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Punjab’s 2024-25 Budget: A Missed Opportunity for Fiscal Transformation

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The Punjab budget for 2024-25, despite facing pressure from the IMF to bolster its revenue generation base, fails to introduce transformative measures. Chief Minister Maryam Nawaz revealed a “tax-free,” Rs5,446 billion surplus budget, with the majority of income estimated to come from the federal divisible pool. The provincial government’s limited progress in implementing essential but potentially unpopular fiscal initiatives, such as increasing income tax rates for high earners or introducing a wealth tax, indicates a lack of political will, boldness, and ingenuity.

The budget allocates significant funds for development, including an Annual Development Programme (ADP) of Rs842 billion, representing a 28 percent increase over the previous year. Notably, substantial sums have been earmarked for crucial sectors such as health and education. However, the budget’s failure to address agricultural incomes’ lower tax rates, absence of new taxes on real estate, which could have been a potential revenue source, and the substantial increase in untaxed pension payments raise concerns about the province’s fiscal trajectory.

While increased spending is promised for infrastructure development and underprivileged districts, the reliance on federal transfers and the reluctance to explore new revenue-generating avenues may impede Punjab’s efforts to address funding shortfalls. The persistent reliance on federal transfers as the main source of revenue, coupled with the lack of attention to non-compliant segments of the economy, exacerbates economic difficulties such as budget deficits and inflation and perpetuates elite capture, where a small group of wealthy individuals or corporations control a disproportionate amount of the country’s wealth.

The budget’s lack of new taxes and failure to address the country’s economic realities highlights a disappointing lack of awareness among the provincial leadership. This budget represents a missed opportunity for Punjab to embark on a path towards fiscal transformation and sustainable development. The audience should feel disappointed and concerned about the current state of Punjab’s economy, as these missed opportunities could have led to significant improvements.

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