ISLAMABAD: The federal government is facing significant challenges in finalizing the upcoming budget due to an estimated fiscal shortfall of around Rs1.7 trillion and has sought greater financial contributions from provinces, particularly Punjab and Sindh, according to Khyber Pakhtunkhwa’s Adviser on Finance, Muzammil Aslam.
Addressing a press conference on Wednesday, Aslam expressed concern over the uncertainty surrounding the budget-making process, citing the abrupt cancellation of the National Economic Council (NEC) meeting scheduled for June 3 and the earlier postponement of the Annual Plan Coordination Committee (APCC) meeting.
He said the lack of clarity had unsettled financial markets and contributed to volatility at the Pakistan Stock Exchange in recent days.
According to Aslam, the federal government is struggling to meet its fiscal targets amid lower-than-expected revenue projections and is increasingly relying on petroleum levy collections and provincial support to close the budgetary gap.
He claimed that Finance Minister Muhammad Aurangzeb had floated a proposal under which approximately Rs1.7 trillion would be generated through adjustments in the divisible pool and revisions to certain taxes, including customs duties. Under the proposed arrangement, Punjab would contribute around Rs700-800 billion, Sindh Rs500 billion, and Khyber Pakhtunkhwa approximately Rs200 billion. However, he noted that no formal decision had yet been reached.
Aslam said the government was facing difficulties balancing the demands of coalition partners while also satisfying conditions set by the International Monetary Fund (IMF), particularly the requirement to achieve a primary budget surplus of 2 percent.
He argued that the federal government had made ambitious revenue commitments to the IMF and was now under pressure to deliver on those targets. At the same time, he said, there appeared to be little consensus among stakeholders regarding expenditure reductions.
“When budgets are prepared under such pressures, disagreements are inevitable and coalition partners may find it difficult to support the final proposals,” he remarked.
The KP finance adviser further claimed that the federal government had requested provinces to assist in raising an additional Rs430 billion in revenue during the next fiscal year through enhanced taxation on property and agricultural income.
Under the initial plan, Khyber Pakhtunkhwa was expected to generate Rs35 billion in additional revenue. However, Aslam said the province was later asked to raise between Rs60 billion and Rs65 billion, with similar revised demands reportedly conveyed to other provinces.
He attributed the increased revenue targets to ongoing differences among coalition partners and the federal government’s efforts to bridge the widening fiscal gap.
Commenting on proposed tax relief measures, Aslam said any concessions announced by the Centre could prove largely symbolic. While the government may increase the income tax exemption threshold from Rs100,000 to Rs150,000 per month, he argued that the resulting revenue shortfall would likely be recovered from other segments of taxpayers.
He also questioned the federal government’s commitment to major water resource development projects, saying that despite discussions with provinces on collaborative efforts to strengthen water infrastructure, the proposed development allocations did not reflect such priorities.
Story by Khaleeq Kiani
