Key Highlights
- IMF mission extends stay in Pakistan for two more days
- The petroleum levy may rise to Rs100 per litre
- FBR tax target proposed at Rs15.264 trillion
- New tax measures worth Rs 430 billion under discussion
- BISP payment likely to increase to Rs18,000
Islamabad: Negotiations between the International Monetary Fund and Pakistan on the budget for the next fiscal year have entered a crucial phase, while sources say the IMF mission’s visit to Pakistan has been extended by two more days to finalise the budget proposals and fiscal targets.
According to government sources, the two sides have reached an agreement on most economic points, but further consultations are underway on a few issues, including energy tariffs, tax reforms and provincial surplus. Meetings have been held continuously between the Finance Ministry officials and the IMF team for the past several days to review the revenue, expenditure and fiscal discipline of the next fiscal year.
Sources said that the IMF has suggested that the government significantly increase the target of petroleum levy. Under the proposed plan, the petroleum levy can reach Rs 100 per litre, while the target is to collect about Rs 1730 billion in this regard. According to experts, this move can help the government increase revenue, but there is also a risk of increasing inflationary pressure as a result.
According to sources, a tax target of Rs 15,264 billion has been proposed for the Federal Board of Revenue in the next fiscal year. The government has prepared a strategy to expand the tax net, increase action against non-filers and collect additional revenue from various sectors. An additional collection of about Rs 50 billion has also been estimated from the sugar, tobacco, cement and fertiliser sectors.
Sources say that the IMF has also given the provinces a target of collecting an additional Rs 430 billion in revenue, while a proposal to provide a surplus of about Rs 2 trillion has been made for the federation. According to economic experts, financial cooperation between the federation and the provinces will be very important for the success of the upcoming budget.
The budget proposals also include an increase in defence spending. According to sources, a proposal to increase the defence budget to Rs 2,665 billion is under consideration, while Rs 986 billion can be allocated for the federal development programme. On the other hand, the possibility of an increase in the provincial development budget is also being shown, which could reach Rs 2.5 trillion.
Regarding economic targets, the government has projected a growth rate of 3.5 per cent and an average inflation rate of 8.4 per cent for the next fiscal year. Experts say that it will not be easy to achieve these targets due to the current regional situation, global oil prices and import pressure.
According to sources, an in-principle agreement has been reached between the government and the IMF to increase the assistance amount of the Benazir Income Support Program from Rs 14,500 to Rs 18,000 so that the low-income groups can be partially protected from the effects of inflation.
At the same time, it has also been agreed to maintain the condition of increasing gas and electricity prices twice a year. According to sources, the recommendation not to give new tax exemptions for special economic zones and to phase out the current incentives by 2035 is also part of the budget proposals.
Economic circles say that the upcoming budget will prove to be a major test for the government because, on the one hand, it is necessary to reduce the fiscal deficit, while on the other hand, protecting the public from the further burden of inflation will also be a major challenge.
