Raja Amer Iqbal
Pakistan proposed national budget 2024-25 with an outlay of Rs 18900 billion is announced on 12th June with a 38% increase in tax revenue of Rs 12970 billion along with a hefty Rs 4800 billion non tax revenue target. The proposed fiscal deficit of Rs 9800 billion besides public debt service head of Rs 9775 billion, Rs 2122 billion defense, Rs 1777 billion grants, Rs 1500 billion PSDP, Rs 1363 billion subsidies, Rs 1014 billion pension and Rs 839 billion for federal admin expenses are proposed. The federal government after paying taxes revenue share to the provinces will have a nominal primary surplus of around Rs 600 billions meaning by all the proposed allocations excluding public debt service will be paid through further borrowing is an alarming concern as Pakistani.
The current expenditures are proposed to increase by 24% along with hefty increases in salaries and other heads like 30 percent increase in parliament expenditures etc are few worrisome concerns. If one adds provinces annual development programs with federal public sector development program total sum is around Rs 4 trillion.
Whereas, on one side the government is determined to include all sectors of the supply chain into the tax net and have proposed a hefty increase in taxes which will result in general inflation across the board but have failed to disseminate a positive posturing through expected decrease in their current expenditures by adopting austerity measures and reducing the size of government footprint.
The government should have reduced the unnecessary expenses like extravaganza spending through borrowed money on new development programs, 25 to 20 percent increase in salaries and 30 percent increase in the parliament budget etc so, to give a “feel good factor” among the general population through their actions of sharing the burden to overcome our contemporary economic difficulties. As well said
“actions are always louder than words”.
Similarly, although the agriculture sector is a provincial tax, their total share in the income tax collection is very low and meager to a few billion Rupees whereas the agriculture sector shares in our total GDP around 22 to 23 percent is another serious concern where the government is reticent.
The evolving scenario is that state and government are asking the general public only to sacrifice and contribute in raising government revenue but they themselves don’t want to share even a nominal burden.
We can at least reduce around Rs 3 to 4 trillions through austerity measures in our federal and provincial budgets meaning by almost a savings of Rs 5 trillion inclusive of around one trillion rupees as one year mark up on forced extra borrowed money.
The individual businesses income tax slabs rates are increased tremendously with minimum of 15% on the income above Rs 600000 per year and 45% on income above 5400000 per year in simple words if one earns Rs 450000 per month in that case Rs 200000 is to be paid as income tax besides all inputs will have inflationary impact due to heavy taxation proposed across the board except agriculture sector and few exemptions will increase the cost of doing business in Pakistan.
This will result ultimately have inflationary prices in the market and will hammer the supply side in the presence of ongoing “stagflation” in the country. This trend will have a direct negative impact on the economy and will further squeeze the employment level so, in nutshell we are entering into a very tough fiscal year for the business community.
If the government keeps increasing the energy price per unit as envisage through ongoing dialogue between them and IMF will further discourage businesses due to the never ending increase in the cost of doing businesses making them further incompetent in the region.
The government is perhaps trying to offset the expected negative effect on employment level through accelerating public sector development programs but our track record is that most of such money is being embezzled and cost of completion of projects are always kept too high along with low quality of work which ultimately results into a failed schemes.
Let’s hope that the corruption index reduces in Pakistan along with improvement in governance indicators inclusive of transparency and accountability then such initiative will fetch positive repercussions on our economy in the future.
The plausible way forward is only in political and economic stability in Pakistan.
Let’s hope the political leadership in Pakistan on a non-partisan basis inks the “charter of the economy” in the national interest at the earliest and all organs of the state and government develop harmonious working relationship to work in synergy to boast our required “Economic Reforms” so to create real business friendly environment in the country.
The ongoing surge in Pakistan stock exchange is to be seen after the first of July 2024 once the government starts imposing the capital gain tax on sale of the shares. Similarly the success of CPEC phase two is heavily dependent on the Chinese foreign direct investments without government sovereign guarantees.
In simple words keep the fingers crossed and hope to sign reasonable and economically feasible agreements with the IMF at the earliest.
The writer is a former President Rawalpindi Chamber of commerce and industry.
