Progressing on the 10th NFC Award The implications of the National Resource Picture and the allocation to different heads on the financial position of the Federal and Provincial Governments respectively are highlighted in Tables 7.7 and 7.8. The former Table reveals that the Federal tax revenues will need to be raised from 10.4 percent of the GDP to 13.4 percent of the GDP by 2024-25. Table 7.8: Projection of the Federal Budgetary Position 2020-21 2021-22 Total Revenues 13.4 14.3 Tax Revenues 10.7 11.3 Non-Tax Revenues 2.7 3.0 Transfer to Provinces-6.2-6.6 Net Revenue Receipts 7.2 7.7 Total Expenditure 15.0 15.3 Current Expenditure 13.8 13.8 Development Expenditure 1.2 1.5 Budget Deficit-7.8-7.6 Cash Surplus of Provinces 0.3 0.6 Consolidated Budget Deficit-7.5-7.0 Primary Deficit(-)/ Surplus(+)-1.1-0.9 Source : Estimated. 2022-23 14.7 11.7 3.0 -6.8 7.9 15.4 13.7 1.7 -7.5 0.9 -6.6 -0.8 (% of GDP) 2023-24 2024-25 15.4 16.0 12.4 13.0 3.0 3.0 -7.1-7.5 -8.3-8.5 15.4 15.4 13.7 13.6 1.7 1.8 -7.1-6.9 1.4 1.9 -5.7-5.0 0.0 0.5 Based on the unchanged vertical distribution formula as in the 7 th NFC Award and projected straight transfers, the total transfers to the Provincial Governments are expected to rise sharply from 6 percent of the GDP to 7.7 percent of the GDP in 2024-25 based on the share in the 7 th NFC Award. This will greatly improve the financial status of the Provincial Governments. The Federal budget deficit is projected to decline from 8.4 percent of the GDP to below 7 percent of the GDP due to the rise in the level of net revenue receipts and some savings from current expenditure. Consequently, an overall primary surplus situation will be reached in 2023-24. Further, by 2023-24, net revenue receipts of the Federal Government will begin to cover the combined expenditure on debt servicing and security. According to Table 7.9, Provincial Governments are expected to raise their own tax-to-GDP ratio from 1 percent to 2 percent of the GDP. This will primarily involve development of direct taxes like the agricultural income tax, the urban immoveable property tax, and the sales tax on services. This will make the overall national tax system more progressive. The Provincial Governments may be able to raise their level of spending especially in promoting human development and providing more inputs to agricultural development. 71