‘Unrealistic targets; Budget FY23 presented to satisfy IMF’

KARACHI: Finance analysts showed displeasure over Budget FY23 on Friday, saying it had nothing much for capital market and was presented with unrealistic targets to satisfy International Monetary Fund (IMF).

“Budget FY23 is an attempt to satisfy IMF on key matters relating to revenue collection, subsidy reductions, and attainment of fiscal discipline,” stated a report of Topline Securities, brokerage house, in its initial impressions over the budget.

Umair Naseer of Topline Research was of the view that last year’s expansionary budget had resulted in industry-led gross domestic product (GDP) growth of 5.97 percent in FY22 and a huge increase in imports.The latest budget was more focused on economic stabilisation, he added.

“A lot will depend on global commodity prices as they will determine outlook on Pakistan macros and ease with which government can achieve its budgetary targets in FY23.”

Though FY23 revenue collection target was set at Rs7trn (+17pc from FY22), it would be a challenge to achieve the target due to the economic slowdown and lower collection from oil sales, Naseer stated.

He said the tax rate on banking companies had been increased from 39 percent to 42 percent and included an additional 3 percent super tax. “This could fetch around Rs15 billion to Rs20 billion of taxes.”

Narrating relief measures, he said that zero sales tax on the import of solar panels and distribution, and zero tax on agriculture machinery and inputs including tractors, wheat and rice seeds. “We estimate zero-rating on tractors can impact tax collection by Rs5-7 billion,” he said.

Zafar Moti, former director Pakistan Stock Exchange Limited (PSX), said it looked like a balanced budget, but the targets were not achievable, he cautioned. “Exports, FBR [Federal Board of Revenue] collectives and real estate collectives are not achievable.”

He said corporate tax had been increased and feasibility of the sector was already out, as its raw material had doubled in prices.

“Fuel, diesel, and gas prices have increased. Besides, they need to increase prices of their staff and cater them. Direct tax collection seems impossible. Tax on 130 items has been dropped, while increased on 670 items whose details are not available yet.”

Zafar Moti said taxes on the auto sector and raw materials of the cement sector would have an impact on the capital market. The capital gain tax was not touched, he added.

Ahsan Mehanti, analyst at Arif Habib Corp, said banking sector would be impacted worse by super tax levy.

“Higher advance tax to impact corporate earnings in auto and banking sector. Cement and pharma to benefit on PSDP outlay and free custom duties,” he said.

“Overall capital markets to weaken on no special exemption to investors.”

Industrialist and businessmen leader Jawed Bilwani said drawback of local taxes and levy (DLTL) dues were approved last week. However, DLTL was not continued and nor notification was issued, he added.

Bilwani said no load-shedding for the industry was a welcome step, and he called for announcement of the price of electricity and gas. Real impacts of the budget would be known in days to come, he stated.