Federal Finance Minister Muhammad Aurangzeb has announced that the long-anticipated tax on the agricultural sector will be enforced from July 1 next year.

In an informal interaction with the media on Wednesday, the finance czar revealed that the government is making substantial progress on the National Finance Pact in collaboration with the provinces.

"The legislation related to the taxation of the agricultural sector is expected to be finalized by January 2024," Aurangzeb said, adding that its implementation would begin on July 1, 2025.

The minister further disclosed that negotiations are ongoing with China concerning the re-profiling of loans for power projects.

"Efforts are underway to reach a consensus on this matter," he said, noting the importance of renegotiating terms for critical energy-related loans to mitigate Pakistan’s growing economic burdens.

The imposition of the agricultural tax comes as part of a broader government effort to bring every sector into the tax fold. In July of this year, Aurangzeb had emphasised the need for all sectors, including agriculture, to contribute their fair share to the national tax base.

"If we continue to rely solely on the salaried class, Pakistan will remain trapped in economic stagnation," he said.

Acknowledging that agriculture is a provincial domain, the FinMin also expressed gratitude to the provincial governments for their cooperation. "I am thankful to the chief ministers for agreeing to legislate in this area, so we can finally bring the agricultural sector into the tax net."

Aurangzeb candidly admitted that bringing the agricultural sector under the tax regime is a monumental task. "Neither you nor the IMF believe we will be able to achieve what has not been done in the last 70 years. But we have no choice but to act now."

He stressed that the government has exhausted other avenues for economic reform and is compelled to take drastic measures. "Things that have remained untouched for 75 years must now be addressed. If we continue to only tax the salaried class, we will not have anywhere left to turn next year," he remarked, highlighting the urgent need for structural change.

This decision follows the government’s broader efforts to address Pakistan’s balance of payments crisis, with the Finance Minister reiterating the country's need to diversify its revenue sources and strengthen its fiscal foundation.