KARACHI: The federal budget will continue the fiscal consolidation seen last year and most of the targets are in line with IMF guidelines which will help in getting long-term financing facility, analyst said.
Though no major reforms were seen on the exports, energy and other sectors but many tax exemptions have been removed, they added.
The government has adapted significant tax measures to get incremental tax revenues of Rs 3.7 trillion, taking total FBR taxes to Rs 12.97 trillion from current year estimated number of Rs 9.25 trillion.
Including PDL in tax revenues, the FBR tax to GDP ratio for FY25 is estimated to reach 11.5 percent from 9.62 percent in FY24E. For last five years this has remained 9.7 percent of GDP. To recall, PDL used to be a tax revenue till FY20.
“We believe, tax measures taken under this budget are quite balanced and less inflationary than expectations, as earlier it was considered that government will increase GST by 1.0 percent,” senior analyst and CEO, Topline Securities Muhammad Sohail said.
“We believe, these measures will pave the way for IMF program, if approved from the parliament,” he added.
Overall budget aims to ensure primary surplus of 2.0 percent of GDP or Rs 2.5 trillion (excluding provincial surplus 1.0 percent of GDP), which we believe is in line with the IMF guidelines, as reported in various news papers.
“We believe, GDP target of 3.6 percent is achievable as industries has started reflecting V shaped recovery; LSM index in the third quarter of FY24 has achieved growth of 1.47 percent,” he said. Approximately, 50 percent of the subsectors have recovered and posted positive growth.
“Going forward, with the expected decline in interest rates, we believe industrial growth target of 4.4 percent is achievable,” Sohail said.
“On the other hand, services sector is also expected to grow 4.1 percent and we believe, on the back of low base, expected recovery in industrial growth and subsequently in advances of the banks, the services sector is also expected to post plus 4.0 percent growth, as projected by government.”
He said actual interest expense for FY25 may remain on lower than projected numbers due to expected fall in interest rates.
Regarding FBR tax revenue, he believes the government can collect around Rs 12 trillion based on the new tax measures. The balance numbers can be achieved through reduction in significant higher PSDP allocation, he said.
The government has projected current account deficit of $3.7 billion for FY25, which will be higher than FY24 as it is expected to be a year of surplus of $100-200 million, he said.
Increase in PDL limit to Rs 80 per liter (minimum Rs 60) on HSD and MS oil will help government to collect around Rs 350 billion.
Copyright Business Recorder, 2024
Comments
Comments are closed.