In a stark warning to lawmakers, Pakistan’s Finance Minister Muhammad Aurangzeb has stated that the federal government may be left with no option but to introduce a mini-budget worth PKR 500 billion if Parliament fails to pass key tax legislation. His remarks have sent ripples through political and economic circles as the government attempts to stabilize the country’s fragile economy and meet its fiscal targets amid ongoing negotiations with the International Monetary Fund (IMF).

Speaking in Islamabad on June 11, 2025, Finance Minister Aurangzeb emphasized the urgency of legal reforms in the taxation system, stating that time is running out. He cautioned that failure to act decisively could widen the fiscal deficit and undermine the country’s credibility in the eyes of global financial institutions.

Context Behind the Warning

The situation stems from the government’s recent attempt to pass the Income Tax (Amendment) Bill 2025, which aims to increase tax revenue by adjusting tax rates—especially targeting the banking sector. The bill proposes raising the tax rate on bank profits from 39% to 42% and imposes an additional super tax. These changes are designed to help the government meet its revenue targets under the terms of its ongoing arrangement with the IMF.

However, the bill’s status as either a “money bill” or an “ordinary bill” has led to political wrangling. According to the Constitution of Pakistan, only the National Assembly is empowered to pass money bills, while other forms of legislation require the concurrence of both houses of Parliament. National Assembly Speaker Ayaz Sadiq reportedly ruled that the bill is not a money bill, which has created procedural hurdles and further delayed its passage.

The Senate Standing Committee on Finance has already approved the bill, but unless it becomes law through proper legislative channels, the government will be unable to implement the proposed tax changes.

The Economic Stakes

The stakes are high. Without this legislation, the government could fall short of its tax collection targets by hundreds of billions of rupees. This shortfall would necessitate a supplementary—or “mini”—budget to make up the difference, a move that is likely to be unpopular both domestically and internationally.

Pakistan's economy has been under tremendous pressure in recent years, grappling with high inflation, a weakening currency, and dwindling foreign exchange reserves. The country has narrowly avoided default multiple times, largely thanks to emergency loans and support from friendly nations and international organizations.

Under the current agreement with the IMF, Pakistan has committed to increasing tax revenues, reducing subsidies, and improving governance in the public sector. Any failure to fulfill these commitments could jeopardize future disbursements and complicate negotiations for a new or extended program. A mini-budget would likely involve additional taxes or expenditure cuts, both of which could have significant political consequences for the ruling coalition led by Prime Minister Shehbaz Sharif.

Political and Public Response

The opposition has seized on the situation to criticize the government’s economic management. Leaders from the Pakistan Tehreek-e-Insaf (PTI) and other opposition parties have accused the government of failing to develop a coherent fiscal strategy and relying too heavily on indirect taxation, which disproportionately affects the lower and middle classes.

Meanwhile, public sentiment is tense. The Pakistani populace is already burdened by rising utility costs, food inflation, and stagnant wages. The mere mention of a PKR 500 billion mini-budget has raised fears of additional tax hikes or price increases in essential goods and services.

Economists have warned that continued legislative gridlock could erode investor confidence and lead to further capital flight. “What Pakistan needs right now is policy certainty,” said Dr. Hafeez Pasha, a noted economist. “Investors, both domestic and international, are watching closely. Delays in tax reforms signal dysfunction at the political level, which could be very damaging.”

Looking Ahead

The coming weeks will be critical. The government has limited time to get the tax legislation passed before the start of the new fiscal year in July. Finance Minister Aurangzeb has appealed to lawmakers to put aside partisan differences and act in the national interest, highlighting that the country cannot afford another cycle of economic uncertainty.

If Parliament fails to act, the government will almost certainly have to introduce a mini-budget to cover the revenue shortfall. While this may solve immediate fiscal challenges, it risks inflaming political tensions and adding to the economic burden on ordinary Pakistanis.

Ultimately, this episode underscores the importance of legislative cohesion and economic foresight in navigating Pakistan’s complex financial landscape.

Reference:  پارلیمنٹ نے ٹیکسز پر قانون سازی نہ کی تو 500 ارب کا منی بجٹ ناگزیر ہو جائے گا:وزیر خزانہ