Steps to broaden tax base: FY24 budget advances primary surplus of 0.4pc of GDP: IMF

ISLAMABAD: The fiscal year 2024 budget advances a primary surplus of around 0.4 percent of GDP by taking some steps to broaden the tax base and increase tax collection from under taxed sectors, including the construction and agriculture sectors, said the International Monetary Fund (IMF).

The Fund on its website uploaded, “Frequently Asked Questions on Pakistan,” which included the key policy recommendations to increase revenue mobilisation.

The fund stated that going forward, the authorities plan to continue strengthening revenue administration efforts, together with support from the World Bank, the Asian Development Bank, and the IMF. Work on creating a Compliance Risk Management framework in fiscal year 2023 will enable improvements in tax compliance in fiscal year 2024.

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It further stated that the stand-by-arrangement (SBA) aims to stabilize the economy and address the needs of the Pakistani people by providing an anchor for policies to address domestic and external imbalances and a framework for financial support from multilateral and bilateral partners. Policy efforts under the SBA-supported program centre on the careful implementation of the fiscal year 2024 budget; restoring a market-determined exchange rate to absorb external pressures and eliminate FX shortages; and appropriately tight monetary policy aimed at disinflation.

Policy actions also include continued reform efforts to improve energy sector viability, strengthen State Owned Enterprises (SOEs) and governance, and build climate resilience. Steadfast policy implementation is critical for Pakistan to address its large financing needs, support the most vulnerable, especially from high inflation.

The new SBA protects the most vulnerable by further increasing the fiscal year 2024 Benazir Income Support Program (BISP) envelope to maintain the generosity of BISP programs in real terms. The SBA also increases development spending to enhance infrastructure and climate resilience.

Additionally, policy actions to place inflation on a downward path towards the SBP’s target will help protect the purchasing power of the most vulnerable through continued monetary policy tightening and the easing of price pressures caused by the shortage of basic goods following the removal of import restrictions and FX rationing.

The fund further stated that Pakistan’s high vulnerability to natural disasters underscores the importance of climate adaptation policies. The authorities plan to accelerate critical adaptation measures, including strengthening flood safety projects and transforming the agri-food system.

They are also working on an action plan to enhance the investment efficiency of climate-related projects for cabinet approval by year-end. Over the medium term, the National Adaptation Plan, to be developed with support from UNEP, would also help enhance policy efforts towards the resilience of particularly vulnerable and exposed sectors, including agriculture, power, and transport infrastructure.

Copyright Business Recorder, 2023