Govt plans to launch Eurobond to generate $2bn

Islamabad_Taxes of more than Rs700 billion, including the previous mini budget, are likely to be proposed in the upcoming fiscal budget. In consultation with the IMF, the annual tax target has been set at Rs9,200 billion.

According to sources, the tax target for the next fiscal year has been decided in consultation with the IMF. The FBR will collect Rs1,900 billion additional tax in the next financial year as compared to the ongoing year. More than 30% tax has been proposed on mutual funds, real investment trusts for non-filers. The budget is also expected to feature an increase in the withholding tax on imported luxury goods.

The withholding tax on sale and purchase of property is proposed to be doubled for non-filers. The taxes imposed on retail and wholesale sector would likely be increased. The withholding tax on sale and purchase of prize bonds for non-filers is also likely to be increased. The withholding tax on purchase and sale of plots for non-filers is proposed to be doubled. A decision has also been taken to adopt strict measures to document real estate transactions. Taxes are likely to be imposed on unused residential, commercial, industrial plots and farmhouses. Withholding tax is also expected to be imposed on machinery and commercial rent.

The Dollar-starved government has planned to generate $2 billion through the launch of Eurobonds in the upcoming budget 2023-24.

As the dollar inflow dried up after the International Monetary Fund (IMF) reluctance to oblige Pakistan, the budget makers are finding it hard to make ends meet.

However, the government hopes to generate more than $22bn through foreign loans and the Eurobond is a part of the strategy for the budget.

Despite failure to launch international bonds during the outgoing fiscal after IMF’s refusal to revive EFF (Extended Fund Facility), poor credit ratings given by global rating institutions and increased bond rates, the government once again plans to go for it.

Other sources

The government has also proposed a levy on all kinds of assets and increasing withholding taxes on cash withdrawals and registration of motor vehicles in the upcoming budget for 2023-24.

The government also plans to raise salaries and pensions of government employees from grade 1 to 16 and also for employees from 17 to 22 in the range of 30% and 20%, respectively.

The pension bill would be more than the salary bill of the federal government. The total budget outlay has been envisaged over Rs14.2 trillion for the upcoming budget whereby the Federal Board of Revenue’s (FBR) tax collection is fixed at Rs9.2 to Rs9.5 trillion and the non-tax revenue target at Rs2.5 trillion.

In order to achieve a primary balance of 0.1% of GDP, the provinces are expected to generate a 1% revenue surplus in order to achieve the primary balance into a slightly positive range in the next budget. The debt servicing is going to consume a major chunk of Rs7.5 trillion in the next budget.