Tola budget proposes rupee at 250 against dollar

ISLAMABAD: Economist Ashfaq Tola has proposed setting the rupee at 250 to the dollar in a model budget for the upcoming fiscal year, arguing that the move could help bring down inflation and support broader economic adjustment.

According to the model budget, reducing the rupee’s value to 250 per dollar could lower inflation by as much as 6%. The document also recommends a Rs10 per dollar incentive for remittances sent through formal banking channels instead of hawala or informal hundi networks, saying such a measure could help raise inflows.

The model budget says Pakistan’s economy is currently caught between the need to pursue domestic growth and the requirement to comply with strict conditions set by the International Monetary Fund (IMF). It warns that rigid adherence to IMF-linked measures could undermine long-term economic stability.

The document states that the government has assured the IMF it will follow tough conditions in order to secure approval of the budget. It adds that policies driven by the IMF could take the fiscal deficit to 4.4% of gross domestic product, while an alternative path based on domestic reforms pursued independently of the lender could bring the deficit down to 2.1% of GDP.

Tax and revenue proposals

Tola’s model budget stresses that local tax reforms and stronger revenue mobilisation are necessary for economic stability. It says tax exemptions for the information technology sector could lead to a significant increase in exports.

At the same time, the document argues that agriculture should now be brought into the tax net to widen the revenue base. It presents this as part of a broader effort to improve fiscal management through domestic policy changes.

Energy, privatisation and investment

The model budget also says the budget deficit cannot be controlled without cutting losses in the energy sector. It links fiscal consolidation to reforms aimed at reducing the burden created by inefficiencies in that area.

In addition, the document proposes the privatisation of state-owned enterprises, saying this could materially ease pressure on the national budget. It also calls for the removal of regulatory obstacles to support private-sector expansion.

Another proposal in the model budget is to grant tax exemptions on foreign assets brought back into the country. According to the document, this step could attract as much as $20 billion in investment.

The proposals come as debate continues over the shape of the next federal budget and the extent to which Pakistan can balance growth objectives with commitments tied to its IMF programme. Tola’s model budget frames that choice as central to the country’s economic direction in the coming fiscal year.