Federal Finance Minister Muhammad Aurangzeb on Thursday addressed stakeholder concerns about the 2024-25 federal budget, which was presented to Pakistan’s National Assembly the previous day.

The finance minister stated that Pakistan’s current tax-to-GDP ratio is unsustainable, and the government aims to increase this ratio to 13% within the next three years. He also said the government seeks to formalize the undocumented economy and digitize financial processes.

Regarding the Petroleum Development Levy (PDL), the minister explained that the proposed increase from Rs60 to Rs80 will be implemented gradually over the next fiscal year.

“The PDL will be linked to international oil prices,” he said.

The finance minister stated that the government has maintained the annual exemption for salaried individuals at Rs600,000. Additionally, the top tax rate of 35% for the highest income bracket has been kept unchanged.

“However, we have made some changes in the tax slabs,” he said, adding that non-filers will see an increase in “tax in transaction”.

“Back in April, we initiated the registration of retailers voluntarily. From July onwards we will start imposing taxes,” he said.

The finance minister stated that the government aims to eliminate the concept of non-filers. He emphasized the importance of bringing the retail and wholesale sectors into the tax net to broaden the overall tax base.

“Back in April, we initiated the registration of retailers on a voluntary basis. From July onwards we will start imposing taxes,” he said.

“This shows the weight of the undocumented economy,” Aurangzeb said.

The finance minister shared that the Export Refinance Scheme, previously managed by the State Bank of Pakistan (SBP), is being shifted to the EXIM Bank. He stated that a significant portion of the refinance funds will now be required to be provided to the small and medium enterprise (SME) sector.

Aurangzeb said that Pakistan’s IT industry is worth $3.5 billion now as the government has aimed to take it to $5 billion.

Pakistani Secretary of Finance, Imdadullah Bosal, stated that the targeted inflation rate of 12% for the upcoming 2024-25 fiscal year is a realistic target.

The finance minister stated that the government is working with all stakeholders on privatization efforts. He noted that two assets, Pakistan International Airlines (PIA) and Islamabad Airport, are already in the process of being privatized.

Aurangzeb said these two transactions are expected to be completed by August. He also shared that the Prime Minister has directed the government to concurrently prepare the documentation for privatizing the Karachi and Lahore airports, once the Islamabad Airport transaction is completed.

The finance minister reiterated that the discussions for a new IMF program are progressing positively, but he refrained from providing further details until a staff-level agreement is reached. Aurangzeb expressed hope that a staff-level agreement with the IMF will be achieved by July.

The finance minister rejected that the Pakistan People’s Party (PPP) was not integrated regarding budget prospects.

The finance minister stated that the government is working to shut down certain ministries, which will become apparent in the coming months as a measure to reduce government expenditure.

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The budget for the 2024-25 fiscal year is aimed at a 3.6% economic growth target. The budget appears aimed at appeasing the International Monetary Fund (IMF) and addressing Pakistan’s growing fiscal challenges through higher taxation measures.

The government also raised the minimum wage to Rs37,000 proposals related to privatisation and the energy sector were discussed.