The National Assembly of Pakistan passed the annual budget for the Fiscal Year 2024-25 on Friday, as the nation seeks a new programme with the International Monetary Fund (IMF) to bolster its economy.
Amid projections of inflation rising to 13.5% for June, the government moved to pass the tax-heavy finance bill ahead of talks with the IMF for a $6 billion to $8 billion loan to avoid a debt default. The bill’s passage comes as Pakistan’s sovereign dollar bonds dipped, with the 2031 maturity shedding 1.4 cents.
Finance Minister Muhammad Aurangzeb presented the bill, which was debated and amended by the ruling alliance and opposition. The budget, presented on June 12, targets a challenging tax revenue of Rs13 trillion ($46.66 billion) for the year starting July 1, up 40% from the current year.
A finance ministry report projected annual consumer price inflation between 12.5% and 13.5% for June 2024, up from 11.8% in May, and outlined measures to control inflationary pressures. The tax target includes a 48% increase in direct taxes and a 35% hike in indirect taxes. Non-tax revenue, including petroleum levies, is expected to rise by 64%.
Taxes on textile, leather products, mobile phones, and capital gains from real estate will increase, alongside higher direct taxes on income. Opposition parties, particularly those supporting jailed former Prime Minister Imran Khan, have rejected the budget, citing high inflation concerns.
The budget projects a fiscal deficit drop to 5.9% of GDP from 7.4% this year and sets a growth target of 3.6% with 12% inflation.
The State Bank of Pakistan has warned of possible inflationary effects from the budget, highlighting the need for structural reforms to broaden the tax base.