What the experts have to say about PTI's 'corona' budget

Published June 12, 2020
Poeple gather around a television to listen to the government's budget for the new fiscal year in Lahore on June 12. — APP
Poeple gather around a television to listen to the government's budget for the new fiscal year in Lahore on June 12. — APP

The PTI-led government on Friday introduced a Rs7.13 trillion budget for the new fiscal year with no additional taxes.

Among the major figures revealed by Industries Minister Hammad Azhar on the floor of the National Assembly, the Federal Board of Revenue (FBR) revenue target was kept at Rs4.95 trillion for next year while defence allocations amounted to around Rs1.3 trillion. The federal development programme was budgeted at Rs650 billion to support growth prospects.

However, analysts were split over whether the government had managed to introduce a realistic budget considering the challenges of the coronavirus and other external factors on the economy.

Mohammad Sohail, economist

"For the common man, the greatest issue is that of jobs and employment [...] in my personal opinion, the issue of jobs is uncertain after listening to the speech [in the National Assembly].

"As for the issue of taxation, well I'll just say that this budget doesn't seem practical at all. Because they've increased Rs1,000 billion in taxes and then said no new taxes. How does that work? The math seems a bit off.

"In my opinion, I didn't hear any notable changes that would make doing business easier. The government said that they would be supporting the construction sector with a package. Maybe that will help, but overall I'd say this budget is neutral for businesses, neither bad nor good."

"One thing that I think is good is that they haven't increased the salaries and pensions of government employees. But they should have imposed taxes on super rich people, luxury bungalows and the import of expensive cars."

Uzair Younus, economic analyst

"The expectation was that the budget would include measures to boost aggregate demand in the economy. But the reality is that this is an accountant's budget, that is bereft of any creative thinking to rescue Pakistan from perhaps the most serious socio-economic crisis the country has faced since independence.

"Like the previous budget, rosy revenue projections are its Achilles heel and I do not see this budget stimulating growth in the coming months. Based on an early assessment of the numbers, my view is that Pakistan will plunge into a deeper recession."

Khurram Shahzad, economic analyst

"A wise man once said desperate times call for desperate measures. Our current economic situation is very difficult right now, I personally didn't see any extraordinary or news-worthy changes in the budget.

"As for the taxes, speculation was that taxes would be reduced to provide relief to the common man. There are questions on tax collection and tax net. Some of the details seemed unclear to me. Maybe we will find out more in the coming days [...] I think that the government is headed towards borrowing."

Farrukh Khan, Pakistan Stock Exchange managing director

"I think it is a creditable thing that no major new taxes have been imposed. But the question that arises is that the budget has talked about 7pc deficit. How that can be managed, because when your economy is in negative growth [...] how will they meet new revenue targets?

"Two things which they could have focused in my opinion — which they may do going forward — one was expense control, where could the government have controlled its expenditures? Because if you are not increasing taxes then can expenditures be controlled?

"The second is the expenditure on state-owned enterprises, their privatisation restructuring whatever effort [they require], how can we accelerate it? Because that is a huge amount that goes down the drain every year so what effort will they do so that support can be given to the budgetary process and non-tax revenues?"

Aadil Nakhoda, economist

"What we are seeing here is that this budget is not as ambitious as compared to previous years, largely due to the Covid-19 crisis. But there are some important factors to look at.

"One of these is that they’re expecting debt financing to fall. This will be beneficial as it will give the government some buffer.

"Another positive aspect is the move to rationalise trade tariffs. It shows the government is moving away from customs duties and more towards sales taxes. This will ultimately help the export sector.

"However, predicting a 2.1pc growth rate is debatable, given we don’t even know yet when the Covid-19 crisis will end. It’s similar to that stage before the 2008 financial crisis when economists really can’t predict the numbers with any certainty."

Anjum Nisar, Federation of Pakistan Chamber of Commerce and Industry president

"Forget ease of doing business, I want to talk about the cost of doing business. Additional customs duty were removed, tariff lines were reduced, capital gains tax which is related to the real estate industry was reduced to four years from eight and they talked about 2.1pc gross domestic product (GDP) growth.

"They will not be able to achieve that target. And the simple explanation from that is our agricultural sector is severely impacted by coronavirus.

"Moreover, our industries have had their backs broken in the last few months. So a sensible person can see that things don't look that positive going into the next year. All in all I'd say that this seemed like a formality than anything else."

Ashfaq Tola, Tola Associates founder

"I was just looking at the targets before coming here. I looked at indirect and direct tax targets [...] I think most collection targets look unrealistic to me.

"The biggest crutch for them is the petroleum levy. To be honest, things don't look good. After the locust attack, expect more damage to the economy and hence tax collection.

"I have a feeling that they may have to bring in a new budget in October or November because if they don't, I have a bad feeling that they won't be able to pay salaries."

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