SINDH’S Rs3.45tr budget for the next fiscal year seeks to combine populism with provincial tax reforms while also prioritising flood rehabilitation and renewable energy in its public sector development programme generously funded by foreign lenders and donors. In keeping with the last budget, the Sindh government has continued its focus on reforming its services sales tax. By developing a negative list of services, which will remain exempt from the general sales tax, the province will be able to expand the scope of tax for higher revenue yields as well as simplify the levy for taxpayers. Simultaneously, Chief Minister Murad Ali Shah has proposed abolishing five levies — professional tax, entertainment duty, drainage cess, cotton fees and local cess — aimed at pleasing the urban and rural middle classes, besides slashing the motor vehicle tax from the next year. The decision is unlikely to affect provincial revenues though.

Additionally, Sindh has launched a bank credit scheme for small farmers in line with a similar initiative implemented in Punjab. The CM, however, conveniently did not describe the measures, if any, his administration plans to undertake for the recovery of agriculture income tax from big landholders to meet a key goal of the IMF funding programme for the federating units. With three-fourth of its revenues coming from the federal divisible tax pool, the ruling PPP in the province chose to allow a much higher salary and pension increase for its employees than announced in the federal budget. Moreover, instead of showing a cash surplus as required by the centre to produce a primary budget surplus of 1.6pc under IMF strictures, the budget has booked a nominal resource shortfall of Rs38bn. Is this called responsible budgeting? The Sindh government, nevertheless, must be appreciated for its consistent focus on building climate-resilient infrastructure in the province, providing free housing to women who lost their homes in the 2022 deluge, and rehabilitating the affected population. Though the job largely remains incomplete because of resource constraints and weak administrative capacity, as well as the scope of the effort, the fact that the province has diverted significant resource is a positive sign. Likewise, it is leading the national shift to cleaner energy, which is good news given the increasing severity of the climate challenge in the country.

Published in Dawn, June 14th, 2025