Budget 2024-25 updates: Pakistan targets 3.6% growth, 38% higher FBR taxes as Aurangzeb presents proposals

Finance Minister Muhammad Aurangzeb announced Pakistan’s federal budget 2024-25, targeting a modest 3.6% growth for the coming fiscal year, as Islamabad looked to appease the International Monetary Fund (IMF) and balance its burgeoning books with higher taxation.

The salaried group came out frustrated, while capital markets rejoiced at ‘status quo’. It was the real estate and IT sectors that were left disappointed. Government employees were offered raises, while pensions also increased.

Minimum wage was enhanced to Rs37,000, and some proposals discussed privatisation and the energy sector.

Inflation, which has proved to be a headache for Pakistan’s policymakers in recent years, was projected at 12% for the coming fiscal year.

The budget was announced with a total outlay of Rs18.9 trillion (up 30% compared to the budgeted outlay of FY24), and gross revenue receipts are expected at Rs17.8 trillion. The Federal Board of Revenue (FBR) taxes are envisaged at Rs12.97 trillion, an amount nearly 38% higher than the outgoing fiscal year.

Business Recorder reported the budget speech live underneath.

Updates

GST on tier-1 textile retail sector enhanced from 15% to 18%, says Aurangzeb.

Capital markets

CGT on non-filers to go as high as 45%, while on filers of income tax returns, it will stay at 15%, says Aurangzeb.

Slabs for salaried group will change, says Aurangzeb.

“For non-salaried individuals, income tax can go as high as 45%.”

The government intends to maintain income tax exemption up to Rs0.6 million.

While Aurangzeb did not share the slabs during his speech, calculations done later by various bodies tax suggest much higher taxation on all income levels.

Rs12.97 trillion is FBR’s target, which is 38% higher than the outgoing fiscal year, says Aurangzeb.

“Rs1.5 trillion for PSDP, which is 101% higher than the previous year.”

“Rs4 billion allocation made for ‘e-bikes’ and another Rs2 billion for energy-saving fans that promote energy conservation,” says Aurangzeb.

Rs86.9 billion allocated to promote remittances in Pakistan, says Aurangzeb.

Rs79 billion allocated for IT sector, says Aurangzeb.

An IT park in Karachi. Allocation of Rs8 billion made for it, says finance minister.

Aurangzeb highlights focus on these areas for energy sector:

Reduce transmission and distribution losses

9 DISCOs privatisation

Reduce theft

Promote solar, energy, and wind

Rs253 billion allocated for energy sector

BISP programme allocation has been increased by over 27%, says Aurangzeb.

“We have prepared a three-pronged strategy to reduce pension burden, and discussions on this has started,” says Aurangzeb.

“The government should not be doing business. We are starting a comprehensive programme to privatise state-owned enterprises,” says Aurangzeb.

“Pension reforms on the cards. I will mention them later in the speech,” says Aurangzeb.

Aurangzeb proposes what he calls a ‘National Fiscal Pact’ with all provinces

Pakistan engaging with IMF on a bigger programme, says Aurangzeb.

Aurangzeb begins budget announcement.

“This is a great honor for me to present the budget for fiscal year 2024-25,” says Aurangzeb.

“We are working on a homegrown reform to accelerate the economic growth of Pakistan.”

Ruckus in National Assembly mars start of session

Earlier, the delay came amid reports of rifts between the government coalition partners – Pakistan Peoples Party (PPP) and Pakistan Muslim League-Nawaz (PML-N) – over budgetary measures.

It was reported earlier that Prime Minister Muhammad Shehbaz Sharif signed the documents of the Federal Budget 2024-25 after its approval from the Federal Cabinet.

Muhammad Aurangzeb, former CEO and president of one of Pakistan’s largest banks, faces his toughest challenge yet – present the budget for a coalition government that is under pressure on three counts; satisfying the International Monetary Fund (IMF), providing some relief to the inflation-weary public, and ensuring growth for an economy that has faced stagnation in the last few years.

The PML-N-led coalition government is looking to balance requirements for the IMF, public, and a struggling economy. But it also has to take PPP onboard over the budgetary measures as it stands on a weak footing in the National Assembly.

The budget is likely to have an estimated outlay of over Rs18 trillion.

It is also being presented at a time when background talks are ongoing with the IMF which is likely to keep a close eye on any subsidies and unsanctioned expenditures that go against the contours of the new programme.

While Islamabad is hoping for a larger, longer facility with the IMF, its requirements are also likely to be tougher for Pakistan in pursuit of its 24th bailout.

Some areas of interest:

• GDP growth target

• External financing estimates

• Taxation on salaried group

• GST level

• PSDP size and focus

• Taxing the under-taxed sectors

• Widening tax base

• Super tax

• CGT and tax on dividends

The budget comes a day after the government said economic growth of 2.4% is expected in the outgoing fiscal year and it would miss a target of 3.5%, although revenues were up 30% over last year, and the fiscal and current account deficits were under control.

Aurangzeb, during his press briefing while unveiling the Pakistan Economic Survey 2023-24, had said there were “no sacred cows”, offering a sneak peek into the budget announcement.