Finance Minister Muhammad Aurangzeb presenting the budget in National Assembly on Wednesday.—Photo courtesy: Ministry of Finance/X account

Finance Minister Aurangzeb presents Rs18.9tr federal budget ‘in line with IMF guidelines’

Tax collection target a lofty Rs13tr; raw materials of solar panel manufacturing zero-rated; PPP attends proceedings after initially threatening boycott.
Published June 12, 2024

Finance Minister Muhammad Aurangzeb on Wednesday presented his first federal budget with a total outlay of Rs18.9 trillion, which analysts say is broadly “in line with IMF guidelines”.

Pakistan’s budget for the upcoming year aims for a modest 3.6 per cent GDP growth, and sets an ambitious Rs13tr tax collection target, raising taxes on salaried classes and removing tax exemptions for the rest.

Aurangzeb, during the budget presentation, said that the goal was to widen the tax base to avoid burdening existing tax payers.

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This year’s budget, like last year’s, is widely considered to be crafted to align with the International Monetary Fund’s (IMF) requirements to secure another bailout, this time “larger and longer”.

Mohammad Sohail, chief executive of Topline Securities, told after the budget presentation concluded that the budget will help in fiscal consolidation and “is broadly in line with IMF guidelines”.


  • Total expenditure estimated to be Rs18.9tr
  • Ambitious Rs13tr tax revenue target set for FBR
  • Non-tax revenue target of Rs3.5tr
  • Aims to secure Rs30bn from privatisation
  • Expects debt servicing of Rs9.8tr
  • Petroleum levy increased by Rs20 on petrol and diesel, Rs25 on superior kerosene oil, light diesel and high-octane, e-10 gasoline
  • Targets 3.6pc GDP growth for 2024/25
  • Budget deficit projected at 6.9pc of GDP
  • Imports of raw materials used in solar panels, inverters and lithium-ion batteries manufacturing have been zero-rated
  • BISP raised by 27pc to Rs592bn

The finance minister thanked Prime Minister Shehbaz Sharif, PML-N chief Nawaz Sharif as well as various other leaders of the coalition government for their guidance in preparing the budget.

“Dear speaker, I think that despite political and economic challenges, our progress on the economic front in the past one year has been impressive,” Aurangzeb said.

He urged Pakistan to capitalise on a fresh opportunity to revitalise its economy.

“Pakistan has another opportunity to improve itself and embark on the path of economic development. I request everyone not to waste this chance,” Aurangzeb said.

The finance minister hailed the government’s efforts to address economic challenges and pledged to accelerate development under the leadership of PM Shehbaz.

“Before presenting the budget, I want to highlight our journey thus far,” the minister said. “Under Prime Minister Shehbaz Sharif’s leadership, we have pursued a homegrown agenda that has enabled us to overcome current economic challenges and boost the pace of development.”

Aurangzeb acknowledged the challenges faced by Pakistan’s economy, which had been struggling with depleted foreign reserves, a 40 per cent depreciation of the rupee, stagnant economic growth, and soaring inflation that pushed citizens below the poverty line.

He commended the government for securing a crucial nine-month IMF programme in June 2023, which helped Pakistan avoid economic collapse.

“The previous IMF programme was ending, and a new deal was essential to prevent a default. I commend Shehbaz Sharif’s government for their efforts in securing the programme,” he said.

Aurangzeb highlighted the significant improvement in economic indicators, crediting the PM and his team for their efforts. “Inflation stood at 11.8pc in May, a notable achievement considering the challenges. We’re on the right track, and inflation is likely to decrease further in the coming days,” he said.

The minister spoke of a significant turnaround in Pakistan’s economy, with foreign exchange reserves bolstered and international investors showing keen interest in investing in the country.

Key points from tax policy

  • Expand the tax base to enhance the tax-to-GDP ratio
  • Documentation of the economy through digitisation
  • Progressive taxation regime to increase burden on high earners
  • Increase in transaction taxes for non-filers
  • Protect vulnerable segments from impact of inflation

“Pakistan’s foreign exchange reserves have been strengthened, and international investors are now seeking opportunities to invest in our economy,” Aurangzeb said, highlighting the improved economic outlook.

He applauded the State Bank’s decision to cut interest rates, citing visible efforts to combat inflation. “The State Bank’s interest rate cut is a significant move, and the efforts to curb inflation are evident. Shehbaz Sharif and his team deserve congratulations for their commendable efforts to turn the economy around,” Aurangzeb said.

“These achievements are not ordinary. As a result of these, the country has exited a difficult time.”

The minister emphasised the need for patience and collective efforts to achieve sustainable economic development, cautioning that progress cannot be accelerated overnight.

Aurangzeb called for prioritising the private sector’s growth, acknowledging its crucial role in revitalising Pakistan’s economy.

“It’s time to give primary importance to the private sector in our economy,” Aurangzeb said.

