The Federal budget for FY25, according to brokerage house Topline Securities, would probably make room for a new International Monetary Fund (IMF) initiative.According to Topline’s analysis, the government’s tax actions under this budget are relatively balanced and less likely to cause inflation than anticipated. Prior to this, it was thought that the government would raise the GST by one percent, for example.
If the parliament approves these reforms, the brokerage house believes that they will open the door for the IMF program.According to the study, the tax income target established by the Federal Board of income (FBR) is Rs. 12.97 trillion, which represents a 40% increase over the expected collection of Rs. 9.25 trillion in FY24. This exceeds both the average increase of 20 percent over the previous five years and the FY24E growth of 29 percent.
Despite the ambitious goal, the trading company expects the government may collect between Rs. 12.4 and Rs. 12.7 trillion with the new tax laws.The remaining amount can be covered by cutting back on expenses like development spending and/or subsidies/grants, etc., or by enacting new taxes, such as a further hike in PDL in the middle of the fiscal year (January 2025), etc.
Primary Balance
Against a projected surplus of 0.4 percent in FY24, the government’s primary surplus aim for FY25 is Rs. 2.5 trillion, or 2.0 percent of GDP. In its May 2024 report, the IMF projects a primary surplus of 0.4 percent of GDP for FY25. With the province surplus excluded, the primary surplus for FY25 would be 1% of GDP, whereas FY24E would see a 0.13 percent deficit.
According to Topline, the government will meet its primary surplus target because any shortfall, estimated at around Rs. 300–500 billion, can be covered by further tax increases by the middle of the following fiscal year or by cost rationalization, which involves cutting back on current spending on subsidies and other development-related costs.
