Pakistan likely to announce mini-budget amid revenue concerns

The Pakistan government is likely to announce a mini-budget if revenue collection during fiscal year 2024-2025 is unsatisfactory in order to meet the International Monetary Fund’s (IMF) conditions for the new loan programme.

IMF sources told Nukta that the timeline for releasing installments of the $7 billion Extended Fund Facility programme was being prepared but the Pakistan government had been urged to avoid any actions that could impact budget targets.

The country needs to fulfil all IMF conditions to keep the 37-month-long programme on track.

Under the agreement, Pakistan will increase its tax revenue by 1% of GDP in FY25 and 3% over the programme’s duration.

It will also broaden its tax base, eliminate exemptions, and bring previously untaxed sectors such as export, agriculture, and retail into the net.

The Pakistan-IMF agreement is expected to significantly improve the primary economic structure, with preliminary measures already in place to meet the new package’s conditions.

The agriculture tax is also expected to be implemented in the coming months depending on cooperation between provincial and federal governments.

Sources said the new IMF programme will also require the government to take decisions on the privatization of the national flag carrier and power distribution companies.

The government is also developing a strategy to enhance human capital and tackle inflation, alongside efforts to boost the tax machinery’s capacity. Every sector is expected to contribute to improving tax collection.

Improving the performance of power distribution companies is a priority, with efforts focused on addressing poor performance and high production costs.

Banks’ policy rates are under close scrutiny, with agreements made with Independent Power Producers posing economic challenges. Cooperation between federal and provincial governments is essential for establishing a new tax structure, IMF sources emphasized.