KARACHI: Economic institutions have released a model budget framework outlining recommendations for the upcoming federal budget and measures to address fiscal challenges.
According to the report, the government has assured the International Monetary Fund (IMF) that it will comply with strict conditions required for budget approval.
The model budget suggests that tax exemptions on the repatriation of foreign assets could attract investments of up to $20 billion.
The report also proposes offering a bonus of Rs10 per dollar to overseas Pakistanis who send remittances through formal banking channels instead of informal money transfer systems, arguing that such incentives could significantly increase remittance inflows.
It further states that strengthening the rupee to Rs250 against the US dollar could help reduce inflation by up to six per cent.
According to the report, a one-percentage-point reduction in the policy rate could save the government approximately Rs625 billion in debt servicing costs.
The analysis warns that budget deficit levels could reach 4.4 per cent of gross domestic product (GDP) under existing IMF-linked policies.
However, the report argues that locally driven reforms could lower the fiscal deficit to 2.1 per cent of GDP.
The model budget also recommends tax incentives for the information technology sector, saying they could significantly boost exports.
It stresses the need to broaden the tax base by bringing agriculture into the tax net and notes that reducing losses in the energy sector is essential for controlling the budget deficit.
The report further highlights privatisation of state-owned enterprises as a key step towards reducing the burden on public finances and calls for the removal of regulatory barriers to encourage greater private-sector investment.
