The BGA Pakistan Team, led by Senior Adviser Aniq Zafar, wrote an update to clients on the country’s new budget.

Context

  • Pakistan Finance Minister Ishaq Dar presented the federal budget in Parliament June 9, with the total exceeding $50.7 billion (PKR 14.5 trillion). The government has set a 3.5 percent gross domestic product growth target for the 2023-2024 fiscal year and a 21 percent inflation projection.
  • The budget seeks to balance the International Monetary Fund’s (IMF) conditions to continue Pakistan’s program with public expectations amid crippling inflation. The government aims to raise around $19 billion in the 2023-24 fiscal year through external sources, including $2.4 billion from the IMF and $4.5 billion from other commercial banks. The budget will focus on developmental expenditure; however, it also proposes a few more taxes, which will cause concern within the corporate sector.

Significance

  • The budget contains special incentives for manufacturing, agriculture and technology, including new relief measures for the information technology (IT) and real estate sectors. In addition, the government will provide a tax relief of 10 percent or PKR 5 million ($17,400) on builders’ business income for the next three years.
  • Pakistan’s external payments challenge remains a priority for policymakers, who have used numerous nontax measures to dampen imports. As a result, the current account deficit narrowed 76.1 percent to $3.3 billion from July 2022-April 2023. However, since many of Pakistan’s exports are import driven, exports declined 11.7 percent during the same period, amounting to $23.2 billion compared to $26.2 billion the previous year despite the dramatic devaluation of the Pakistani rupee against the U.S. dollar over the past year.

Implications

  • The government will continue to impose a super tax on companies, following the model introduced in the 2023 fiscal year budget. A new advance tax will be imposed on listed and unlisted companies at rates of 5 percent and 7.5 percent, respectively. The government has proposed that every company issuing bonus shares to company shareholders should withhold 10 percent to help collect tax revenue on dividends.
  • Austerity measures are likely to continue until Pakistan’s revenue increases. The budget raises the monetary limit of foreign remittances from outside Pakistan from PKR 5 million ($17,400) to PKR 29 million ($101,000) and allows people to enter the country without disclosing the source of their income.
  • The government aims to boost IT exports and provide young professionals opportunities in the growing sector. The government is committed to invest a significant amount in youth training and will provide 100,000 youths with laptops.

We will continue to keep you updated on developments in Pakistan as they occur. If you have any questions or comments, please contact BGA Pakistan Senior Adviser Aniq Zafar at azafar@bowergroupasia.com.

Best regards,

BGA Pakistan Team

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Senior Advisor

Aniq is one of Pakistan’s most experienced business and public relations advisors, maintaining networks throughout the country’s public and private sectors, civil society and diplomatic circles. As a former journalist, Aniq also has strong relationships in the vibrant and rapidly expanding domestic media environment. Prior to joining BGA, Aniq worked with global clients across sectors on developing communication strategies, crisis communication, understanding regulatory frameworks and political risk assessment. He advised multinational clients from sectors including telecommunications, fast moving consumer goods, tobacco, agriculture, infrastructure, airlines and energy, as well as international development organizations. In the public sector, Aniq advised Pakistan’s Federal ... Read More