Finance Minister Muhammad Aurangzeb presented his first federal budget on Wednesday with a total cost of Rs 18.9 trillion, which analysts say is broadly ‘in line with IMF guidelines’.
Pakistan’s budget for next year aims for modest GDP growth of 3.6 percent, and sets an ambitious tax collection target of Rs 13 billion, raising taxes on the salaried class and ending tax exemptions for the rest.
Aurangzeb, while presenting the budget, said that the aim is to broaden the tax base so that existing taxpayers are not burdened.
- Total expenditure estimated to be Rs18.9tr
- Ambitious Rs13tr tax revenue target set for FBR
- Non-tax revenue target of Rs3.5tr
- Aims to secure Rs30bn from privatisation
- Expects debt servicing of Rs9.8tr
- Petroleum levy increased by Rs20 on petrol and diesel, Rs25 on superior kerosene oil, light diesel and high-octane, e-10 gasoline
- Targets 3.6pc GDP growth for 2024/25
- Budget deficit projected at 6.9pc of GDP
- Imports of raw materials used in solar panels, inverters and lithium-ion batteries manufacturing have been zero-rated
- BISP raised by 27pc to Rs592bn
The Finance Minister thanked Prime Minister Shehbaz Sharif, PML-N chief Nawaz Sharif, and other coalition government leaders for their guidance in preparing the budget.
Aurangzeb said, ‘Dear Speaker, despite the political and economic challenges, our progress in the last year on the economic front has been impressive. Pakistan has one more chance to improve itself and embark on the path of economic development. I request everyone not to miss this opportunity,’ said Aurangzeb.
The Finance Minister appreciated the government’s efforts to tackle the economic challenges and pledged to speed up development under Prime Minister Shehbaz’s leadership.
‘Before presenting the budget, I want to highlight our journey so far,’ the minister said. ‘Under Prime Minister Shehbaz Sharif’s leadership, we have pursued a domestic agenda that has enabled us to overcome the current economic challenges and accelerate growth.’
Aurangzeb acknowledged the challenges facing Pakistan’s economy, struggling with dwindling foreign reserves, a 40 percent depreciation of the rupee, stagnant economic growth, and rising inflation pushing citizens below the poverty line.
He lauded the government for securing the IMF’s flagship nine-month program in June 2023, which helped Pakistan avoid economic collapse.
“The previous IMF programme was ending, and a new deal was essential to prevent a default. I commend Shehbaz Sharif’s government for their efforts in securing the programme,” he said.
Aurangzeb highlighted the significant improvement in economic indicators, crediting the PM and his team for their efforts. “Inflation stood at 11.8pc in May, a notable achievement considering the challenges. We’re on the right track, and inflation is likely to decrease further in the coming days,” he said.
The minister spoke of a significant turnaround in Pakistan’s economy, with foreign exchange reserves bolstered and international investors showing keen interest in investing in the country.
Key points from tax policy
- Expand the tax base to enhance the tax-to-GDP ratio.
- Document the economy through digitisation.
- Implement a progressive taxation regime to increase the burden on high earners.
- Increase transaction taxes for non-filers.
- Protect vulnerable segments from the impact of inflation.
‘Pakistan’s foreign exchange reserves have been strengthened, and international investors are now seeking opportunities to invest in our economy,’ Aurangzeb said, highlighting the improved economic outlook.
He applauded the State Bank’s decision to cut interest rates, citing visible efforts to combat inflation. ‘The State Bank’s interest rate cut is a significant move, and the efforts to curb inflation are evident. Shehbaz Sharif and his team deserve congratulations for their commendable efforts to turn the economy around,’ Aurangzeb said.
‘These achievements are not ordinary. As a result of these, the country has exited a difficult time.’
The minister emphasised the need for patience and collective efforts to achieve sustainable economic development, cautioning that progress cannot be accelerated overnight.
Aurangzeb called for prioritising private sector growth, acknowledging its crucial role in revitalising Pakistan’s economy.
‘It’s time to give primary importance to the private sector in our economy,’ Aurangzeb said.