The sales tax rate will remain unchanged at 18% for the new budget. The government has decided not to increase it to 19%. They aim to avoid increasing inflation. The Finance Bill 2024 will not alter this rate.
The Federal Board of Revenue (FBR) proposed a 1% increase. This would generate an additional Rs. 40-50 billion for the fiscal year 2024-25. However, Prime Minister Shehbaz Sharif rejected this proposal. He was concerned about the inflationary impact on the public.
The government discussed the proposal again. They decided to keep the sales tax at 18%. The FBR and top government officials agree on this decision. They believe it is better for the people. They want to prevent a rise in the cost of living. This will be reflected in the 2024-25 budget.
Prime Minister Shehbaz Sharif confirmed that the sales tax rate will not increase. It will remain at 18%.
SBP Forecasts Strong Reserves Above $9 Billion Amid Budget Changes
The State Bank of Pakistan (SBP) predicts foreign reserves will stay above $9 billion. This prediction holds despite $1 billion in repayments by June 2024.
Topline Securities shared MPC analyst briefing notes. These notes show SBP repaid $10.7 billion in 11 months of FY24. Another $1 billion will be repaid in June 2024. This totals $11.7 billion for FY24.
In FY24, rollovers reached $11-12 billion. This implies a gross need of $22.7-23.7 billion. In July 2024, external repayments were near $2 billion.
The SBP liquidity data sheet shows June and July 2024 repayments as $10.2 billion. The central bank will roll over the remaining amount.
SBP has cleared most of the backlog for dividends and profit repatriation. Dividend payments in May 2024 were around $1 billion. This brings total payments in FY24 to about $2 billion.
The State Bank of Pakistan addressed the differences in repayment data between SBP and IMF. SBP stated the difference is due to how numbers are treated.
SBP says IMF does not count some maturities. The SBP believes this difference is not concerning. The Economic Affairs Division provides repayment data to SBP and IMF.
SBP stated future interest rate cuts depend on post-budget and IMF measures. Current rate cuts model budget and IMF measures known to SBP. Actual measures may change the inflation outlook.
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