Pakistan to increase taxes, cut spending in new budget aimed at economic stability

Pakistan Forward and AFP


A Pakistani legislator carries copies of the budget document as he comes out from the National Assembly during the budget session in Islamabad on June 11. [Farooq Naeem/AFP]

ISLAMABAD -- Pakistan Prime Minister Imran Khan's government vowed to collect more taxes and make cuts in spending when it presented its budget to parliament Tuesday (June 11), weeks after reaching a deal with the International Monetary Fund (IMF) for a Rs. 911 billion ($6 billion) bailout.

The government announced plans to slash civil expenditure and freeze military spending. It also promised to substantially raise revenues to stem a widening fiscal deficit by pledging to collect Rs. 5.5 trillion ($36 billion) in taxes.

"We have slashed the civil budget by 5%, while the military budget will remain the same," said Minister of State for Revenue Hammad Azhar, as he announced the details of the plan.

"The financial year 2019-2020 will be a year for economic stability. We will make some tough decisions, and will try to save the poor public from the effects of those tough decisions," he added.


Prime Minister Imran Khan, seen in this screenshot of his special message to the nation on June 10, urges Pakistanis to declare their assets. [Pakistan Tehreek-e-Insaf]

Azhar went on to highlight a range of new taxes and tax increases in the new budget, saying raising revenues is pivotal to stabilising the country's economy.

"As long as we do not improve our tax system, Pakistan cannot prosper," Azhar said.

Pakistan has struggled for decades to collect taxes, with estimates suggesting that only about 1% of the 200-million-strong population filed a return in 2018.

Ahead of the budget presentation, Khan took to the country's airways on Monday (June 10) for the second time in recent weeks to plead with Pakistanis to declare their assets in the latest effort aimed at increasing tax revenues.

The budget session was dominated by a vocal opposition, with members of the Pakistan Peoples Party and Pakistan Muslim League-Nawaz chanting throughout the proceedings.

The presentation of Khan's first budget comes just a day after the government released the latest round of bleak economic figures, showing growth for the current fiscal year falling to 3.3% -- well below the 6.2% target.

Discontent is simmering in Pakistan following repeated devaluations of the rupee, soaring inflation and increasing utility costs.

The economic pain follows months of failed efforts by Khan's administration to stave off ballooning fiscal and balance-of-payments deficits, along with low tax yields and mounting debt.

The agreement eked out with the IMF still needs final approval by the fund's board, and it is widely believed the body was waiting to see details of the budget before giving the final sign-off.

Helping youth, countering money laundering

The establishment of peace and economic prosperity will help create jobs and ultimately discourage terrorism and militancy in the country, according to analysts.

The government has initiated a number of programmes to help citizens cope with the economic downturn, including the Rs. 100 billion ($674 million) Wazir-i-Azam Kamyab Naujawan Programme aimed at providing job opportunities, education and professional skills to Pakistani youth.

One of the aims of this programme is help steer unemployed and impoverished youth away from potential recruitment by extremists who prey on vulnerable citizens.

Peshawar-based senior journalist Riffat Ullah Orakzai said he was satisfied with the government's initiatives to prevent currency smuggling and money laundering in regards to the new budget.

"For the first time, Pakistan has realised that to discourage terrorism it has to stop cross-border movement of currency, and in this budget, the government has suggested establishing an anti-money-laundering system in the country," he said.

"Pakistan is also facing sanctions, and if it has not satisfied the world community with its actions, that will be harmful for it," Orakzai said.

"The government has already established separate collection offices in Karachi, Quetta and Peshawar to strengthen its anti-money-laundering efforts that will also be helpful in countering terrorism," he added.

[Abdul Nasir Khan in Lahore contributed to this report.]

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