Economic Survey: an objective survey?
EDITORIAL: Federal Finance Minister Muhammad Aurangzeb began traditional press conference on the Economic Survey 2024-25 claiming that that the Pakistan economy must be viewed in the context of the global economy.
It would, however, been more appropriate to compare Pakistan's growth rate with regional countries — China's growth rate for 2024 was 5 percent, India's 6.5 percent for 2025, Bangladesh's 4.2 percent, and Sri Lanka's 5 percent against Pakistan's projected 2024-25 growth of 2.68 percent.
This rate even though downgraded from the budgeted 3.5 percent will be a challenge, given that the first quarter GDP rate was revised by the Pakistan Bureau of Statistics (PBS) to 1.34, the second quarter revised to 1.53 percent and third quarter (not yet revised) to 2.4 percent.
The Survey notes manufacturing growth at 4.77 percent in spite of slow recovery of the large-scale manufacturing (LSM) sector; however, this rate is not in synch with the LSM negative growth of 1.47 percent July-March 2025 against negative 0.22 percent in the comparable period last year.
The Survey determined to give this a positive spin noted that 'despite the overall lacklustre performance it is noteworthy that nearly half of the LSM sectors demonstrated positive growth, including industries such as wearing apparel, textiles, coke and petroleum products, pharmaceutical and automobiles.'
One can only hope that this is not a prelude to changing the weightage of the industrial subsectors to show improved performance as was witnessed when Dr Hafeez Sheikh as the Finance Minister reduced the weightage of food in inflation calculation thereby, halving the rate of inflation overnight.
Inflation, Aurangzeb contended rightly, has come down dramatically. We are sure that he is aware that basic economic theory dictates a 2 percent inflation is necessary to oil the wheels of industry (supported by the US Federal Reserve).
A major contributing factor to the drop in food inflation was the decline in the prices of the staple wheat due to the International Monetary Fund (IMF) barring provincial/federal governments from procuring or setting a support price for wheat, which is likely to lead farmers to switch to a more lucrative crop next year, necessitating imports.
The Survey inexplicably does not cite employment/unemployment rates and those that it cites are dated to 2020-21 while the section on Population, Labour Force and Employment details policy priorities including Gender Path and Sustainability, Prime Minister's Women Empowerment package 2024, Initiatives for skill development and employment generation, new initiatives sourced to the Prime Minister, Prime Minister's Youth programme as well as future of employment in green and digital transitions. There is, however, a section on overseas employment but here too the total number is calculated from 1972 onwards, thereby data of overseas employees in 2024-25 is not quantified.
The Survey disturbingly notes a net outflow of 1.6 billion dollars on the financial front as government debt repayments escalated and net (as opposed to gross) liabilities decreased. In other words, the financial account remains a source of serious concern, necessitating higher loans and rollovers in the next fiscal year.
Total expenditure rose to 16.337 trillion rupees July-March 2025 compared to 13.682 trillion rupees in the comparable period of last year – a rise of 19.4 percent with current expenditure rising by 18.3 percent as per the Survey and this in spite of the massive decline in debt service payments, which rose by 16.7 percent this year compared to a rise of 54 percent recorded last year due to a decline in the discount rate — from 22 percent last year to 11 percent last month.
The government had budgeted a 21 percent rise in current expenditure in 2025 and after the recent Indian adventurism effectively repelled by Pakistan it is likely that the rise maybe higher than the budgeted 21 percent.
The Survey's claim that the rise in expenditure is attributable to a 'notable rise' in development expenditure is not borne out by data uploaded on the Ministry of Planning, Development and Special Initiatives website which distinguishes authorisations (894 billion rupees July-April 2025) from actual disbursements (expenditure as per SAP), which is less than half at 449 billion rupees.
It is important to note that the focus remained on physical infrastructure development rather than on social development particularly education, which was one of the main contributors to China's meteoric rise as an economic power that has enabled the country not to succumb to US tariff threats.
Pakistan faces many challenges associated with climate change; however, Shehbaz Sharif-led government has shown a key commitment to overcoming these challenges, reflected by IMF's approval of the 1.4 billion-dollar Resilience and Sustainable Facility.
The voluminous Economic Survey publication prepared by the Economic Adviser's Wing under the administrative control of the Finance Ministry released to the general public on a national holiday and as usual a mere one day prior to the Budget presages few, if any, indications of what the Budget would contain the following day.
While the statistics it contains are not up to date (with few exceptions including trade figures updated till April and foreign exchange reserves till 27 May) the analysis as always mirrors the government's claims of success in raising the tax-to-GDP ratio (though the budgeted shortfall till end May was cited at one trillion rupees) and the continuation of reliance on indirect taxes whose incidence on the poor is greater than on the rich.
Copyright Business Recorder, 2025
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Express Tribune
2 hours ago
- Express Tribune
Non-filers to be barred from purchasing vehicles, immovable property
Listen to article In the Federal Budget 2025–26, unveiled on Tuesday, the government has proposed a series of stringent financial restrictions and increased tax rates targeting non-filers as part of efforts to broaden the tax base and enhance the documentation of the economy. Finance Minister Muhammad Aurangzeb, who presented the budget in the National Assembly, announced a proposal to increase the advance tax on cash withdrawals by non-filers from 0.6% to 1%. The government also aims to eliminate the existing distinction between filers and non-filers in key financial matters. The finance minister stated that only those who submit tax returns and wealth statements will be allowed to engage in formal financial transactions. As per the new proposals, non-filers will be barred from purchasing vehicles or immovable property, and they will not be permitted to invest in securities or mutual funds. In a further tightening of financial regulations, a proposal has been put forward to prohibit non-filers from opening bank accounts, a move expected to significantly impact undocumented financial activity. The proposed measures, if implemented, would represent one of the most aggressive steps taken by the government to compel citizens to join the formal tax net and improve fiscal transparency.
