• Next year’s revenue target set at Rs14.13tr
• Provinces’ contribution helps Centre outperform fiscal target, record lowest budget deficit in a decade
• Subsidy allocations have been reduced by 14pc
• Reduced debt servicing drives expenditure containment of nearly Rs2.26tr
• Generous tax relief, incentives for construction sector
• Fuel levy, electricity surcharges to rise next year
• Tough crackdown planned on non-filers, tax evaders
• Development spending squeezed to cut deficit

ISLAMABAD: Maintaining an aggressive stance on fiscal consolidation, as required by the Int­ernational Monetary Fund (IMF), Finance Minister Muhammad Aurangzeb on Tuesday still managed to offer some notional relief to the salaried class in the federal budget for fiscal year 2025-26, along with incentives for the real estate and construction sectors, in an effort to revive the struggling industrial sector and stimulate economic growth.

At the same time, however, the government announced it was imposing a ‘carbon levy’ of Rs2.5 per litre on petrol, diesel and furnace oil in the upcoming fiscal year, to be doubled the following year.

It also introduced a 5 per cent tax on large pensions, an 18pc tax on imported solar panels, and an increase in the debt servicing surcharge on electricity to finance not only interest payments, but also principal debt. Additionally, it announced the gradual elimination of tax exemptions for the tribal areas beginning this year.

Ambitious targets

Despite a record tax shortfall of Rs1.07 trillion recorded for the current fiscal year, the finance minister set next year’s revenue target at Rs14.13tr — an 18.7pc increase from this year’s revised estimate of Rs11.9tr, against the original budget target of Rs12.97tr. This would include approximately Rs840 billion in additional revenue measures, on top of a Rs1.39tr automatic tax increase supported by projected inflation of 7.5pc and economic growth of 4.2pc and expenditure containment of nearly Rs2.26tr (equivalent to 2pc of GDP), driven primarily by reduced debt servicing costs, and also at the expense of development and public welfare initiatives.

Not only the Federal Board of Revenue (FBR), but the provincial governments, too, were unable to meet their commitment of maintaining a Rs1.22tr surplus for the current year. Still, they provided vital support to the federal government with a surplus of Rs1.01tr.

This contribution enabled the federal government to outperform its fiscal target and record a budget deficit of just 5.6pc of GDP (Rs6.44tr) —........

© Dawn Business