Finance Minister Muhammad Aurangzeb expressed optimism about Pakistan’s financial future, revealing a concerted effort to boost tax revenues and secure a staff-level agreement with the International Monetary Fund (IMF). Speaking to various media outlets, Aurangzeb highlighted the government’s ambitious plan to raise Rs13 trillion ($46.6bn) by July 2025, a significant 40% increase from the previous fiscal year. This initiative aims to enhance economic stability and reduce reliance on IMF bailouts.
In recent months, Pakistan’s economic indicators have shown promising improvements. Inflation dropped to 12.6% in June from a record 38% in May 2023, the stock market experienced robust growth, and the central bank’s foreign reserves increased to over $9 billion. Aurangzeb noted, “The direction of travel is positive, and investors are showing confidence in the stock market.”
Tax Reforms and Revenue Targets
The new budget has set an ambitious target to address Pakistan’s long-standing fiscal challenges. The Federal Bureau of Revenue (FBR) is expected to spearhead these efforts, aiming to improve the country’s tax-to-GDP ratio from 9% to 13%. The finance minister acknowledged the challenges posed by the current perception of the FBR, citing issues of corruption and harassment. “People don’t want to deal with the tax authority because of corruption, because of harassment, because of people asking for speed money, facilitation money,” Aurangzeb admitted, emphasizing the need for systemic reform.
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The federal budget for 2024-25 focuses on raising Rs13 trillion by next July. This figure represents a near-40% jump from the current financial year, designed to reduce the debt burden that consumes 57% of government revenue through interest payments. The tax increases primarily affect salaried workers, retailers, and exporters, with punitive measures for tax avoiders, including restrictions on essential services and travel.
Energy Sector Adjustments
In tandem with fiscal reforms, the National Electric Power Regulatory Authority (Nepra) approved a hike in electricity tariffs, responding to the federal government’s request. This decision affects various consumer categories, including domestic, commercial, agricultural, and general services consumers. The base tariff for domestic consumers increased up to Rs48.84 per unit, with a temporary exemption for those using up to 200 units per month from July to September 2024.
Commercial consumers will now face a base tariff of Rs77.15 per unit, while agricultural and general services consumers will see rates rise to Rs46.83 and Rs61.03 per unit, respectively. This hike is part of a broader strategy to eliminate government subsidies and ensure the financial sustainability of the energy sector. The Ministry of Energy emphasized the importance of an efficient tariff structure to recover the full cost of service.
Strategic Partnerships and Future Plans
Prime Minister Shehbaz Sharif has been actively seeking foreign investment, visiting Saudi Arabia, UAE, and China to forge “mutually beneficial” partnerships. Aurangzeb highlighted the necessity of presenting bankable projects to attract equity from Gulf investors, indicating a shift towards more sustainable economic practices.
The government’s comprehensive approach includes structural changes within the military service, introducing a contributory pension system for new servicemen from July 2025. Additionally, efforts to reduce the fiscal deficit from 7.4% to 5.9% of GDP are underway, reflecting a commitment to fiscal responsibility.
Aurangzeb’s positive outlook is tempered by a recognition of the challenges ahead. “We need to create the capacity to repay loans,” he stated, acknowledging the need for a sustainable, export-driven economy. The government’s proactive measures aim to stabilize Pakistan’s economy, ensuring a brighter financial future.