Finance Minister Foresees Current Account Surplus for FY25

Finance Minister Muhammad Aurangzeb has predicted that Pakistan’s current account balance will remain in surplus for the entirety of fiscal year 2024-25. This outlook differs somewhat from the central bank’s assessment, which suggests the balance could potentially register a deficit of 0.5% during the same period.

The State Bank of Pakistan (SBP), in its semi-annual report for 2024-25, projected that the current account for the full fiscal year could fluctuate between a deficit of 0.5% and a surplus of 0.5% for FY25.

Speaking at a pre-budget seminar held at the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) in Karachi this Wednesday, the finance minister asserted that the current account would maintain a positive trajectory throughout FY25.

He stated that the nation’s tax-to-GDP ratio is anticipated to climb to 10.6% in FY25. Furthermore, the government aims to elevate this ratio to 13.5% within the next three years through the implementation of various tax reforms.

“This will be the final International Monetary Fund (IMF) program for Pakistan,” the finance minister affirmed.

Aurangzeb emphasized the government’s commitment to providing tax relief to businesses and salaried individuals wherever feasible, underscoring that “the government is fully dedicated to bolstering economic activities in the upcoming fiscal year 2025-26.”

Government Prioritizes Economic Growth

Aurangzeb clarified that the government will not support ventures centered around ‘plots and files’.

He also noted that the administration has engaged independent analysts to aid in crafting a more effective budget that aligns with global best practices for FY26.

“Every sector of the economy must remit its due taxes to alleviate the burden of elevated taxation on salaried individuals and manufacturing industries.”

However, the finance minister pointed out that Pakistan’s involvement with the IMF program might constrain the extent of relief measures for FY26.

“Despite this constraint, the government will explore potential avenues for providing relief in the coming years.”

Aurangzeb highlighted three primary challenges confronting businesses and the economy: high taxation, elevated energy costs, and significant financial costs.

He noted that the finance cost (Kibor) has decreased to approximately 12%, aligning with the State Bank of Pakistan’s (SBP) decision to reduce its policy rate by 10 percentage points since June 2024, bringing it to the current level of 12%. This adjustment is intended to facilitate access to credit for new projects and the expansion of existing production lines for businesses and the private sector.

“We are progressing in the correct direction, but there is still more work to be done,” the finance minister concluded, adding that the government is actively exploring opportunities to provide tax concessions to businesses and individuals.