IMF makes Pakistan set over Rs11,000bn revenue target for next fiscal year
It isn’t clear whether Islamabad will go direct or indirect taxes; Big test for new govt
ISLAMABAD (Dunya News/Web Desk) – The International Monetary Fund (IMF) again managed to impose more conditions on Pakistan, as documents show that the tax collection target for the next fiscal year 2024-25 has been increased to over Rs11,000 billion rupees.
The move represents a massive increase of Rs1,600bn, or around 12 per cent, when compared to the Rs9,400bn target set for 2023-24, as Pakistan grapples with the solving the puzzle of meeting expenditures with income.
It is the Memorandum on Economic and Financial Policies (MEFP) in which these pledges are outlined after earlier reports suggested that the government was all set to push the tax-to-GDP ratio up to 15pc.
However, it is not clear yet whether this increase in revenue generation would be achieved through direct taxes on elites and wealthy professionals – doctors and lawyers among them – as well as sectors like real estate and retail or it is the ordinary people who are to be burdened with more indirect taxes, and higher fuel prices and energy tariffs.
Interestingly, the MEFP comes despite the fact that current nine-month long $3bn stand-by arrangement reached with the IMF will expire on March 31 next year with the budget for 2024-25 to presented in late May or early June.
When it comes to the federal government expenditures are concerned, sources say the figures are estimated to be up to Rs16,500bn, meaning that deficit remains very high against the tax target which will require more government borrowing – internationally or domestically.
At the same time, loans and interest payments will again consume a massive chunk of revenue as the amount is calculated to be over Rs9,500bn and the defence budget reaching Rs2,100bn.
Meanwhile, the estimated amount for subsidies and grants stands at Rs3,000bn.
As far as the provinces are concerned, the federating units would receive Rs5,320bn while the PSDP (Public Sector Development Programme) is much less than expectations and needs at Rs750bn.
It shows that the next government would have very little room to fulfil the promises made with the people during elections and forward its economic, social and political development agenda besides generating economic activity for job creation at a time when Pakistan has been crippled by record-high inflation and interest rates, requiring active government intervention.