3 Key Points to Monitor in the Upcoming Budget
Key Focus Areas in the 2024-25 Budget
- Government’s Financial Strategy
The 2024-25 budget will center on how the government plans to balance its finances. As in previous years, the government will emphasize protecting ordinary citizens, while the opposition will criticize its impact on the populace. Media coverage is expected to highlight the IMF’s conditions more than before, given the ongoing economic crisis and the need for support from creditors.
Important Elements to Watch
- Tax Targets and Collection Methods
The government is expected to set a high tax collection target. It’s important to examine the real growth in tax revenues compared to last year, considering inflation, and the mechanisms for achieving these targets. Likely, the focus will be on increasing regressive taxes and extracting more from existing taxpayers, maintaining the status quo and failing to broaden the tax base.
- Debt Servicing and Interest Payments
In 2022-23, nearly 73% of tax revenue went towards debt servicing. It’s crucial to check the debt servicing goal for the upcoming year and compare it to tax revenue targets. This will indicate the interest rate and inflation projections, impacting growth, business investments, job creation, and the cost of living for citizens.
- Privatisation Receipts
The government aims to privatize entities like Pakistan International Airlines (PIA). The budget’s privatisation receipts target will show the government’s commitment to selling assets and their contribution to revenue. Past targets have been missed significantly, so this year’s target will be telling.
- Conclusion: Fiscal Sustainability
Amidst various announcements, focus on the fiscal sustainability of Pakistan. The budget’s credibility will influence the IMF program’s progress and macroeconomic stability. The government will need to balance meeting IMF targets and managing political challenges.
