Pakistan’s Finance Minister Muhammad Aurangzeb has signaled potential tax relief for the salaried class, acknowledging the heavy tax burden on this segment of society. Speaking at the “Dialogue on the Economy” event organized by the Pakistan Business Council (PBC), the minister outlined the government’s intent to rationalize tax slabs and simplify tax filing procedures for salaried individuals, though he made it clear that no formal commitments could be made at this stage.
Aurangzeb emphasized that the government is committed to supporting the salaried class, but he also stressed the need for careful consideration and further discussions before any changes are implemented. He highlighted that efforts to revise the tax structure were ongoing and that any alterations would be discussed in future budget proposals.
During his address, the Finance Minister reiterated Pakistan’s adherence to the International Monetary Fund (IMF) program, describing it as a crucial pillar for the country’s economic stability. He noted that although some policy measures might be phased in or out in the upcoming budget, the government intends to honor its existing commitments to the IMF. With budget preparations already underway since January, Aurangzeb shared that the government is keen to engage with business chambers and stakeholders to gather input before finalizing the budget in the coming months, with feedback expected by March-April.
On the topic of economic stability, the minister welcomed the recent 100 basis points cut in the State Bank of Pakistan’s (SBP) policy rate, which has lowered the Karachi Interbank Offered Rate (KIBOR) to around 11%. This reduction has already started to have a positive impact on business confidence, providing hope for a more favorable business climate. The minister also expressed optimism about the country’s foreign exchange reserves, which are projected to reach $13 billion by the end of the fiscal year. This level of reserves would offer a vital cushion for the country, covering almost three months of imports, and could potentially pave the way for an upgrade in Pakistan’s sovereign credit rating.
In his speech, Aurangzeb also addressed the government’s ongoing efforts to rightsize the federal workforce, revealing that around 150,000 vacant positions are being abolished as part of broader structural reforms. Additionally, he reiterated the government’s privatization efforts, specifically focusing on state-owned enterprises (SOEs) such as Pakistan International Airlines (PIA). Privatization, he noted, is a key strategy to improve the efficiency of these enterprises and reduce the fiscal burden on the government.
The finance minister also underscored the need to strengthen tax documentation and improve revenue collection, referencing the Rs9.7 trillion in cash circulation that currently remains outside the formal economy. To address this, the government has transferred tax policy-making authority from the Federal Board of Revenue (FBR) to the Ministry of Finance, allowing the FBR to focus solely on tax collection. The government is also pushing for the implementation of agriculture income tax, with provinces like Punjab and Khyber Pakhtunkhwa already making progress.
Foreign Direct Investment (FDI) remains a cornerstone of Pakistan’s economic strategy. The government is working to ensure that these investments lead to an exportable surplus, thus strengthening the country’s external trade position. Alongside this, strong remittance flows, exports from the IT sector, and diversification of the economy are seen as critical factors in sustaining economic momentum.
Aurangzeb also touched on Pakistan’s global economic engagements, noting the country’s participation in the World Economic Forum (WEF). Discussions at the forum covered a wide range of topics, including trade, tariffs, digitalization, artificial intelligence, and economic policy. For Pakistan to transition from stabilization to sustained growth, the minister emphasized that structural economic reforms are essential to avoid recurring cycles of instability.
Ultimately, the Finance Minister reaffirmed that while the IMF program remains crucial for immediate stability, long-term sustainability hinges on comprehensive economic reforms. These reforms, covering taxation, energy pricing, privatization, and public finance, are central to creating a stable investment environment, fostering business growth, and ensuring fiscal discipline for the future.