Pakistan’s Federal Budget for FY24
Various experts and industry professionals have shared their perspectives on Pakistan’s Federal budget for the fiscal year 2023-2024. Here is a summary of their comments:
Ghias Khan, President & CEO of Engro Corp: The budget falls short of addressing critical issues such as expanding the tax net, investing in education and human development, managing the fiscal deficit, and creating a conducive business environment. The burden of taxes has increased on compliant formal sectors, which may hinder capital formation and growth in the manufacturing sector.
Ehsan Malik, CEO of the Pakistan Business Council: The budget missed opportunities for fundamental reforms by not adequately taxing sectors like wholesale, retail, and real estate. There is a lack of measures to widen the tax base and combat under-invoicing. However, there are positive aspects, such as the focus on agriculture, IT promotion, and a reduction in minimum tax on listed companies.
Shahid Habib, CEO of Arif Habib Limited: Achieving revenue targets without significant taxation on agriculture, retail, wholesale trading, and real estate would be challenging. The allocation for the public sector development program and the proposed increase in salaries and pensions could put pressure on the fiscal deficit.
Musadaq Zulqarnain, Director at Pakistan Textile Council and Chairman at Interloop Holdings: The budget seems to be a balancing act. Incentives for the agricultural sector are encouraging, and the taxation of company reserves is a relief. However, the increase in super tax without adequately taxing undocumented real estate and trade sectors is counterproductive.
M Abdul Aleem, CEO and Secretary General of the Overseas Investors Chamber of Commerce and Industry: The budget appears to focus on short-term measures for certain sectors rather than stabilizing the economy. Positive measures for the IT and agriculture sectors are appreciated, but there is a lack of incentives for investment in manufacturing and job-creating sectors.
Irfan Iqbal Sheikh, President of the Federation of Pakistan Chambers of Commerce & Industry: The budget presents an unrealistic picture of the economy, and the revenue targets may have negative consequences. Last year’s targets were not achieved, and this year’s economic growth rate is significantly lower. Imposing more taxes with minimal economic growth is concerning.
Mustafa Pasha, Chief Investment Officer at Lakson Investments: The budget is unlikely to improve the chances of a Stand-By Arrangement (SLA) with the IMF in June. Additional revenue measures may be required, leading to a possible mini-budget during the negotiation of a new program.
Shahbaz Ashraf, Chief Investment Officer at FRIM Ventures: The budget does not align with the IMF’s preferences. There is a lack of control on fiscal expenditures, and the dollar amnesty announcement may not be favored by the IMF. Structural reforms are absent, and no new sectors are being taxed. The increase in super taxes and the re-imposition of taxes on bonuses may not be well-received by capital market investors.
Fahad Rauf, Head of Research at Ismail Iqbal Securities: There don’t seem to be any major deviations from the IMF’s path. The budget appears to prioritize logical actions rather than populist measures, except for the increase in salaries for government employees. Further analysis of the budget statistics is necessary.
Gohar Ejaz, Patron in Chief of the All Pakistan Textile Mills Association: Considering the current scenario and meeting IMF conditions to revive the program, the budget is balanced. However, the regional energy price budget, including cross subsidies and collection losses, may be unsustainable for the export industry.
In conclusion, the expert and industry perspectives on Pakistan’s Federal budget for FY24 present a mixed assessment of its strengths and shortcomings. While some commend the budget’s focus on sectors like agriculture and IT, concerns are raised regarding the lack of comprehensive reforms, limited taxation of untapped sectors, and unrealistic revenue targets. The increase in taxes on compliant formal sectors, along with the pressure on the fiscal deficit due to salary and pension increases, also raise eyebrows. The budget’s ability to address deep-rooted problems and pave the way for sustainable economic growth remains a subject of debate. Further scrutiny of the budget’s details is essential to fully comprehend the government’s proposed measures and their potential impact on the projected economic trajectory.
