Planning Minister Ahsan Iqbal said on Tuesday the government had approved an estimated 3.5 per cent GDP growth target for its 2023-24 financial year budget.

The government is set to present the annual budget on Friday, at a time when the South Asian country faces its worst economic crisis with months of delay in securing funding from the International Monetary Fund (IMF).

Iqbal said the growth target was realistic.

“We’re taking those choices which take the country toward stability,” he told a press conference in Islamabad after a meeting of the National Economic Council (NEC), chaired by Prime Minister Shehbaz Sharif, approved the estimated budget figures.

The minister said that Rs1,150 billion was allocated for federal spending under the Public Sector Deve­lopment Pro­gramme (PSDP) and the collective development budget for the provinces was set at Rs1,559bn.

Commenting on the decisions, economist Maha Rehman said the increase in the PSPD budget made it evident that the government would likely focus on “short-term relief” in this prospective election year.

The increase in the development budget also showed that the government was likely to focus on “either project completion or initiation of only new projects with a short life-cycle, though under a redefined agenda”, she told Dawn.com.

She added that “it is important to redirect the focus towards the most obvious goals that everyone has advised the government on, [which is] increasing exports by creating the right incentives for the key sectors to grow and attract investment” and increasing the tax base by “turning attention to new avenues like the land tax”.

During the press conference, Iqbal also pointed out the dismal condition of the economy, saying the government would not be able to pay off debt fully through federal revenue.

“This is a defining moment of where we’ve reached,” he said. “(The country) will need to borrow for the rest of budget that includes salaries for the government, defence budget, development budget, pension, subsidies.”

He also said a committee had been constituted to review the health card scheme.

Pakistan, which is also in political turmoil, has been caught up for months in an acute balance of payments crisis, with its central bank’s foreign exchange reserves dipping to as low as to cover hardly a month of controlled imports.

In these circumstances, the budget is being keenly watched as the government is caught between a painful fiscal adjustment reforms agenda set by the IMF, and to make room for any relief to the people ahead of a national election scheduled in early November.

For the outgoing fiscal year 2022-23, which ends on June 30, the country’s GDP growth fell to 0.29pc against last year’s annual budget target of 5pc, and a revised projection of 2pc by the central bank.

Inflation posted at 38pc in May is the highest in Asia.

The IMF’s $1.1 billion funding, stalled since November, is critical for Pakistan to unlock other bilateral and multilateral financing to avert a debt default.