The budget for next financial year, announced on Tuesday, seeks to deepen fiscal consolidation to pave the way for a second successful review of the IMF program of $ 7 billion in September.
This is evident from the significant reduction in the objective of consolidated national fiscal deficit up to 3.9pc of GDP of the original 5.9pc objective. The provinces, which have often been criticized for adding federal fiscal problems due to their greater participation under the NFC award, will contribute with cash surpluses of almost RS1.5tr, up to 50 percent of the RS1TR, they were required to contribute this year to maintain the national deficit.
In fact, the Government has partially fulfilled the demand for the relief of the income tax of the salaried classes, but the fiscal space for this is basically provided by RS1TR savings in debt payments due to national interest rates reduced during the last year. These savings have also allowed the authorities to relieve the powerful real estate lobbies that demand tax concessions.
That said, the budget is disappointing for those who thought that the economic stability achieved during the last year and a half would encourage the implementation of deeper structural reforms for sustainable economic growth.
There is not much in the budget to give hope for such structural change. But that does not mean that the document is devoid of good points. For example, long -standing tariff reforms are launched that hopefully will end the protections for some rental search industries in the next five years.
It also seeks to bring non -filters to the network by imposing restrictions, as in the purchase of values above a certain threshold, the purchase of cars greater than 850cc, etc. In addition, it is established for the elimination by stages of sales tax exemptions for industries that operate in ex-family/leg to make the playing field even throughout the country.
Although the Minister of Finance spoke of the difficulties of the corporate sector he fulfills, his budget discourse failed to address the issue of inequitable corporate tax rates, an important obstacle to investment and export growth. Although the controversial Super Tax has been marginally reduced, the steps to improve competitiveness and attract foreign investment are absent.
It is mainly due to unjust tax policies and the burden they put in the industry, which forms 18 percent of the economy, but contributes to almost 60 % of general tax revenues, which large -scale manufacturing has been hiring.
Since the government wants to increase exports to $ 100 billion in five years under its Uraan program, it is likely that the objective will remain difficult to achieve without increasing industrial productivity and attracting FDI. Many remain skeptics about the government’s ability to achieve the growth objective of the next year of 4.2PC, greatly due to their failure to change the dynamics of a dying economy. Stability has returned. Will growth follow your example?
Posted in Dawn, June 11, 2025