Express Tribune
3 hours ago
- Express Tribune
Budget 2025-26: Govt provides income tax relief for salaried class
Listen to article The government has taken a significant step to provide substantial relief to lower and middle-income sectors, proposing up to a four per cent decrease in income tax across various slabs. Presenting the federal budget for the fiscal year 2025-26, Finance Minister Muhammad Aurangzeb stated that the prime minister had consistently endeavoured to lower taxes on salaried individuals. "Keeping this objective in mind, we have proposed a decrease in income tax across all slabs," he said. "This measure will not only ease the existing tax structure but also strike a crucial balance between inflationary pressures and individuals' take-home pay by alleviating the tax burden." Under the new budget, individuals earning between Rs0.6 million (Rs50,000 monthly) and Rs1.2 million per annum (Rs100,000 monthly) are set to receive significant tax relief, as the government has lowered their tax rate from five per cent to one per cent. For those earning up to Rs100,000 per month, the federal budget also proposes a reduction in the total tax amount from Rs30,000 to Rs6,000. Similarly, individuals earning up to Rs2.2 million per annum will see a four per cent decrease in tax on their salaries, bringing the rate down from 15 per cent to 11 per cent. Some relief has also been extended to the higher income bracket. Individuals earning up to Rs3.2 million will benefit from a two per cent cut, reducing their tax rate from 25 per cent to 23 per cent for the upcoming fiscal year. Meanwhile, in a move to mitigate the brain drain phenomenon, which sees professional human resources facing the highest tax burden in the region, the government has proposed a one per cent decrease in the surcharge applied to individuals earning more than Rs10 million per annum. Earlier, it was revealed that the salaried class paid a staggering Rs331 billion in income tax in the eight months of the current fiscal, which is 1,350% more than the taxes paid by retailers, but still not enough for the government to seek relief from the International Monetary Fund (IMF) for the marginalised segment. The total income tax contributions by the salaried people during the July–February period of this fiscal year were Rs120 billion, or 56% higher than the Rs211 billion collected during the same period of the last fiscal year. Last year, the salaried class paid Rs368 billion in taxes. But despite this backbreaking burden on the salaried people, who pay taxes on their gross income without adjusting expenditures, the government did not take up the issue of lessening this burden with the IMF during the recently held talks.
Business Recorder
3 hours ago
- Business Recorder
Budget 2025-26: Pakistan govt offers tax relief to salaried class, but representatives unhappy
In a move to ease the tax burden on the working population, Finance Minister Muhammad Aurangzeb has announced cuts in income tax rates for low- to middle-income salaried individuals in the federal budget for 2025-26. However, representatives of the salaried class remain dissatisfied, citing minimal relief and continued neglect of broader tax reforms. The budget maintains the income tax exemption threshold at Rs600,000 annually, rejecting the long-standing demand by the Salaried Class Alliance of Pakistan (SCAP) to increase it to Rs1.2 million. The government has instead focused on offering limited tax rate reductions for individuals earning between Rs600,001 and Rs3.2 million annually. Budget 2025-26: Pakistan targets 4.2% growth as Aurangzeb presents proposals 'for a competitive economy' According to the Finance Bill 2025-26, the tax rate for those earning Rs600,001 to Rs1.2 million has been slashed to 1% from 5%. Individuals earning between Rs1.2 million and Rs2.2 million will pay 11%, down from 15%, along with a drop in the fixed tax component from Rs30,000 to Rs6,000. For the Rs2.2 million to Rs3.2 million bracket, the rate has been reduced to 23% from 25%, and the fixed tax lowered from Rs180,000 to Rs116,000. For those earning above Rs3.2 million annually, the rates remain unchanged. The 30% tax on incomes up to Rs4.1 million and 35% for those earning more continues. However, fixed taxes for the two slabs have been reduced to Rs346,000 and Rs616,000 from Rs430,000 and Rs700,000 respectively. A slight relief has also been provided in the form of a 1 percentage point cut in the surcharge, down to 9% from 10% for individuals earning more than Rs10 million a year. 'Pakistan salaried class paid 5 times more taxes than exporters, retailers in outgoing FY25' While these measures appear to provide some reprieve for the salaried class, SCAP has called them insufficient. 'The reduction in income tax rates for salaried individuals is insignificant,' said Komal Ali, a member of SCAP. 'Any relief is being negated by increased tax rates on investment avenues such as banking products and mutual funds, which many salaried individuals rely on.' She also criticized the government for failing to widen the tax net. 'The budget is silent on taxing millions of wealthy individuals who remain outside the tax system. The Finance Minister did not mention efforts to bring agriculture or the retail sector into the fold,' she added. In FY25, salaried individuals contributed over Rs550 billion to the national exchequer, making them one of the most tax-compliant groups in Pakistan.
