Aurangzeb tells Senate body: Govt eyes $2bn loan to boost reserves

Business Recorder

13-06-2025

ISLAMABAD: Amid expectation of borrowing $2 billion from commercial banks to shore up reserves to $14 billion by the end of outgoing fiscal year, the government only managed to utilise around 40 percent of the development funds of Rs1.1 trillion revised budget allocation for the outgoing fiscal so far.
This was revealed by Finance Ministry while briefing the National Assembly Standing Committee on Finance and Revenue, which was also informed that government has proposed special relief allowance @50 percent to officers and 20 percent to JCOs/soldiers of armed forces in the budget 2025-26.
The committee which met with Syed Naveed Qamar in the chair here on Thursday was also informed by the Finance Minister that from their perspective there is cushion to do more on the policy rate and hopeful that by end of calendar year, it would move to single digit as move forward.
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The briefing also revealed that Public Sector Development Programme (PSDP) has been revised downward for the second time in the outgoing fiscal year from Rs1.1 trillion to Rs967 billion, but it would also not be achieved, as confirmed by the Secretary Finance.
Secretary Finance informed the committee that Rs662 billion under the PSDP has so far been utilised, which according to PTI leader and member committee Omar Ayub Khan was given a steroid injection in the last month and may have consequences on the overall economic indicators including GDP growth in the outgoing fiscal year. The lack of spending suggests a large part of PSDP — revised down from Rs1.4 trillion to Rs1.1trillion would remain unspent at the end of the fiscal year in June.
The finance minister said that as far as inflows are concerned things are speed up in the last quarter. 'We have gone back to the commercial market in this fiscal year and are in the process of syndicating around $2 billion of commercial borrowing and expecting to shore up reveres from the current around $11-12 billion to $14 billion by end of the current fiscal year.
Secretary Finance further said that non-tax revenue udder the head of State Bank of Pakistan (SBP) profit is budgeted at Rs2,400 billion for the next fiscal year down from Rs2,500 billion in the current fiscal year on the back of decrease in interest rate.
The committee was skeptic about Rs105 billion budgeted from the Captive Power Plants (CPP) levy for the next fiscal year. Regarding the Petroleum Development Levey (PDL) Secretary Finance said that Rs1,468 billion are budgeted for the next fiscal year against Rs1,281 billion in the outgoing fiscal year. He said that there is no upper cap for PDL; however, after the addition of Rs2.5 per litre carbon levy, the government wants to restrict it to around Rs80-80.5 per litre.
Omar Ayub Khan said that petroleum products of 2.1 billion worth Rs550 billion are smuggled, causing the national exchequer around Rs145 billion under the head of non-collection of PDL, where the Federal Board of Revenue (FBR) needs to strengthen enforcement.
Secretary Finance informed that financing of federal deficit is budgeted for 2025-26 at Rs6,501 billion against the budgeted Rs8,500 billion for the outgoing fiscal year. External financing (net) is estimated at Rs106 billion for the next fiscal year compared to Rs666 billion for the current fiscal year. Further, domestic financing (net) is estimated at Rs6,308 billion for the next fiscal year compared to Rs7,804 billion for the current fiscal year.
The finance minister stated that there were fake rumors in media of mini budget which became wrong. He informed the committee on fiscal discipline, economic growth and stability, social welfare and public services like relief for salaried class with reduction in the minimum tax rate and expansion in the Benazir Income Support Program (BISP) to Rs716 billion. The Minister of State and Secretary Finance briefed the Committee on policy measures adopted for the preparation of the Finance Bill 2025 and the government's financial proposals for the next financial year.
The committee members expressed concerns to the tax-to-GDP ratio, revenue shortfall, taxes on solar panels, hybrid vehicles, carbon levy, petroleum levy, private sector lending and debt, SMEs, industrial and agricultural growth and targets, withholding tax (WHT) on ATMs and bank deposits, pensions, gender-specific allocations, health-specific allocations, electric vehicles, structural reforms, sales tax on cotton, public sector expenditure, defence spending, the widening current account deficit, and the negative growth rates observed in both the manufacturing and agricultural sectors.
The discussion also highlighted the challenges of climate change and the need for social protection. The members expressed serious concerns regarding the inefficiency of Customs Intelligence and smuggling at borders.
The chairman emphasised the importance of keeping the committee fully informed and desired that a comprehensive overview of both the structural reforms and the tariff reforms be prepared and shared with the committee members. The minister said that only Rs312 billion is budgeted from new taxes. He said that while international stakeholders had previously doubted Pakistan's ability to implement tax laws effectively, the government has now demonstrated that meaningful enforcement is possible.
Talking about the tariff rationalisation which the committee was informed that it was a step aligning Pakistan's trade and industrial policy with global standards. The initiative marks the beginning of a phased plan towards a simplified tariff regime, ultimately targeting an average tariff rate of just over four per cent.
'Overall, there are 7,000 tariff lines. Additional customs duty has been removed on 4,000 lines, and in 2,700 of those, the customs duty has also been reduced,' the committee was informed. Of these, around 2,000 tariff lines are directly linked to raw materials and intermediary goods used by the exporters.
The government's broader goal, according to Aurangzeb, is to reshape Pakistan's tariff architecture in a way that supports industrial growth and integrates the economy more deeply into global supply chains.
Aurangzeb said an additional tax on fertilisers and pesticides was a benchmark but it was negotiated with the IMF on the directions of Prime Minister Shehbaz Sharif as it was a critical input into agriculture and should not be imposed.
Secretary Finance said a modest 1.9 percent rise in government expenditure, crediting prudent financial management. He said, despite inflation, the government managed to contain subsidies and reduce debt servicing, while selectively increasing spending where necessary for national priorities.
He further informed that Rs494 billion were allocated for tariff differential subsidy (TDS) in the budget 2025-26. Replying to a question the committee was informed that the government has budgeted Rs87 billion from privatisation admitting that Rs30 billion budgeted for the current fiscal year was not materialized on account of lower bids for PIA and Islamabad International Airport.
The committee was informed that privatisation of Pakistan International Airlines (PIA) and the Roosevelt Hotel is scheduled for the next fiscal year, and privatization efforts for power distribution companies (DISCOs) and generation companies (GENCOs) will continue.
The government has set inflation target of 7.5 percent for the next fiscal year. Regarding the fiscal deficit, the government projected a target of 3.9 percent of the GDP — or Rs5,037 billion — from the outgoing fiscal year's target of 5.9 percent. The primary surplus is targeted at 2.4 percent of the GDP against the budgeted two percent in the current fiscal, which has been revised to 2.2 percent.
The government has set tax collection target for the FBR at Rs14,131 billion, an 8.95 percent increase from the current fiscal year of Rs12,970 billion and around 19 percent higher than the revised estimate of Rs11,900 billion. Non-tax revenue is estimated to be Rs5,147 billion for the next fiscal year against the budgeted Rs4,845 billion for the current fiscal year.
Copyright Business Recorder, 2025