Pakistan’s Prime Minister Shehbaz Sharif on Tuesday acknowledged the collaboration between the federal budget and the International Monetary Fund (IMF), stating that the prevailing circumstances dictated the joint effort. “We had to prepare the budget jointly with the IMF because of the prevailing circumstances and ground realities,” Dawn quoted the prime minister as saying in the National Assembly. While refraining from making a premature statement, PM Shehbaz expressed hope for a positive response from the lender, promising to share any response with Parliament. However, it remained unclear whether he was referring to the IMF bailout or relaxations concerning fertilizer.
The prime minister’s statement followed Finance Minister Muhammad Aurangzeb’s announcement of significant amendments to the proposed finance bill for 2024-25. These amendments, reportedly influenced by pressure from influential industrialists and aimed at appeasing public sector employees working in parliament, deviated from several key reform measures outlined in the initial budget speech. The entire staff of the National Assembly and the Senate would receive honoraria equivalent to three basic salaries, Aurangzeb announced during his winding-up speech on the budget debate.
Despite the adjustments, the finance minister asserted that the government was progressing positively with the IMF, emphasizing the necessity of a bailout for a sustainable solution to the prevailing economic and financial challenges.
Key changes to the original budget included the reinstatement of zero rating (zero sales tax) for local sales of export industries and stationery items. To offset the revenue loss resulting from these amendments, the government reduced allocations for the Public Sector Development Programme (PSDP) by Rs250 billion. This amount would now be presented against the Public-Private Partnership (PPP) at Rs350 billion instead of the earlier Rs100 billion, although the private sector would be responsible for this notional funding, a potentially challenging task.
Aurangzeb also highlighted three other significant revisions: eased policies for hybrid vehicles, stationery items, and the Export Facilitation Scheme 2021. He further proposed a “national financial pact,” urging provinces to contribute to national expenses, reduce provincial spending, and enhance provincial revenue generation for the reinforcement of national financial stability.
The finance minister underscored the importance of provincial contributions to national expenses, reduced provincial expenditures, and increased provincial resource mobilization for national financial stability under the proposed “national financial pact.” He emphasized that the budget was “based on a homegrown reform plan through which the government wanted to take the country out of the current economic situation for which structural reforms are needed.”
Aurangzeb announced stringent measures targeting retailers and distributors outside the tax net, signaling the government’s commitment to accelerating FBR reforms. The prime minister himself is overseeing the digitalization of the FBR, encompassing the expansion of the track-and-trace system (TTS) and point-of-sale (POS) operations, along with the separation of tax policy and administration. “Time has come to take strict action against retailers who do not participate in the FBR’s Tajir Dost Scheme,” Dawn quoted Aurangzeb as saying. He stated that a substantial increase in tax rates would be implemented for traders, shopkeepers, retailers, and distributors classified as non-filers under Section 236G and Section 236H, effective from July 1, 2024, across all sectors.
The government also reiterated its focus on expenditure control and austerity measures within government departments, which would continue into the next year. To manage future expenditures, Aurangzeb mentioned pension reforms and the formation of a committee to recommend the closure or merger of federal ministries, or the transfer of devolved ministries’ functions to provinces.
