Finance Minister unveils economic plan to slash expenditures and boost revenues

Federal Finance Minister Senator Muhammad Aurangzeb reiterated the government’s dedication to reducing expenditures and boosting revenues in a bid to fortify Pakistan’s economy sustainably.

The announcement came during a press conference in his hometown, Kamalia, as reported by the state-run APP.

Aurangzeb highlighted that the federal government plans to shut down parallel ministries or departments that have been devolved to provinces. This strategic move is anticipated to significantly cut down on expenditures and enhance operational efficiency.

As an example, the minister noted that the Prime Minister has already announced the closure of the Pakistan Public Works Department, a decision expected to alleviate the financial burden on the government.

Furthermore, the government is set on privatising state-owned enterprises (SOEs), which have been a considerable strain on the national exchequer. Aurangzeb cited Pakistan International Airlines (PIA) as a prime example, mentioning its liabilities amounting to billions of rupees now transferred to the government. The privatisation of these SOEs is projected to reduce financial burdens and enhance efficiency.

In a related development, the minister revealed that the government is working on outsourcing airport management, starting with Karachi airport, which is expected to be handed over to the private sector by July or August this year, followed by Lahore airport.

On the revenue side, Aurangzeb stressed the need to elevate the tax-to-GDP ratio from the current 9.5 per cent to 13 per cent over the next three years, underscoring the essential role of taxes in national administration.

To achieve this, the government has introduced various revenue measures, including broadening the tax base to include non-taxable sectors, phasing out tax exemptions worth Rs3.9 trillion, and revising policies in sectors like health and agriculture.

The minister announced that 32,000 retailers had already been registered for taxation starting from July 2024. He emphasised the government’s commitment to incorporating other sectors into the tax net, enhancing compliance, plugging systemic leakages, and implementing end-to-end digitisation to reduce human intervention, increase transparency, and curb corruption. Automation of sales tax collection is a top priority, Aurangzeb noted.

Addressing the agricultural sector, Aurangzeb affirmed the government’s commitment by allocating Rs41 billion in the federal Public Sector Development Program (PSDP) to promote agriculture. Initiatives include the solarisation of tube wells, provision of loans to small farmers, and the development of warehouses to support small-scale farmers.

Subsidies on fertilisers, seeds, and other agricultural inputs will continue, with efforts to involve banks, including Islamic banks, in providing loans to farmers.

In the IT sector, the government aims to support freelancers and double exports from $3.5 billion to $7 billion. Aurangzeb mentioned a substantial budget allocation to facilitate the IT sector. He also assured that the Prime Minister’s recent visit to China focused on technology transfer, industrial development, and enhancing exports, rather than seeking aid.

This comprehensive strategy, combining expenditure reduction and revenue enhancement, reflects the government’s robust commitment to placing the country’s economy on a sustainable growth trajectory.