Aurangzeb identified structural factors as key to addressing Pakistan’s economic imbalance, stressing the need to boost investment, economic output, and exports.

“We’re facing an economic imbalance, but structural factors like investment, economic output, and exports can help address this challenge,” Aurangzeb said, as he outlined a path forward for economic stability.

He said like most modern economies, we also need to keep in mind privatisation and regulatory reforms. The state should limit itself to essential public services only.

“To improve productivity, domestic and foreign investment should be encouraged,” he said.

Total budget outlay

The federal budget for fiscal year 2025 has a total outlay — the sum of expenditures and net lending of funds — of Rs18.877tr, representing a 30pc increase from the previous year’s budget.

Current expenditure

The government has proposed Rs17,203 billion for current expenditure in the FY25 budget, a substantial 29pc increase from the previous year.

Interest payments, or debt servicing, have surged 34pc to Rs9,775bn, consuming more than half of total budget outlay and becoming, like last few years, the government’s single largest expense.

Of that, defence expenditure constitutes Rs2,122bn, 17.6pc higher than last year’s budget, making up 1.71pc of GDP, largely unchanged from last year.

Federal revenue

Pakistan’s total revenue for fiscal year 2025 is budgeted at Rs17,815 billion.

After accounting for provincial transfers of Rs7,438 billion, the net revenue stands at Rs10,377 billion, representing a significant 48.7pc increase from the previous year.

FBR tax target

Aurangzeb highlighted the urgency of tax system reforms, citing Pakistan’s lagging tax-to-GDP ratio compared to other countries.

“The prime minister is closely monitoring the digitalisation of tax policies and FBR’s administrative reforms. Our goal is to broaden the tax net without burdening existing taxpayers,” Aurangzeb said.

The government has set an ambitious tax collection target for the Federal Board of Revenue (FBR) at Rs12,970 billion, a 38pc increase from last year’s goal.

Mohammad Sohail, chief executive of Topline Securities, says the tax collection target is high, but “we believe that considering new taxation measures, Pakistan may be able to reach closer to the primary and fiscal deficit estimates”.


Aurangzeb expressed the government’s commitment to tackling inflation, a top priority, and noted significant progress in reducing price pressures.

“Inflation had surged to 38pc a year ago, with food inflation reaching 48pc, causing hardships for low-income households. I’m pleased to report that our improved economic strategy has successfully brought inflation down,” Aurangzeb said.

The government has set an inflation target at 12pc for next fiscal year, aiming to rein in prices.

“In May 2024, the Consumer Price Index stood at 11.8pc and food inflation at 2.2pc. We’ve worked tirelessly to bring inflation into single digits and will sustain our efforts to ensure price stability,” Aurangzeb said.

Faisal Mamsa, the chief executive of financial services firm Tresmark, told that inflation projections of “12pc are realistic and achievable”.

“This can imply an average policy rate of 16pc,” Mamsa said.

Fiscal deficit

PSDP allocation

The government has allocated Rs3,792.2bn for the Public Sector Development Programme (PSDP) in FY25, a 40pc increase from last year’s Rs2,709bn.

The total federal PSDP, which includes state-owned enterprises and public-private partnerships, has received a boost with an allocation of Rs1,696 billion, representing a 47.5pc increase from last year’s Rs1,150 billion.

Provincial PSDP allocation, on the other hand, has risen 34.4pc to Rs2,095 billion, up from Rs1,559 billion in the previous year.

‘Hard work needed’

“There is a need for patience and extreme hard work, combined with homegrown corrective plans. The public must work together with institutions to achieve our economic goals,” Aurangzeb said, once again stressing the importance of collaboration and sustained efforts.

Aurangzeb emphasised the need for Pakistan to transition from a government-controlled economy to a market-driven economy, aligned with global standards, to boost exports and foster a savings-and-investment-based economy.

“We must shift from a government-determined economy to a market-driven economy, aligning our economic system with global standards, increasing exports, and promoting a savings-and-investment-based economy over a consumption-based one,” Aurangzeb said.

He highlighted the importance of considering equity and inclusion when implementing economic reforms, urging bold measures to ensure a more equitable economic system.

“When introducing economic reforms, we cannot ignore equity and inclusion. Bold measures are necessary to create a more inclusive economic system,” the minister said.

Earlier, the session commenced with the recitation of the Holy Quran and the national anthem.

PM Shehbaz and Deputy PM Ishaq Dar — Aurangzeb’s predecessor — attended the session.

Disgruntled PPP

The session started with a nearly two-hour delay after the PPP voiced reservations on the development allocations and PML-N managed to placate them.

PPP lawmakers attended the session to complete the required quorum, albeit without party chairman Bilawal Bhutto Zardari.

Earlier, PPP leader Khurshid Shah, speaking to reporters, said the party had reservations with regard to the PSDP budget and that the PPP should have been taken into confidence for the budget.

“It was decided that the PSDP for the four provinces would be decided together,” he said while speaking to the media.

