Pakistan’s government plans to increase total tax revenues by around 40% in the 2024/25 fiscal year, aiming to raise $46 billion out of a $68 billion budget. The budget includes scrapping petrol/gasoline subsidies and cracking down on tax avoidance to secure an IMF loan of $6-8 billion. Despite the tax increases, with inflation projected at 13.5%, there are concerns about the impact on voters, 40% of whom already live below the poverty line.
Short-term Fix for Long-term Structural Problems
Economist Ali Hasanain criticizes the government for prioritizing short-term measures over long-term reforms. With limited progress in broadening the tax base, increasing revenue can only come from tax hikes. Pakistan’s central bank also warns of potential inflationary consequences due to the budget. Years of fiscal mismanagement and external crises have pushed Pakistan to the brink of financial ruin, leading to reliance on IMF loans and austerity measures.
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