The fiscal year 2024-25 Pakistan federal budget will be presented on June 10. All preparations, including integrating draft proposals by the International Monetary Fund (IMF), are now finalized.
Sources indicate that the IMF has proposed a tax collection target of 1,290 billion rupees. Pakistan’s Federal Board of Revenue (FBR) advocates for a slightly lower target of 1,250 billion rupees. As the discussions progress, Pakistan’s economic team engages with the IMF through virtual meetings and online communications to refine the budget details.
Among the notable proposals from the IMF is an increase in the General Sales Tax (GST) rate from 18% to 19%, expected to raise an additional 180 billion rupees in revenue.
The IMF also recommends significant tax reforms, including increasing the tax rate for high-income earners from 30% to 40% and simplifying the tax structure for government employees by reducing the number of tax slabs from seven to four.
Additionally, the IMF advises abolishing the fifth schedule related to zero-rating in the Sales Tax Act, suggesting that all items, except exports, should adhere to the standard GST rate. This change aims to streamline the tax system by removing unnecessary exemptions currently listed under the sixth schedule and restricting concessional tax rates under the eighth schedule to essential goods such as health, education, and food, with a maintained tax rate of approximately 10% on these items.
As the budget finalization approaches, sources from the Ministry of Finance confirm that negotiations with the IMF are progressing, with the expectation that the proposed measures will be implemented. This implementation will likely facilitate a staff-level agreement with the IMF following the budget’s approval, thereby securing the financial assistance Pakistan needs under the new loan program.
