A burdensome budget
A heavy tax-laden budget seems to be on the cards as the government has agreed to stringent IMF conditionalities to ensure revenue generation targets are met. Among the most lethal for the public would be a further rise in petroleum development levy (PDL), as well as sales tax on many more services and agricultural income. The Fund has set a staggering target of Rs1.73 trillion on PDL whereas defence allocation in the coming budget is to rise by Rs101 billion to reach Rs2.665 trillion. These figures are estimated to swell Budget 2026-27 to Rs17.1 trillion, posting a 9% rise.
These figures solicit minute monitoring as federal and provincial governments will slap additional taxes to raise Rs860 billion in the backdrop of a Rs680 billion tax shortfall in the first three quarters of the outgoing fiscal year. With an additional Rs259 billion supposed to be generated from PDL, the price of petroleum products will rise further. To add to the consumer's burden, another Rs215 billion will be procured through audit, production monitoring and other enforcement measures.
The coming fiscal year must see a Rs15.27 trillion tax target achieved, which seems quite unlikely given the rotten edifice of the FBR. That means an additional revenue of 0.6% of GDP. Rumours are rife that there won't be any raise in salaries and pensions, as austerity measures are sadly confined to the commoners in a society captured by the elite that eats away $22 billion per annum, roughly 6% of GDP. Last but not least, the IMF bailout programme will ensure that the budget is strictly passed as per the lender's conditionalities, which include amending laws governing the special economic and technology zones, and regularly adjusting the electricity and gas prices to maintain a progressive tariff structure.
The new tax measures will surely be toiling at a time when inflation has moved into the double-digit territory, trade deficit has hit a 46-month high of $32 billion, forex reserves are standing just around $17 billion and remittances are anticipated to fall amid worsening geopolitical situation.