Zubair Qureshi Islamabad
The new government of Prime Minister Shehbaz Sharif faces the gigantic task as the Federal Board of Revenue (FBR) has missed its targets of revenue collection for the second consecutive month, leading to a probability of a mini-budget. It is likely that PM-Shehbaz government will have to resort to emergency fiscal strategies to cope with the current economic situation.
The persistent underperformance necessitates the generation of an additional Rs18 billion monthly throughout the fiscal year 2023-24 to mitigate the shortfall. Inside sources told Pakistan Observer that a deviation exceeding 1pc from the target could trigger the activation of a supplementary budget, as stipulated by an agreement with the International Monetary Fund (IMF). Official reports reveal that the FBR’s revenue collection fell short by 1.3pc and 4.6pc in January and February 2024, respectively.
They further disclosed that February’s collections amounted to Rs 681 billion, significantly below the targeted Rs 714 billion, resulting in a Rs 33 billion deficit. January witnessed a shortfall of Rs 9 billion, cumulatively amounting to a Rs42 billion loss over two months.
This financial discrepancy has been attributed to FBR’s resistance against the Finance Minister’s proposed reforms aimed at enhancing the efficiency of the tax apparatus. Moreover, this resistance has escalated to the point of calls for a strike by senior management of the FBR, undermining the institu-tion’s operational integrity.
There is speculation within the FBR that revenue metrics will improve with the appointment of a new Finance Minister, suggesting that the current down-turn is a strategic maneuver to assert dominance and negotiate favorable conditions with the upcoming fiscal leadership to avoid reforms at FBR. This in-ternal strife hints at a deeper malaise, with the po-tential introduction of a mini-budget as a corrective measure, in line with IMF agreements. Such a move, however, would likely place additional finan-cial burdens on the public.
To counteract the revenue shortfall, the government has outlined eight provisional measures projected to bolster monthly revenue by Rs18 billion during the 2023-24 fiscal year. These include adjustments to sales tax rates on textiles and leathers, the introduc-tion of a Federal Excise Duty (FED) on sugar, and incremental increases in advance income and with-holding taxes on various sectors.
Each measure is carefully calibrated to address the revenue gap without imposing undue strain on the economy. However, the efficacy of these strategies and their impact on the broader economic landscape remains to be seen, as stakeholders closely monitor the FBR’s next moves in this financial chess game.
