In a significant address at the Pakistan Business Council (PBC) event titled “Dialogue on the Economy”, Finance Minister Muhammad Aurangzeb acknowledged the disproportionate tax burden on the country’s salaried class and hinted at the possibility of rationalizing the current tax slabs. This move could potentially bring relief to millions of salaried employees who have long complained about the high tax rates.
During the session, Aurangzeb emphasized that the government’s commitment to meeting its obligations under the International Monetary Fund (IMF) program remains unwavering. However, he signaled that certain tax reforms, particularly a review of tax slabs for salaried individuals, could be phased in as part of the upcoming budget for fiscal year 2025-26. The finance minister also expressed his personal belief that the salaried class carries an unfairly high tax burden, stating, “This is my personal view, that indeed on the salaried class side, there is a disproportionately high burden.”
Aurangzeb did not make any definitive commitments regarding tax changes but hinted at significant reforms, stating that the government is working on simplifying the tax filing process for salaried individuals. The discussion of tax rationalization is seen as a key component of the government’s broader goal to alleviate the financial strain on middle-class earners while also ensuring the stability of the national economy.
The minister further explained that, while the government will honor its commitments to the IMF, it is keen to explore measures that would benefit the salaried class. He noted that the tax slabs could be reconsidered, acknowledging that the current system may require adjustments. “We want to make life simpler for the salaried class in Pakistan,” he added, underscoring the government’s intention to prioritize the needs of workers who contribute significantly to the national economy.
In addition to tax reforms, Aurangzeb provided an overview of the government’s fiscal strategy, which includes a focus on enhancing the documentation of Pakistan’s economy. The finance minister pointed to the circulation of Rs9.7 trillion in cash as a crucial factor in the government’s efforts to formalize the economy. While the government remains committed to stabilizing the country’s finances, he stressed the importance of transitioning from stabilization to growth in a sustainable manner. “We have gone for stabilization, but there is no automatic switch from stabilization to growth,” he remarked.
The finance minister also discussed the ongoing budget process, which began in the first week of January. He assured business leaders that consultations with chambers of commerce would begin in February, with feedback expected by March or April. This feedback will play a pivotal role in shaping the government’s fiscal policies and addressing the concerns of the business community.
Beyond tax reforms, Aurangzeb addressed other pressing economic issues, including fiscal discipline, rightsizing the government, and the privatization of state-owned enterprises (SOEs). He confirmed that the government had already initiated efforts to streamline federal ministries, with around 30,000 vacant posts having already been abolished as part of its rightsizing policy. Additionally, discussions on the privatization of Pakistan International Airlines (PIA) have been relaunched, with adjustments made to fiscal policies in collaboration with the IMF.
The finance minister also highlighted Pakistan’s positive trajectory in remittance inflows, particularly through strong support from overseas Pakistani workers. He forecasted that the country’s foreign exchange reserves could reach $13 billion by the end of the current fiscal year, which would help cover approximately three months of imports. Aurangzeb expressed optimism about this milestone, calling it a “critical trigger” for Pakistan’s economic recovery and a potential upgrade in the country’s sovereign credit rating.
As part of the broader economic roadmap, the government is also focused on promoting export-led growth, with Foreign Direct Investment (FDI) playing a key role. Aurangzeb emphasized that every foreign investment entering Pakistan should be aligned with the objective of generating exportable surplus, a strategy that will help strengthen the economy in the long term.
In conclusion, Finance Minister Aurangzeb’s address painted a picture of a government determined to balance fiscal discipline with economic growth, while signaling important reforms that could ease the tax burden on Pakistan’s salaried class. The potential overhaul of tax slabs for salaried individuals, alongside ongoing structural reforms, reflects the government’s commitment to improving the financial well-being of its citizens while adhering to international commitments.