By Ariba Shahid
KARACHI, Pakistan (Reuters) – Pakistan has submitted its federal budget for the next fiscal year, which the International Monetary Fund (IMF) will measure ahead of release. At least $2.5 billion in funding remains pending under loan programs due this month, one of three measures.
The cash-strapped country, whose reserves barely cover a month’s worth of imports, is taking steps to secure a $1.1 billion loan as part of a $6.5 billion IMF rescue package that November has been postponed since 2018, it has been more than 29 days since last staff level visit to Pakistan, is at least 2008 the longest delay since.
On Thursday, Pakistan’s permanent representative told Reuters that Pakistan needed to restore normal functioning of the foreign exchange market through the planned fiscal year budget target and ensure firm and credible financing commitments to cover the $6 billion shortfall, adding that the IMF board only has time for one last review before the current bailout package ends.
Pakistan’s GDP growth target is 3.5%, inflation is expected to be 21%, and fiscal deficit target is 6. 54 as a percentage of GDP is 2023- fiscal year, slightly below the revised estimate for the current year by 7%.
Experts had mixed reactions to the IMF’s compliance with the budget and the impact on the economy.
SHAHID HABIB, CEO, ARIF HABIB LIMITED
“92k will be hard to achieve if taxes are not taken seriously Rs 100 crore revenue target measures for agriculture, retail and wholesale trade, and real estate; relying solely on the industrial sector.
“The government should not allocate large sums of money on public sector development programs and should not have proposed substantial Increase wages and pensions at all employment levels. “
MUSADAQ ZULQARNAIN, DIRECTOR OF PAKISTAN TEXTILE BOARD AND CHAIRMAN OF INTERLOOP HOLDINGS, ONE OF THE LARGEST TEXTILE MANUFACTURERS
“The budget seems to be a balancing act. Incentives for the agricultural sector are encouraging. It is a relief that corporate reserves are not taxed.
“Clearly, the scope and extent of the Super Tax has increased alongside the taxation of the undocumented real estate and trade sectors. In the long run, this is counterproductive as the tax burden increases Having taxpayers who do not bring the exempt sector into (the) tax net will not strengthen the economy.
“Furthermore, authorizes the federal government to collect up to
% of the tax year’s 2023 and additional tax on so-called windfall gains for the first five years, after any such income has already been taxed.
“Overall, the budget appears to be reasonable in the specific circumstances.”
M ABDUL ALEEM, Secretary General, Overseas Investors Chamber of Commerce and Industry
“Based on a preliminary assessment of the budget tax measures announced today, it appears to be an interim budget with short-term measures for certain sectors but a lack of measures to stabilize the economy. However, the IT and agriculture Ministry and positive measures to promote small and medium enterprises.
“There are no measures to encourage investment in manufacturing and other job-creating sectors, while there are no special measures to attract substantial foreign investment into the country .
“Significant increases in wages and pensions for government employees, partly justified, will have a snowball effect on the economy and should be accompanied by measures to increase productivity and reduce Pakistan’s enormous governance costs.
“Overall, we need to look closely at the details of the budget measures before giving any final comments, as people need to understand what tangible measures the government plans to take to justify the expected economic growth. ”
IRFAN IQBAL SHEIKH, Chairman, Federation of Pakistan Chambers of Commerce and Industry
“The Federal Budget presents an unrealistic economic picture; It must also be unrealistic. Also, the business community will be looking for any hidden taxes in the budget.
“PKR 9 revenue target, 54 billion in revenue not only looks difficult; however, it could have far-reaching consequences Negative impact.
“Last year target was PKR 700 crore, 200 crore; this is still on track. Last year, the economic growth rate was close to 6%. This year, the economic growth rate has dropped a lot, only 0.21%. So how do you tax a very large number of people? Poor economic growth? “
MUSTAFA PASHA, Chief Investment Officer, LAKSON INVESTMENTS
“The budget is unlikely to improve the chances of meeting the SLA in June. The IMF may call for additional revenue measures of 800-800 billion. Expect a small budget when negotiating new plans. “
SHAHBAZ ASHRAF, CHIEF INVESTMENT OFFICER, FRIM VENTURES
“This is certainly not a budget that the IMF would approve. There is no control over fiscal spending, and at the same time they announced a dollar amnesty which the IMF does not like.
“This is an ordinary budget with no path to structural reform. No new sectors are taxed. Pensions and wages of government employees have had the biggest increases. 50% or more will be used to pay interest, same old story we’ve seen over the years.
“Capital market investors won’t like Increase the super tax and reintroduce the dividend tax
“Finally, imposing a withholding tax on withdrawals does not help improve financial inclusion. It will increase the money in circulation and develop a cash economy, and will cause more inflation readings. Big upward pressure.”
FAHAD RAUF, Head of Research, ISMAIL IQBAL SECURITIES
“So far, I don’t see any major deviation from the IMF path. Except Apart from increasing the salaries of government employees, this does not seem like an election budget filled with populist actions. However, budget statistics need to be looked at for a logic test.”
GOHAR EJAZ, All Pakistan Textile Mills Association Chief Patron
“Budget is balanced under current circumstances as all IMF conditions have been met to resume the program, especially maintaining positive interest rates.
“Regional energy price budgets have been built into cross-subsidies, with general collection and distribution losses that export industries cannot afford. ”