Budget 2024-25 sets big tax target ahead of IMF talks

Pakistan has set a challenging tax revenue target of Rs13 trillion for the year starting July 1, a near 40% jump from the current year, in its national budget on Wednesday that looked to strengthen the case for a new bailout deal with the International Monetary Fund (IMF).

The ambitious revenue targets for the fiscal year through June 2025, presented by Finance Minister Muhammad Aurangzeb in parliament, were in line with analyst expectations with total spending at Rs18.87 trillion.

Pakistan had to find ways to increase its revenues to reduce its fiscal deficit as part of reforms being discussed with the IMF. The country is in talks with the lender for a loan of $6 billion to $8 billion as it seeks to avert a default for an economy growing at the slowest pace in the region.

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The rise in the tax target is made up of a 48% increase in direct taxes and 35% hike in indirect taxes over revised estimates of the current year. Non-tax revenue, including petroleum levies, is seen increasing by a whopping 64%.

The finance minister further said that the sales tax would increase to 18% on textile and leather products as well as mobile phones. He also announced a hike in the tax on capital gains from real estate.