Pakistan’s coalition government is expected to set ambitious fiscal targets in the 2024-25 budget on Wednesday, officials and analysts said.
Pakistan is in talks with HPG to borrow between $6 billion and $8 billion to avoid default for the region’s slowest-growing economy.
“The budget is very important for Pakistan’s HPG program and we need to close the gap between our revenue collection and our total expenditure, which can be contradictory,” said Ali Hasanain, head of the economics department at Lahore University of Management Sciences.
Pakistan avoided default last summer thanks to a short-term HPG bailout of $3 billion over nine months.
Although fiscal and external deficits have been kept under control, this has come at the expense of growth and industrial activity, as well as high inflation, which has averaged 30 percent in recent years and 24.52 percent in recent years. 11 months.
Next year’s growth target is expected to be 2 percent this year and 3.6 percent higher than last year’s economic contraction.
Prime Minister Shehbaz Sharif has promised tough reforms since being elected in February, but high prices, unemployment and a lack of new job opportunities have put political pressure on the coalition government.
In last month’s budget note, Standard Chartered said it would be difficult for the government to fully implement all measures to raise revenue by expanding the International Monetary Fund’s tax base and increasing electricity tariffs.
“The weak coalition government, open and popular opposition and difficulty implementing major structural reforms are reasons for caution,” Standard Chartered said in a note.
“The main concern among stakeholders is the risk of public backlash from stricter tax measures,” he said.
It will also be the first test for new Finance Minister Mohammad Aurangzeb, the former chairman of Pakistan’s largest HBL bank, who has been brought in by Sharif to formulate new policy solutions to address the problems facing the $350 billion economy.
The former finance minister backed away from tougher steps to cut subsidies, reduce government spending and increase tax revenue from politically sensitive sectors such as housing, agriculture and retail.
Mustafa Pasha, chief investment officer of Lakson Investments, said he believes such a move would be difficult.
“Businesses for agricultural, retail and real estate taxes will be less structured and may face legal challenges that will prevent any collection,” he said. Pakistan could not pay for a long time.
Another important thing to consider in the budget will be the result of privatization. Pakistan is looking to make its first major sale in decades as it sells shares in its national airline.
It is expected to be the first to sell loss-making entities, especially in the troubled power sector.
