Tag: fiscal trends

  • FBR collects Rs5.15 trillion in taxes in less than eight months

    FBR collects Rs5.15 trillion in taxes in less than eight months

    The Federal Board of Revenue (FBR) has revealed that it has achieved a remarkable milestone by collecting revenue amounting to Rs5.15 trillion from July 2023 to mid-February 2024.

    This represents a substantial 30 per cent increase compared to the same period in the previous fiscal year, according to an official press release.

    The report indicates that the growth in tax revenue is attributed to a comprehensive strategy employed by the FBR, with a keen focus on both domestic and import taxes.

    Tax refunds during this period witnessed a substantial 28 per cent growth, further contributing to the positive financial trajectory.

    A breakdown of the month-wise revenue collection for the period from July 2023 to January 2024 reveals that overall growth in domestic taxes reached an impressive 40 per cent. Concurrently, import duty and related taxes experienced a significant uptick of 16 per cent.

    The surge in revenue collection aligns with the revival of the Gross Domestic Product (GDP) and increased scrutiny of FBR’s collection processes.

    However, growth in import taxes faced challenges, primarily due to downward adjustments in import tariffs over the years and recent restrictions on import licences imposed by the State Bank of Pakistan to address balance of payments concerns amid foreign exchange constraints.

    The report acknowledges that revenue collection from imports incorporates the impact of improvements in import valuations, resulting in an additional Rs151 billion in collections.

    Additionally, the anti-smuggling drive witnessed a substantial 69 per cent growth in the fiscal year compared to the previous year (FY 22–23).

    Despite these achievements, concerns were raised regarding the decline in the growth of import taxes. This decline is attributed to two main factors: the gradual reduction in import tariffs and recent restrictions on import licenses.

    The need for continued efforts in anti-smuggling activities was emphasised, particularly in Baluchistan, where the customs force currently consists of only 378 personnel.

    Strengthening the enforcement efforts by increasing personnel in this region was suggested as a potential solution.

    The report concludes on a positive note, highlighting that the revenue mobilisation from domestic taxes now accounts for over 64 per cent of the total revenues collected in the current financial year.

    Simultaneously, the share of import taxes has decreased to 36 per cent, marking a significant shift from the 50 per cent share observed just three years ago. This indicates a positive trend in the diversification of revenue sources for the FBR.

  • December inflation may surpass 30% due to gas price hike

    December inflation may surpass 30% due to gas price hike

    In December, inflation is expected to surpass the 30 per cent threshold, driven by the recent increase in gas prices and the persisting adverse base effect, which continues to impact the consumer price index (CPI).

    The headline inflation for December is projected to settle at approximately 30.11 per cent year-on-year (YoY) and 1.18 per cent month-on-month (MoM), in contrast to the previous month’s figures of 29.2 per cent YoY and 2.7 per cent MoM.

    This monthly inflation rate is significantly lower than the 12-month average of 2.17 per cent MoM.

    Consequently, the average yearly inflation for the first six months of FY24 is estimated to be 28.87 per cent YoY, compared to 25.05 per cent YoY in the same period of FY23.

    The surge in inflation can be attributed to the adverse base effect and the notable increase in gas prices, which were not fully realised in the previous month.

    Conversely, food inflation is expected to exhibit a marginal decrease of 0.29 per cent MoM, driven primarily by the decline in prices of tomatoes, potatoes, chicken, and oil.

    Additionally, the transport index is forecast to undergo a 4 per cent MoM decrease, mainly due to the relief in petrol and high-speed diesel (HSD) prices.

    Post-December, inflation is anticipated to decline at a relatively faster pace, supported by the favorable base effect, the delayed impact of monetary tightening, and other administrative measures.

    The December spike is attributed to the lingering effects of the overdue gas price hike. Notably, unforeseen climate events, volatility in global commodity prices, especially oil, and external account pressures pose significant upside risks to the inflation outlook.

    Global oil prices are on the rise amid challenges in Red Sea shipping, potentially threatening the inflation outlook.

    Moreover, the successful completion of the International Monetary Fund (IMF) review, coupled with additional loan programmes, remains crucial.

    The outstanding amount of $1.8 billion under the stand-by arrangement (SBA) is yet to be released.

    The accompanying chart illustrates the yearly inflation trajectory based on different MoM CPI scenarios. At 0.5 per cent and 1 per cent MoM CPI, yearly inflation is projected to fall below the 22 per cent policy rate by February–March 2024.

    By the end of FY24, with 0.5 per cent and 1 per cent MoM CPI, it is expected to decrease to 15.29 per cent and 19.37 per cent, respectively, a significant change from the previous month’s forecasts of 12.9 per cent and 17.5 per cent.

    Considering the last 12-month average of 2.17 per cent MoM, the real interest rate is anticipated to remain in negative territory by the end of FY24.