ISLAMABAD: As virtual technicallevel discussions on the upcoming federal budget begin, the International Monetary Fund (IMF) expects Pakistan`s total revenue to grow to nearly Rs20 trillion in the next fiscal year, up from the current estimate of less than Rs17.8tr, with an emphasis on tight expenditure controls to ensure sustainable debt servicing.

After three days of technical discussions through video link, formal policylevel negotiations on budget finalisation are set to begin on Monday (May 19) and continue until Friday (May 23). The agreeament between the IMF staff mission and the authorities on next year`s budgetary measures and macroeconomic framework would lead to the announcement of the federal budget on June 2.

The IMF has already put on the table its projections for major economic indicators, including fiscal and monetary policies, envisaging an economic growth rate of 3.6 per cent and average inflation of 7.7pc. This means the inflation rate would be significantly higher than the current year`s average of 5.1pc. The combination of economic growth and inflation is expected to jack up revenue collection by more than Rs1.4tr from the current year`s estimated collection of about Rs12.4tr.

However, besides the FBR`s revenue collection, a major push for expansion in revenue base is being envisaged to come from provincial governments and agriculture income tax would be a key area for additional efforts.

Overall revenues for the next year are targeted to cross Rs19.9tr or 15.2pc of GDP compared to Rs17.8bn of budget estimates for the current year or 15.9pc of GDP.

The Fund expects Pakistani authorities to continue to focus on expenditurecontrol, trimming it from 21.6pc of GDP in the current year to Rs20.3pc next year.

But even then the expenditures would get close to Rs26.57tr next year compared to budget estimates of about Rs18.9tr. The two sides have yet to work out the final numbers on revenue collection and revised expenditures, particularly those that have arisen re cently due to the security situation.

The IMF expects Pakistan to reduce its fiscal deficit from 5.6pc of GDP during the current year to 5.1pc next year, or about Rs6.67tr. The government is also being asked to maintain a primary surplus revenues minus non-interest expenditures of around Rs2.1tr, a key condition for improving debt sustainability. Achieving this target is anticipated to bring down the debt-to-GDP ratio from the current 77.6pc to 75.6pc in FY26.On the other hand, the Ministry of Finance has asked all the ministries and divisions to submit an additional pro forma (Form-III-C) to capture the climate-related component of subsidies to enhance and expand reporting on climate considerations in all allocations of the annual budget.

`Climate tagging of subsidies is one of the requirements under the Extended Fund Facility (EFF) agreed with IMF, read a circular issued to all government entities and ministries.

The federal budget is required to map climate relevance in three categories of adaptation, mitigation, and transition.

The public expenditure under the running of civil government and public sector development programme is being tagged and the process is now being extended to other expenditures like grants and subsidies to identify the overall climate-related public expenditure.