Previous Editions
  • Budget 2024-25 is a continuation of tight fiscal policy
  • Evaluating the balance between optimism and overlooked reforms for sustainable growth

Highlights from the 2024-25 budget:


Targets 3.6% economic growth up from 2.38%
Fiscal deficit seen at 6.9% of GDP


Total spending is estimated to be Rs18.9 trillion ($67.84 billion)
Expects debt servicing of Rs9.8 trillion
Defense expenditure of Rs2.1 trillion expected
Pension payments seen at Rs1 trillion
Total subsidies projected at Rs1.4 trillion
Projects 27% increase in cash handouts to Rs600 billion under BISP


Target total tax revenue of Rs13 trillion
Targets total non-tax revenue of Rs3.5 trillion
Aims to secure Rs30 billion from privatisation
Targets net external receipts of Rs666 billion

Pakistan is seeking to revive its economy after two years of slump following political volatility. It seeks to balance the domestic commitments of the 240 million populace with the demands of fiscal prudence from the IMF. Before the announcement, inflation has come down to 25%, fuel prices have also shown a declining trend and foreign reserves stood at $9 billion. The rupee was somewhat stable at 280 per dollar and the stock market has touched its highest level of 75,000. It was in this backdrop that the budget for the year 2024-25 was announced.

The budget for the year 2024-25 could best be explained as a ‘heavy taxation budget’’ prepared on the guidelines of the IMF, which is cautiously optimistic but inherently inflationary. Although the document gives a brief hint that the government wants to shift the focus from a consumption-oriented society to a market-based or investment-oriented society, the details on how it aims to do so are missing. The formal sector once again faces a higher burden of taxes, with little discussion on how to bring the informal sector and other sectors with more favourable concessions into the tax net. The government has set a lofty target of tax revenue amounting to Rs13 trillion without realising that the main issue in taxation is implementation and compliance. What the government has done is that it has deepened the tax base but there is no expansion in the tax net.

Although exporters, manufacturers and the real estate sector have been proposed to be brought under the tax net, it does not offer anything on bringing agriculture, retailers and wholesalers into the tax net. It is evident that overtaxed segments will continue to bear the burden of a narrow tax base, struggling to stay within the system. Despite some positives like allocations for digitisation and automation and taxing hybrid vehicles, it mainly misses out on bold structural reforms in taxation, governance and export sectors.

While concessions have been allowed on the manufacturing of local solar panels and lithium-ion batteries, taxes have been imposed on mobile phones, luxury vehicles, construction materials (steel and cement), and imported glass and paper products. The imposition of 2.5% WHT on manufacturers is likely to be passed on to consumers. Exporters brought under a tax regime is likely to be resisted and reversed. In case of any shortfall in the total tax revenue target of Rs13 trillion, it remains to be seen how the role of SIFC and materialisation of commitments from UAE, Saudi Arabia and China pans out. The announcement of a mini-budget is also not out of the question that may bring additional tax measures.

In conclusion, the federal budget, while optimistic in its projections, falls short of addressing critical issues such as broadening the tax base, and is instead instituting measures that are inflationary in nature. By continuing to target existing taxpayers and failing to incentivise compliance among non-filers, it risks exacerbating the transition from the formal to the informal economy. The inflationary nature of indirect taxes further complicates the economic landscape, potentially undermining efforts to achieve sustainable growth. Without significant reforms and a broader tax base, the burden on the formal economy will only increase, limiting the country’s ability to foster a truly investment-oriented environment, and a path for sustainable growth.