The coalition government is poised to introduce its inaugural budget for FY25 in Parliament on June 10, 2024. This aligns with reports suggesting the formal announcement of the Staff Level Agreement (SLA) by late June 2024 or early July 2024, contingent upon satisfactory compliance with previous actions and revisions to certain tax laws through the Finance Bill 2024-25.
The FY25 Budget is anticipated to serve as a prerequisite action for the IMF, crucial in progressing towards the SLA. It aims to achieve a primary surplus of Rs. 500-700 billion or 0.4-0.5 percent of the GDP, along with an FBR revenue target of Rs. 11.5-12.5 trillion, representing a 25-33 percent increase from the current fiscal year’s estimates.
Read more: Govt May Present 2024-25 Federal Budget on June 10
The budget may include several revenue measures, such as a 1% increase in GST to 19%, taxation on pensioners, removal of exemptions on FATA/PATA, higher tax rates for non-filers, and adjustments to various taxes affecting sectors like pharmaceuticals and food.
Other countries in IMF programs have implemented similar revenue measures, including gift and inheritance taxes, reduced corporate income tax rates, and VAT reforms.
The FBR’s revenue collection mix is expected to shift towards direct taxes, with a projected 25% year-on-year growth in absolute targets. Non-tax revenue is also expected to play a significant role, with a target of Rs. 2.1 trillion, albeit lower than the previous fiscal year’s target.
The budget sets ambitious economic targets, including a GDP growth target of 3.6% and an inflation target of 12.5-12.7%. On the expenditure side, debt servicing is estimated to increase significantly, while the development expense budget is expected to surpass Rs. 1 trillion.
The budget’s impact on the Pakistan Stock Exchange (PSX) is anticipated to be neutral to negative in the short term, with potential for medium-term positivity if realistic revenue measures are implemented to achieve targeted tax collections. The PSX could see substantial growth by June 2025, contingent upon the successful review and completion of the IMF program.
