On Thursday, Finance Minister Muhammad Aurangzeb expressed optimism about the federal government’s prospects of securing a staff-level agreement with the International Monetary Fund (IMF) in July following the presentation of the budget in accordance with the lender’s stipulations. Aurangzeb stated that the ongoing discussions with the IMF were progressing positively and that the government aimed to formalize a staff-level agreement in July, marking an important step in the process.
The budget presented by the government, widely believed to have been tailored to meet IMF requirements, outlines a 25% increase in expenditure compared to the previous fiscal year. Analysts assert that this budget could potentially secure an additional bailout of $6 to $8 billion under the medium-term Extended Fund Facility (EFF) from the IMF.
Furthermore, the government has set a challenging tax revenue target of Rs13 trillion for the upcoming fiscal year, signalling a nearly 40% surge from the current year. These ambitious revenue targets have been incorporated into the national budget, aligning with the government’s efforts to bolster the case for a new IMF bailout deal.
In order to meet the IMF’s demands and address fiscal deficit concerns, the government has implemented measures aimed at generating additional revenues. This includes raising taxes on various sectors such as salaried and non-salaried individuals, real estate, retailers, and vehicles, and imposing taxes on items like milk and milk products, mobile phones, and tier-1 retailers of branded stores at 18%.
The minister also addressed the gradual increase in the Petroleum Development Levy (PDL), highlighting that any changes would be linked to international oil prices and would be implemented over the course of the next fiscal year. Additionally, the government has outlined its plan to target a budget deficit of 6.9% of the country’s GDP.
In response to concerns raised by the Pakistan Peoples’ Party regarding the Rs18.7 trillion budget, the finance minister assured that all allied parties were briefed on the budget proposal and actively participated in the decision-making process.
With the aim of broadening the tax base and reducing the undocumented economy, the minister emphasized the need to address tax-to-GDP ratios and the increased focus on taxing non-filers and higher income individuals.
Furthermore, Aurangzeb stressed the government’s push for the digitalization of the economy, citing its potential to curb corruption and enhance transparency. This emphasis on digitalization extends to efforts to incorporate freelance professionals and bolster the information technology (IT) sector in Pakistan, as evident through the substantial allocation of funds for the IT sector.
Overall, the finance minister’s statements reflect the government’s concerted efforts aimed at achieving an IMF agreement, navigating fiscal challenges, and implementing reforms to drive economic stability and growth.
