The National Assembly of Pakistan has approved the Federal Budget for the fiscal year 2024–2025, allocating a budget of Rs 18,877 billion. The primary goal of the FY24 budget is to control the fiscal deficit by managing the nation within its means. The customs and revenue budget plans are now public. The Finance Department of the Government of Sindh has presented the citizen budget for the fiscal year 2024–2025. More precise information regarding the budget’s many sectors and provisions is still unknown despite the material that is now available. The budget also calls for a paradigm change in the direction of the country’s economy, moving from one centred on state control and consumption to one centred on savings and investments. The government wants to become less involved in the economy and encourage a market-driven model.
The Finance Bill 2024–25 aims to resolve the financial issues across the country. Key fiscal activities being undertaken are Changes to Tax Policy: Demands are for high levels of direct and indirect taxation with a 48% rise in direct and 35% rise in indirect taxation. The increase in Public Sector Development Program (PSDP) spending unveils that the government is committed to infrastructure development, which caters to social, transportation, and energy projects. Showing how determined it is when collecting taxes by using aggressive targets as well as coming up with strategies meant to enhance voluntary tax payments implies a commitment to expanding its revenue sources that are important for ensuring sustainable economic growth. A point of view towards inflation that is different from the public’s is also where some relief lies, for it comes with increasing earnings along with the minimum wage, whomever may be concerned about at various times.
Pakistan’s tax collection burdens emanate from routine challenges that obstruct its financial plan. No clearly defined tax policy makes it necessary for business entities and the state to resort to unpremeditated measures, making strategic tax plans difficult to develop. This challenge is made worse by the increasing number of complex exemptions and rates that keep changing and arbitrary reviews that add more complexity to the situation. A regressive fiscal system, where all consumers are taxed uniformly without considering their income level, is created when a government relies on indirect taxes for most of its revenue generation. This results in a wide net that boosts inflation as prices shoot up for products and services.
The budget outlines a comprehensive plan to reform the current tax structure through the elimination of zero ratings, exemptions, and reduced rates, which have long been a burden on government revenue and impeding socio-economic development. This means that many items that were previously enjoying favourable tax slots will now be subjected to a normal rate of 17%, and a few others will be on reduced rates. This significant change in the tax structure offers hope for a more efficient and equitable system.
In regard to inflation and interest rates, the government’s budget sets ambitious targets: an inflation forecast of 12% next year and a GDP growth rate of 3.6%. The new policy anticipates higher tax revenues and arrears, particularly in the area of external debt. If global prices for oil and other commodities remain unchanged, there will be no problem with hitting the inflation target of 12 percent. These ambitious targets inspire confidence in the country’s potential for growth and development.
To get us out of this fiscal rut, we need to revisit – urgent Structural Reforms, Debt Management Strategy and Data-Driven Monetary Policy. Moreover, when you grab the bull’s horn, you’re trying to shave non-essential government operations. This implies closing down some agencies or departments that do the same thing as others do; hence, they do not need to exist independently of each other, and scaling back on what might be termed as new projects within our budgets until we finish spending money on what lies ahead; it also involves adopting an approach which ensures spending leads to outcomes. (Contributed by Dr. Muhammad Nawaz Iqbal).
