Expert and industry views on Pakistan’s Federal budget for FY24


Karachi (Reuters) – Pakistan presented its federal budget for the next fiscal year, one of three measures the International Monetary Fund (IMF) will gauge before releasing at least some of the $2.5 billion still pending under a lending programme expiring this month.

The cash-strapped country, with reserves to barely meet a month’s worth of imports, is undertaking steps to secure a $1.1 billion loan, part of a $6.5 billion IMF bailout package, which has been delayed since November, with more than 100 days gone since the last staff-level mission to Pakistan, the longest such delay since at least 2008.

On Thursday, the resident representative for Pakistan told Reuters that Pakistan needs to restore the proper functioning of the FX market, pass a fiscal year 2024 budget consistent with programme objectives, and secure firm and credible financing commitments to close the $6 billion gap, adding that there was only time for one last IMF board review before the end of the current bailout package.

Pakistan is eyeing GDP growth of 3.5%, expecting inflation at 21%, and targeting a fiscal deficit of 6.54% of GDP for the 2023-24 fiscal year, slightly below the current year’s revised estimate of 7%.

Experts have mixed reactions on whether the budget will meet IMF requirements and the impact on the economy.


Ghias Khan, President & CEO, Engro Crop (ENGR.SI), One Of The Largest Conglomerates In Pakistan

“Our ongoing economic challenges call for bold action to address our deep-rooted problems. The announced budget 2023-24 falls short of tackling critical issues like expanding the tax net, investing in education and human development, managing the mounting fiscal deficit, and creating an enabling business environment.

“Pakistan cannot prosper till we generate higher exports and equitable tax revenues from real estate, agriculture, and retail sectors. The budget has enhanced the tax burden on the already compliant formal sectors, which will limit capital formation and growth-oriented initiatives in the manufacturing sector.”

Ehsan Malik, CEO Of Pakistan Business Council

“It’s a budget ‘as usual’ at times ‘unusual’. It fails to take the opportunity of fundamental reforms by taxing the untaxed and under-taxed sectors – wholesale, retail and real estate. Nor is there a mention of steps to harvest data on non filers and NADRA to widen the tax base. Nothing on stemming under-invoicing. The ‘No new Taxes on Industry’ claim is belied by increase in super tax and that too in not a fully progressive way.

“Having said that there are a few good measures. The focus on agriculture, especially on seeds and mechanisation is good as is on promoting IT and IT-enabled exports. The reduction in minimum tax on listed companies is a step in the right direction. However the opportunity of encouraging consolidation and widening the shareholder base by removing double taxation of intercorporate taxes was missed.

“Business will derive confidence from the limited mention of steps taken to revive the IMF program especially also as there was no mention of how debts would be reprofiled.

“What will change? Will more than 3% of tax payers contribute 90% or more to direct taxation? Will retailers and the agri sectors that together contribute 40% contribute more than 2% as a result of the budget? No.

“The tax collection targets look unrealistic and the increase in government salaries and pensions will put pressure on the fiscal deficit. A mini budget is inevitable.”

Shahid Habib, Chief Executive Officer Of Arif Habib Limited

“It will be very difficult to achieve revenue targets of 9.2 trillion rupees without taking serious taxation measures on agriculture, retail and wholesale trading, and real estate; and relying only on the industrial sector.

“The government should not have allocated a high number on the public sector development programme, and should not have proposed such a steep increase in salaries and pensions for all employment grades.”

Musadaq Zulqarnain, Director At Pakistan Textile Council And Chirman At Interloop Holding, One Of The Largest textile Manufacturers In Pakistan

“The budget appears to be a balancing act. Incentives for (the) agricultural sector are encouraging. Company reserves have not been taxed which is a relief.

“Apparently, the scope and extent of super tax has been increased at the same time undocumented Real estate and trade sectors have not been adequately taxed. This is counterproductive in the long run as increasing tax burden on existing tax payers without bringing untaxed sectors into (the) tax net is not going to strengthen the economy.

“In addition, the provision of empowering the federal government to impose up to 50% additional tax on so-called unexpected gains during tax year 2023 and five preceding years, is arbitrary and uncalled for when any such income is already being taxed.

“On the whole (the) budget appears to be reasonable under the given circumstances.”

M Abdul Aleem, Chief Excutive Officer And Secretarty General Of The Overseas Investors Chamber Of Commerce And Industry In Pakistan

“Based on first assessment of the budgetary tax measures announced today, it appears to be an interim budget with short-term measures for certain sectors but lacking on measures to stabilize the economy. However, positive measures for (the) IT and agriculture sector as well as for promotion of SMEs are appreciated.

“There is absence of measures to incentivize investment in manufacturing and other job-creating sectors, while there are no special measures to attract large foreign investment in the country.

“The substantial increase in salaries and pension of government employees, partially justified, will have snowball effect in the economy and should have been accompanied by measures to improve productivity and reduction in (the) huge cost of governance in Pakistan.

“Overall, there is need for us to go through the details of the budgetary measures before giving any final comments as one needs to understand solid measures planned by the government to justify the projected economic growth.”

Irfan Iqbal Sheikh, President Federation Of Pakistan Chambers Of Commerce & Industry

“The federal budget presents an unrealistic picture of the economy; and, therefore, the budgetary targets set in the budget documents are unrealistic as well. Additionally, the business community will be looking for any hidden taxes in budget.

“The revenue target of PKR 9,200 billion revenue not only looks difficult; but, it can have far-reaching negative consequences.

“Last year’s target was PKR 7,500 billion; which is still under failing efforts to be achieved. Last year, the economic growth rate was close to 6%; while this year the economic growth rate has dropped a lot to only 0.29%. So, how can more taxes be imposed on very little economic growth performance?”

Mustafa Pasha, Chief Investment Officer At Lakson Investments

“The budget is unlikely to improve chances of a SLA in June. IMF will likely ask for additional revenue measures of 500-800 billion. Expect a mini budget when a new program is being negotiated.”

Shahbaz Ashraf, Chief Investment Officer At Frim Ventures

“It is surely not a budget that the IMF would approve of. There is no control on fiscal expenditures, while they’ve announced a dollar amnesty which the IMF doesn’t like.

“It is a plain-vanilla budget with no path to structural reforms. There are no new sectors being taxed. There’s been a maximum increase in pension and government employees’ salaries. 50% or more will go towards interest payment, which is the same old story we’ve seen over the years.

“The increase in super taxes and re-imposition of taxes on bonus tax will not be liked by capital market investors

“Lastly, withholding tax on cash withdrawals is negative for improving financial inclusion. This will increase currency in circulation and grow the cash economy, and also create more upside pressure on inflationary readings.”

Fahad Rauf, Head Of Research At Ismail Iqbal Securities

“So far, I don’t see any major deviations from the IMF path. This does not seem like an election budget full of populist action other than increasing salaries for government employees. However, will need to see the budget statistics for a test of logic.”

Gohar Ejaz Patron In Chief, All Pakistan Textile Mills Association

“The budget is balance given the current scenario as all IMF conditions being met to revive the programme, especially keeping interest rates positive.

“The regional energy price budget, which has built in cross subsidies, general collection and distribution losses is something the export industry cannot sustain.”

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