Analysis of Pakistan’s 2024/25 Budget.

The announcement of Pakistan’s 2024 budget has drawn significant attention, highlighting 

the government’s strategic direction amidst economic challenges. As we dissect the 

budget, several points merit attention.

Budget 2024/25: Tax Increases and Stricter Import Regulations The government has unveiled the budget for the fiscal year 2024/25, introducing several tax hikes and removing certain import duty exemptions to meet financial needs and protect local industries. One of the significant changes is the withdrawal of customs duty exemptions on hybrid vehicle imports. Additionally, tax and duty concessions on luxury 

electric vehicle imports have been revoked. Registration of motor vehicles will now be 

subject to advance tax based on the vehicle’s price rather than engine capacity, marking a 

shift in taxation policy. Mobile phones will be taxed at a standard rate of 18%. The Federal 

Excise Duty (FED) on cement has been increased from 2% to 3%. Non-filers will face a hike 

in advance withholding tax from 1% to 2.25%.The capital gains tax rate has also seen a 

significant increase, with the rate for filers set at 15% and non-filers at 45%. Furthermore, a 

5% FED has been imposed on new plots, residential, and commercial properties. There are 

proposals to increase duties on the import of steel and paper products. A hefty FED of Rs 

44,000 per kilogram is proposed on acetate tow used in cigarette filters. Import duty 

exemptions on glass products have been eliminated, and increases in general sales tax for 

the textile and leather industries are proposed. Copper, coal, paper, and plastic scrap will 

now be subject to sales tax withholding. These measures aim to address the government’s 

financial requirements and protect local industries, but they are likely to lead to an 

increase in the prices of goods.

GST Adjustments

Adjustment in General Sales Tax (GST) rates aim to rationalize the tax structure, though 

these could potentially contribute to inflationary pressures in the short term.

Tax Incentives for Industries Certain sectors, such as technology and export-

oriented industries, are granted tax incentives to stimulate growth and competitiveness in 

the global market. Expenditure Priorities

On the expenditure front, the government has allocated significant resources to key 

sectors.

• Defense: A considerable portion of the budget is allocated to defense, reflecting 

ongoing security concerns and geopolitical dynamics. 

• Social Welfare Programs: The government has increased funding for social welfare 

programs, including the Benazir Income Support Programme (BISP) and various 

health and education initiatives, aiming to alleviate poverty and enhance human 

capital development. 

• Infrastructure Development: Major investments in infrastructure, particularly in 

transportation and energy, are planned to support long-term economic growth. The 

China-Pakistan Economic Corridor (CPEC) remains a focal point, with new projects 

expected to boost economic connectivity. 

Fiscal Deficit and Debt Management

The budget outlines measures to manage the fiscal deficit, which remains a pressing 

concern. The government aims to reduce the deficit through a combination of revenue 

enhancement and expenditure rationalization. However, achieving these targets will 

require stringent fiscal discipline and effective implementation of policies. Debt

management strategies are also highlighted, with an emphasis on negotiating favorable 

terms for external debt and exploring opportunities for debt restructuring. The government 

is committed to reducing reliance on expensive foreign loans, focusing instead on 

mobilizing domestic resources. 

Inflation and Monetary Policy Inflation control remains a significant challenge, with 

the budget proposing measures to curb price hikes. The State Bank of Pakistan (SBP) is 

expected to maintain a cautious monetary policy stance, balancing the need for growth 

with inflation containment. Challenges and Risks Despite

The optimistic projections, several risks could hinder the budget’s success:

• Revenue Shortfalls : If the ambitious revenue targets are not met, it could 

exacerbate the fiscal deficit, leading to further borrowing and debt accumulation.

• Inflationary Pressures: The proposed tax adjustments and potential subsidy cuts 

could lead to higher inflation, impacting household purchasing power and overall 

economic stability. 

• Political Stability: The effectiveness of the budget largely depends on political 

stability and the government’s ability to implement its policies without significant 

disruptions.

Conclusion.

Pakistan’s 2024 budget reflects a concerted effort to navigate economic challenges while 

laying the groundwork for sustainable growth. The stringent withholding tax and tightened 

regulations for filers and non-filers will likely drive the affluent segment of the population to 

leave the country, creating more difficulties for the business community. To bring stability 

and improvement within our country, we need to make doing business easier. Businessmen 

need more facilitation and fewer taxes. We must reduce the rates of electricity, water, and 

gas. If businessmen are preoccupied with paying hefty utility bills, how can they manage 

their company’s overheads? Naturally, this burden will be passed on to the consumers. It is 

essential to implement better policies within the country to alleviate these challenges. The 

focus on revenue generation, social welfare, and infrastructure development is 

commendable. However, effective implementation and management of associated risks 

will be crucial to achieving the desired outcomes. As we move forward, continuous 

monitoring and adaptive strategies will be essential to ensure that the budgetary goals 

translate into tangible economic improvements for the nation.

By Zakir Ahmed, Chairman, Gradsy.