Prime Minister Shehbaz Sharif on Tuesday confirmed the government’s Finance Bill 2024 was shaped by the requirements put forth by the International Monetary Fund (IMF) as a prerequisite for Pakistan securing a fresh bailout from the lender.
“We had to prepare the budget jointly with the IMF,” he told the National Assembly during the debate on the budget for fiscal year 2024-25, as he expressed optimism about a positive response from the lender but stopped short of making any premature statements. If the government receives a response from the IMF, he said, it would be shared with Parliament.
The government has set a challenging tax revenue target of Rs. 13 trillion for the upcoming fiscal year, nearly 40 percent higher than the ongoing year, with observers claiming this is aimed at securing a new extended fund facility with the IMF. However, contrary to expectations, the budget has failed to take steps to expand the tax base, relying once again on imposing further taxes on existing taxpayers to make up the anticipated shortfall.
In his address, the prime minister recalled that during the PMLN’s previous tenure, it had boosted budgetary allocations and job quotas for south Punjab beyond its shared based on population. Similarly, he maintained, he had initiated infrastructure projects during his time as Chief Minister of Punjab and lamented they were not completed by the successor federal government.
Sharif also sought to address criticism about government expenditures, maintaining he had abolished the Pakistan Public Works Department as part of austerity measures. “All the members know how much corruption is there,” he claimed, adding a committee led by Finance Minister Muhammad Aurangzeb was working on downsizing and rightsizing of various departments. He said the government would submit to Parliament details of its expenditures within the next 2 months.
Earlier, the finance minister announced some amendments to the Finance Bill in his winding-up speech, granting honoraria to the staff of the National Assembly and Senate; reviving zero sales tax on local sales of export-oriented industries and stationery items; and reducing allocations for the Public Sector Development Program by Rs. 250 billion.
Reiterating that a fresh IMF bailout was essential to achieve sustainability and stability, Aurangzeb also announced relaxations for hybrid vehicles and urged provinces to contribute to expenses of national importance. He recalled that the proposed budget sought to increase the tax-to-GDP ratio to 13 percent; pursue privatization of loss-making state-owned entities; implement energy sector reforms; and seek public-private partnerships.
He said the government desired an end to subsidies creating market distortions and building a targeted social protection system through a “broad-based and fair taxation system.” He said that, on the advice of the Senate Standing Committee on Finance, the government had decided to grant an opportunity for personal hearing to non-filers of income tax before blocking their phone SIMs or foreign travel.
Aurangzeb announced strict measures for retailers and distributors outside the tax net, maintaining the government was committed to FBR reforms. “Time has come to take strict action against retailers who do not participate in the FBR’s Tajir Dost Scheme,” he said, warning non-filers would see significant boosts to their tax rates. “This will be implemented from July 1, 2024, on all sectors,” he said.