Good News | After Budget Cars, Dollar Price Decrease? | Hafeez Pasha Break Big News | GNN

Summary

The conversation revolves around the upcoming budget in Pakistan, discussing the challenges and proposals for fiscal policy. Dr. Hafeez Pasha explains the difficulties in meeting IMF targets, including potential tax hikes, cuts in subsidies, and the impact of economic reforms. Key issues such as tax increases on various sectors, energy reforms, and the agricultural sector's struggles are highlighted. The discussion also covers projections for GDP growth and inflation rates, emphasizing the impact of IMF-driven policies. Ultimately, Dr. Pasha paints a concerning picture of the economic landscape and the pressure on the government to manage the situation.

Takeaways

• 😀 The presentation discusses the critical need for presenting the budget before July to ensure legal approval, as without it, all expenditures would be deemed illegal.
• 😀 The government is negotiating with the IMF, aiming to align its proposals with IMF targets to avoid potential disruption of the Extended Fund Facility program.
• 😀 The proposed budget includes an increase in withholding taxes, higher carbon levy, and discontinuation of tax exemptions on solar energy, signaling a tax-heavy future without visible relief for the public.
• 😀 The IMF targets a revenue of 14,300 billion, but the FBR's revenue shortfall for this year could reach around 1,200 billion, creating a challenge to meet next year's revenue targets.
• 😀 A significant increase of 22% in revenue is expected, but due to a lack of growth in the industrial sector, achieving these targets might be difficult.
• 😀 There is no scope for relief for the public, as the government must focus on implementing new taxes to meet revenue goals, limiting any possibility of reducing public burden.
• 😀 Discussions are ongoing about raising taxes on salaries, as the IMF demands further reductions in subsidies, and this could lead to higher inflation rates despite efforts to control them.
• 😀 The GDP growth forecast for the coming year is 3.6%, but challenges such as reduced agricultural output, including wheat and cotton, and proposed fertilizer taxes may hinder this growth.
• 😀 The industrial sector faces stagnation, with rising energy prices and taxes severely impacting profitability and investment, leading to a lack of capacity growth.
• 😀 Predictions suggest that inflation will stabilize at around 7%, with the possibility of car prices decreasing due to allowing imports of second-hand vehicles, though the overall economic outlook remains concerning.

Q & A

Why is it important to present the budget before July 1st?

Presenting the budget before July 1st is crucial because it ensures the approval of the national budget in the National Assembly and the provincial budgets in the respective Provincial Assemblies. Without approval, all expenditures starting from July 1st would be unauthorized and potentially illegal.

What is the significance of the agreement with the IMF regarding Pakistan's budget?

The agreement with the IMF is significant because it dictates key financial targets, including revenue and fiscal policies. Without IMF approval, Pakistan risks not receiving the extended loan program, which could negatively impact the country's financial stability.

What is the expected increase in tax revenue in the upcoming budget?

The government expects to increase tax revenue by 2,600 billion rupees, which represents a 22% increase compared to the previous year. This is considered a challenging target given the economic situation.

How will the introduction of new taxes affect the common people?

The introduction of new taxes, such as an increase in withholding tax and carbon levies, is unlikely to provide relief to the public. Instead, it could lead to higher costs of living due to additional taxation on various goods and services.

What impact will the IMF's suggested reduction in subsidies have on Pakistan's economy?

The reduction in subsidies suggested by the IMF could significantly strain Pakistan's economy, especially in sectors like agriculture and energy. It may lead to higher costs for basic goods, further increasing inflation and economic hardship for the people.

What is the government's proposed growth rate for Pakistan's GDP in the next fiscal year?

The government has proposed a GDP growth target of 3.6% for the next fiscal year. However, experts suggest this target may be optimistic given the challenges in the agricultural and industrial sectors.

How might changes in tax policies impact inflation rates in Pakistan?

The proposed changes in tax policies, such as the imposition of indirect taxes on fertilizers, solar energy, and even medicines, could lead to higher inflation. These increased costs would likely affect the overall price levels and contribute to an inflation rate of approximately 7%.

What does the discussion about reducing subsidies on fertilizers imply for Pakistan's agricultural sector?

Reducing subsidies on fertilizers could severely affect Pakistan's agricultural sector, which is already under strain. This policy could lead to decreased agricultural productivity, especially in crops like wheat and cotton, which could, in turn, impact food security and the economy.

Why are second-hand car imports being allowed, and how might it affect the economy?

Allowing second-hand car imports is a strategic move to reduce the country's foreign exchange expenditure on new cars. This policy could help reduce the trade deficit and make cars more affordable in the domestic market, benefiting the automotive market and consumers.

How does the IMF's projection of a devaluation of the Pakistani rupee affect Pakistan's economy?

The IMF's projection of a devaluation of the Pakistani rupee is aimed at supporting exports by making them more competitive in the global market. However, this could also lead to higher inflation as the cost of imports rises, which could further strain the economy and the living conditions of ordinary citizens.