The Federal Board of Revenue (FBR) has ruled out the introduction of a mini-budget, expressing confidence in meeting its revenue targets despite significant challenges. FBR Member Policy, Hamid Ateeq Sarwar, acknowledged the difficulty of reaching the ambitious tax target of Rs12.97 trillion for the current fiscal year but stressed that no new tax measures are under consideration.
During a Senate Standing Committee on Finance and Revenue meeting, chaired by Senator Saleem Mandviwalla, Sarwar highlighted several hurdles, including the challenges in conducting audits and recruiting new staff. Currently, 2.5 million of the 6 million registered taxpayers are not contributing any tax. Despite these obstacles, Sarwar emphasized the FBR’s commitment to integrating an additional 2 million traders into the tax net.
To address the shortfall in taxpayer contributions, Sarwar announced plans to hire 4,000 auditors and bring wholesale markets into the tax system. The FBR is also focused on enforcing the existing tax regulations rather than introducing new tax measures.
Earlier, the FBR had considered a mini-budget aimed at generating around Rs650 billion in revenue by cracking down on tax evaders and increasing general sales tax (GST) on properties, tractors, and other items. However, Sarwar’s latest statement rules out this approach, instead emphasizing efficient tax administration and expanding the tax base.
During the parliamentary briefing, the State Bank of Pakistan (SBP) Governor, Jameel Ahmad, discussed the regulation of the Islamic banking system. Ahmad explained that Islamic banking is regulated by the Shariah Advisory Committee and the Shariah Compliance Department under the Shariah Governance Framework (SGF). The committee concluded that further discussions are necessary to assess Islamic banking regulation according to Islamic principles and requested a comparative report on SBP regulations for both Islamic and conventional banking.
Senator Anusha Rehman raised concerns about whether losses in Islamic banking are passed on to clients. An SBP official responded that if an Islamic bank incurs a loss, it typically reduces its profit margin to protect consumers, citing competitive pressures. The committee noted that Islamic banks offer lower returns compared to conventional banks, with the SBP confirming a disparity: in July 2024, Islamic banks offered a return on deposits of 14.1%, while conventional banks offered 18.8%.
Senator Mohsin Aziz remarked that Islamic banks’ balance sheets appear “greener” than those of conventional banks, suggesting they offer lower returns due to fewer investment avenues. The committee urged stricter regulations for Islamic banks to ensure fairness in the banking sector.
The discussion also touched on the lack of loan allocation for industrial ventures in provinces like Balochistan and Khyber Pakhtunkhwa. Senator Mohsin Aziz highlighted that loan allocations in Khyber Pakhtunkhwa stood at only 0.98%, with Balochistan even lower at 0.35%. The SBP governor acknowledged the issue but indicated that heavy government borrowing limits banks’ willingness to pursue other lending opportunities.
Additionally, the committee discussed the Exim Bank, which was established in January with Rs230 billion allocated under the Export Finance Scheme but still lacks a CEO. Mandviwalla questioned the removal of the former CEO, who had served for four years and received a substantial salary despite being deemed “not clear” in an intelligence report. Senator Anusha Rehman demanded transparency regarding the criteria for appointments and the rationale behind the former CEO’s removal.
The committee unanimously approved the government bill titled “The Banking Companies (Amendment) Bill, 2024,” with proposed amendments. A private member’s bill, “The State Bank of Pakistan (Amendment) Bill, 2024,” introduced by Senator Mohsin Aziz, was passed by a majority, with Senator Anusha Rehman abstaining from the vote.
After the meeting, SBP Governor Jameel Ahmad told media persons that inflation is expected to remain around 11.5% while GDP growth is likely to range between 2.5% and 3.5%. He also noted that Pakistan’s current account deficit is projected to be around 1% of GDP.
