Govt weighs ‘mini-budget’

ISLAMABAD, NOV 08 (DNA) — The Shehbaz Sharif-led government has begun preparations for high-stakes discussions with the upcoming International Monetary Fund (IMF) staff mission, aiming to finalise a strategy this weekend.

If a mini-budget is introduced, seven proposals for tax hikes across various sectors are on the table.  However, the Federal Board of Revenue (FBR) plans to advise the government against raising tax rates, citing signs of economic recovery and easing inflation pressures,.

“The government is going to firm up its strategy this weekend for holding negotiations with IMF Staff Mission, led by Nathan Porter, who are scheduled to pay a visit to Islamabad from November 11-15, 2024,” top official sources confirmed while talking.

There are two options available to Pakistani authorities. They may unveil a mini budget or reduce expenditure to strike a balance in achieving the agreed fiscal deficit and primary balance targets. Now it is a test of the economic managers how they can forcefully convince the government to reduce its expenditures instead of further suffocating the economy by unveiling a mini budget.

The FBR has already faced a revenue shortfall of Rs189 billion in the first four months of the current fiscal year. It is projected that this revenue shortfall will go up to Rs321 billion in the first half of the current fiscal year.

The FBR thinks that the government must make an effort to convince the IMF to slash the revenue collection target of Rs12,913 billion keeping in view changes that occurred in nominal growth and reduction in LSM growth and imports. However, the IMF might not extend its support for a reduced target of FBR.

Pakistan has given a written commitment that in case of revenue shortfall, there will be a contingency plan to raise tax revenues. “Should revenue collection underperform, contingency measures will be implemented in consultation with IMF staff with priority on increases in withholding and excise taxes. —DNA