ISLAMABAD: The Federal Board of Revenue (FBR) collections witnessed a robust increase of 27.9 percent during the current year, reaching Rs2,748 billion compared to Rs2,149 billion in the same period last year.
Non-tax revenue, primarily from the petroleum levy, saw a staggering growth of 114.7 percent, surging from Rs211 billion to Rs453 billion. However, the report cautions that the higher mark-up payments could exert substantial pressure on the expenditure side.
The Finance Act 2023 imposed additional taxes, estimated at Rs415 billion, mainly on the existing taxpayers.
The petroleum levy was also raised from Rs50 per litre to Rs60 per litre. This move prompted a recent visit from the International Monetary Fund (IMF) team, who talked with the Pakistani authorities and emphasized the need for tax structure reform to ensure fairness and equity, said Dr. Zafar ul Hassan, Joint Chief Economist at the Ministry of Planning Development and Special Initiatives.
He added that the surge in mark-up payments suggests that the budgeted domestic borrowing of more than Rs5 trillion was incurred during the first quarter. The bulk of this borrowing is through instruments like the Pakistan Investment Bonds and treasury bills, with only Rs1.9 trillion budgeted from the national savings schemes.
“This borrowing pattern is noted to have a highly inflationary impact, potentially contributing to the 29.2 percent consumer price index for November 2023,” he added.
He highlighted that remittances declined by 13.3 percent in July-October 2023 compared to the same period the previous year. The finance minister’s announcement of allocating Rs80 billion to encourage workers’ remittance inflows through official channels is anticipated to yield positive results.
Foreign exchange reserves stood at $7.2 billion on 23rd November 2023, slightly lower than the previous year. However, hopes are pinned on the inflow of over $25 billion in pledged foreign direct investment from the GCC countries and China.
“While there are signs of revival, such as 0.68 percent positive growth in the large-scale manufacturing (LSM) sector from July to September, concerns arise from the negative 291.1 percent growth in credit to the private sector compared to the same period the previous year,” he said.
On a positive note, the current account deficit (CAD) has declined by 65.9 percent from 3.1 billion dollars in July-October 2022-23 to 1.05 billion dollars in the comparable period this year.
He concluded that as Pakistan navigates through these economic dynamics, the need for strategic fiscal management and reform remains imperative. The government’s response to these challenges will likely shape the economic trajectory in the coming months. –INP