“We are in the same boat. If something goes wrong, it would be not just for the PML-N, but for us as well [as allies],” the PPP leader said, adding that the decision to not take part in the speech was to protect their party.

He stated that if his party were taken into confidence then they can have dialogue.

Following a parliamentary party meeting, PPP MNA Shazia Marri told reporters that: “We had two party meetings, one yesterday and another today, to discuss our concerns and recommendations, but they were not addressed.

 PPP leaders during a parliamentary party meeting ahead of the budget on Wednesday.
PPP leaders during a parliamentary party meeting ahead of the budget on Wednesday.

“Our members have protested the violation of our agreement on PSDP, and we have received no response to our legitimate concerns.”

Following the airing of these concerns, Deputy PM and PML-N leader Ishaq Dar met PPP Chairman Bilawal Bhutto Zardari in his chambers. Shortly afterward, Dar told reporters that the nation would receive “good news [in this regard soon”.

Furthermore, party leader Naveed Qamar nodded in affirmation when asked by reporters whether the party would join the session.

A meeting of the federal cabinet took place to approve the budget. Soon after the government released a photograph of PM Shehbaz signing the budget after it was approved.

 Prime Minister Shehbaz Sharif signs the documents of the federal budget 2024-25 after its approval from the federal cabinet to be laid before the National Assembly on 12 June 2024.
Prime Minister Shehbaz Sharif signs the documents of the federal budget 2024-25 after its approval from the federal cabinet to be laid before the National Assembly on 12 June 2024.

As per the government’s tentative plan, a general debate on the budget would start on June 20 and would continue till June 24. The members will take part in the debate and voting on cut motions on June 26 and 27 whereas the budget will be passed on June 28.

A day earlier, the government unveiled the Pakistan Economic Survey 2023-24, which showed that the economy failed to meet most of its targets set in the previous budget due to challenging conditions. The agriculture sector, however, achieved unprecedented growth.

On Monday, the National Economic Council (NEC) — comprising PM Shehbaz, Deputy PM Dar, the four chief ministers and the defence, finance, and planning ministers — approved a Rs3.792 trillion federal PSDP, an increase of more than 47pc compared to the previous FY.

Last week, it was reported that the finance ministry and the IMF were locked in last-minute talks ahead of the budget as the global lender put forward some tough conditions.

The IMF’s key demands include an increase in the tax revenue target, withdrawal of subsidies, taxes on the agriculture sector, increase in levy and taxes on power, gas and oil sectors, privatisation of sick government organisations and units and improving administration, a ministry official was quoted as saying.

Meanwhile, economist Sakib Sherani said the budget would be in line with IMF requirements but cautioned, “However, the real problem will be adherence to fiscal austerity and prudence and containment of populism.”

Ahead of the budget presentation, PM Shehbaz also chaired a meeting on the “rightsizing of the government”, the government’s official X account stated.

According to state broadcaster PTV News, a committee constituted for the purpose presented a preliminary report before the premier.

The report, containing short-term and mid-term recommendations, proposed shutting down a few state-owned enterprises, merging several others and handing some to the provinces, PTV News reported.

The committee further recommended that all such posts vacant for more than a year be abolished and that government officials’ “unnecessary travel” be prohibited while teleconferencing be encouraged.

Subsequently, the prime minister formed a high-powered committee to furnish a comprehensive report within 10 weeks on the said proposals.

Agriculture only saving grace in otherwise dismal year

According to the PES, the strong 6.25 per cent expansion in the agriculture sector — said by the report to be the highest in 19 years — drove Pakistan’s GDP growth by an expected 2.38pc in FY2024, recovering from a contraction of 0.21pc in the previous year.

The report said fiscal discipline was maintained, with a fiscal deficit of 3.7pc of GDP and a primary surplus of 1.5pc of GDP. Total revenues, meanwhile, grew by 41pc, driven by non-tax revenues and improved tax collection.

The State Bank of Pakistan, meanwhile, kept a tight monetary policy, with a 22pc policy rate, helping to ease inflation to 26pc from 28.2pc last year.

The current account deficit narrowed by 87.5pc to $0.5 billion compared to $4.1bn last year, and gross foreign exchange reserves increased to $8.0bn.

However, the PES noted a decline in the investment-to-GDP ratio, sluggish large-scale manufacturing, and high public debt.

It further revealed that cash-strapped Pakistan witnessed the highest-ever single-year increase in tax exemptions or concessions, surging by 73.24pc compared to the previous year to dole out a record Rs3.879tr.

During the presentation, Aurangzeb hinted at letting “no sacred cow” escape without paying due taxes through the budget for FY2024-25. He expressed confidence in beginning the next fiscal year on a stronger note, backed by the IMF’s support.

Speaking less on the performance of each economic sector and their sub-sectors, the finance minister stressed focusing on reforming the revenue system, energy sector, and state-owned enterprises (SOEs), reiterating that there were no strategic SOEs.