The federal government’s economic team and the International Monetary Fund (IMF) will begin consultations over the budget for the next fiscal year 2023-24 from next week during which the global lender will be taken into confidence that it will be in accordance with the terms agreed with it.
Sources said the Federal Board of Revenue (FBR) had already met the IMF team present in the country last week and briefed it on the progress made so far in the budgeting process for the next financial year as well as its initial characteristics.
The first part for the next financial year’s federal budget is in its final stage of preparation.
It will include the expenses incurred by the ministries and divisions in the current financial year, the completed projects as well as ongoing ones, and other details.
It will also carry the details of the government’s performance in the current financial year.
Estimates for the next fiscal year are in progress.
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The sources said the official consultations with the IMF on budgeting for the next financial year was going to start next week.
They added that during the consultations, the IMF team would be informed about the measures to be taken in the budget.
The sources said the FBR was waiting for the finance ministry’s normal growth forecast for the next fiscal year keeping in view its estimates for the expected inflation rate and GDP so that it could set its collection target.
They added that for the normal growth of revenue for the next financial year, the rate of inflation was expected to be around 20% to 25%, while the GDP growth was estimated to remain at 3% to 3.5%.
By the end of the current month, the FBR will also have an idea about the expected revenue in the ongoing financial year for determining the tax collection targets for the next one.
The revenue growth target for the next financial year will be set based on the tax collections achieved during the current one.
The sources said it seemed difficult to achieve the revised tax collection target of Rs7.60 trillion for the current financial year because there was a shortfall of more than Rs400 billion.
The preparation of the budget strategy paper by the finance ministry is in its final stage.
It is expected that the budget strategy paper will be prepared and sent to the federal cabinet next week.
The budget strategy paper will contain other projections for the next fiscal year including the inflation rate and GDP.
The FBR will set its targets based on these estimates.
About the abolition of tax exemptions, the FBR sources said unnecessary ones had almost been eliminated.
However, they added that if any unnecessary income and sales tax exemptions were found in the budget for the next financial year, it would be considered to eliminate or reduce them.
In addition to this, comprehensive measures are being proposed to expand the scope of the tax net in the next fiscal year’s federal budget.
Other recommendations, including a fixed tax scheme, are under consideration to bring the retail sector into the tax net.
Budget proposals received from chambers of commerce and other business organisations as well as those from the FBR’s field formations are also being reviewed.
The sources said the federal budget estimates for the next fiscal year would be completed by the end of the ongoing month and submitted to the cabinet for approval.
In the first week of June, the federal government will finalise the process of preparing the budget.
On June 10, the government will present the federal budget in parliament for approval.