New Budget Hits Pakistani Middle Class with High Inflation, Hike in GST
Economists warn of economic hardships as Pakistan seeks $8 Billion IMF bailout
Tariq Ali 
Islamabad: The upcoming budget for the fiscal year 2024-25, crafted under stringent IMF conditions, won't bring much relief for Pakistan's middle class.
The government is poised to hike electricity and gas prices while introducing new taxes, burdening the public to meet the hefty expenditures.
Prepared to secure an IMF bailout of up to $8 billion, the proposed federal budget of Rs18,900 billion will operate with a deficit of Rs9800 billion. Inflation is expected to surpass the 12% official target, with electricity prices soaring by Rs5 to Rs7 per unit.
Economic analyst Ashfaq Tola anticipates significant challenges ahead, given the budget's conditions. The Federal Board of Revenue (FBR) aims for an annual tax target of Rs13,000 billion, necessitating additional levies. To rope in non-filers, a 2.5% income tax across the supply chain and increased taxes on various professions are proposed, aiming to generate Rs4800 billion.
Under the new budget, hundreds of items, including imported food and stationery, will face an 18% GST. Moreover, taxes on old vehicles will rise, and sectors like retail will be included in the tax net.
Approximately Rs9700 billion will service loan interest, with Rs2100 billion allocated for defense. The federal Public Sector Development Programme (PSDP) budget may increase to Rs1500 billion, and subsidies are estimated at Rs1300 billion.
While the Benazir Income Support Programme (BISP) continues and small government employees receive raises, the middle class will bear the brunt of additional taxes.
Economic expert Dr. Waqar Ahmad predicts minimal relief due to IMF constraints, foreseeing hardships for middle and high-income groups. The budget aims to bring 60 lakh traders into the tax net by imposing an 18% GST on various goods.
Dr. Abid Silhari believes that despite reform aspirations, political tensions may arise post-budget approval. Ensuring currency stability amidst ongoing inflation remains a paramount challenge for the government.
