Tag: Pakistan budget

  • 17.6 percent hike in defence budget in new budget

    17.6 percent hike in defence budget in new budget

    The federal government on Wednesday allocated Rs 2.12 trillion for the armed forces in the upcoming fiscal year 2024-2025, a substantial increase of 17.6 percent compared to last year’s budget.

    This is the second-largest hike in the defence budget in six years and marks the second consecutive year of increased funding for the armed forces.

    Last year, there was a 15 percent increase in defence budget – different from the traditional 11 percent annual increase which took place over the last decade.

    Interestingly, according to budget figures presented to the NA by the government, it has been revealed the armed forces exceeded last year’s allocated budget of Rs 1.8 trillion, in reality spending Rs 1.83 trillion.

    The significant hike in defence spending highlights Pakistan’s priorities in a region marred by geopolitical tensions.

  • IMF team set to visit Pakistan to discuss new programme before budget finalisation

    IMF team set to visit Pakistan to discuss new programme before budget finalisation

    An International Monetary Fund (IMF) mission is set to visit Pakistan in May to discuss a potential new financial programme, the IMF announced on Sunday.

    This visit comes as the Pakistani government begins crafting its annual budget for the next financial year with the aim of stabilising the economy and implementing necessary reforms.

    The announcement follows the completion of a short-term $3 billion programme last month, which helped Pakistan avoid a sovereign default.

    Prime Minister Shehbaz Sharif’s government is now seeking a more comprehensive and longer-term agreement with the IMF to ensure sustained economic recovery and growth.

    “A mission is expected to visit Pakistan in May to discuss the FY25 budget, policies, and reforms under a potential new programme for the welfare of all Pakistanis,” the IMF stated in an email response to Reuters.

    However, the exact dates of the visit and the specifics of the programme were not disclosed.

    Pakistan’s fiscal year runs from July to June, and the budget for fiscal year 2025 must be presented before June 30.

    The IMF emphasised the importance of accelerating reforms, stating that the size and duration of the new programme would be determined by the reform package and the country’s balance of payments needs.

    Pakistan’s economy, which is valued at around $350 billion, has shown signs of stabilisation following the last IMF programme, with inflation decreasing from a record high of 38 per cent in May 2023 to about 17 per cent in April 2024.

    However, the country still faces significant fiscal challenges and a high deficit, and growth has stagnated due to strict import controls.

    The current growth rate is expected to be around 2 per cent this year, a slight improvement from the negative growth rate experienced last year.

    In a recent interview with Reuters, Finance Minister Muhammad Aurangzeb expressed optimism about reaching an agreement on a new IMF programme in May. Pakistan is expected to seek at least $6 billion in additional financing from the IMF, including funding under the Resilience and Sustainability Trust.

    The forthcoming IMF visit is crucial for Pakistan as it prepares its budget and seeks to implement reforms to strengthen the economy.

    The discussions are likely to focus on fiscal discipline, economic growth, and the welfare of all Pakistanis, with an emphasis on achieving long-term stability and sustainability.

  • Finance Ministry responds to IMF’s concerns on budget, pledges commitment to programme

    Finance Ministry responds to IMF’s concerns on budget, pledges commitment to programme

    The International Monetary Fund (IMF) has publicly raised reservations regarding Pakistan’s budget, prompting a response from the Finance Ministry. The ministry clarified that the budget is not part of the pending ninth review, which has been delayed since November of last year. However, it emphasised its commitment to finding an amicable solution through ongoing engagement with the IMF.

    In a statement addressing the IMF’s concerns, the ministry highlighted the completion of the ninth review in early February 2023, with all technical issues promptly addressed. The only outstanding matter was external financing, which was resolved after discussions between Prime Minister Shehbaz Sharif and the IMF managing director.

    The ministry clarified that although the FY24 budget was not part of the ninth review, it shared the budget numbers with the IMF mission in line with the prime minister’s commitment. Continuous engagement with the IMF, including discussions on the budget, is ongoing.

    Addressing the IMF’s concerns about broadening the tax base, the ministry noted the addition of 1,161,000 new taxpayers by the Federal Board of Revenue (FBR) over the past 11 months. It emphasised that efforts to expand the tax base will continue, highlighting the introduction of a 0.6 per cent advance adjustable withholding tax on cash withdrawals over Rs50,000 as a significant step.

    The ministry defended the tax exemptions announced in the budget, describing them as catalysts for growth in the real sectors of the economy. It assured that the budget provides targeted subsidies for families with a PMT scorecard of up to 40, not limited to the Benazir Income Support Programme (BISP) beneficiaries.

    Regarding the amnesty measures, the ministry explained that the only change made was to “dollarize” the value of an existing provision in the IT Ordinance. It clarified that this facility has always been available and that the cap of Rs10 million ($100,000 approximately) introduced in FY2016 is being resolved based on the rupee equivalent of $100,000.

    The ministry reiterated its full commitment to the IMF programme and eagerness to at least complete the ninth review. It emphasised the government’s willingness to make difficult decisions and engage with the IMF to find an amicable solution.