’s liabilities. It adds to the capital stock of the economy and is non-recurring in nature.
• Revenue expenditure — these are short-term expenses used in the current period or typically within one year.
It is a shortfall in a government’s income compared with its spending. A government that has a fiscal deficit is spending beyond its means.
Financing is the process of providing funds for business activities, making purchases, or investing.
A budget deficit occurs when expenses exceed revenue, and it can indicate the financial health of a country.
The debt-to-GDP ratio is the metric comparing a country’s public debt to its GDP.
A subsidy is a benefit given to the people by the government. It can be direct (such as cash payments) or indirect (such as tax breaks).
Debt service is the cash that is required to cover the repayment of interest and principal on a debt for a particular period
A tax-to-GDP ratio is a figure to gauge a nation’s tax revenue relative to the size of its economy as measured by the GDP.