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Arab News
18 hours ago
- Business
- Arab News
FY26 budget: Markets rally, analysts welcome fiscal plan, business chambers voice mixed views
KARACHI: Analysts, investors and key business chambers on Wednesday broadly welcomed Pakistan's federal budget for 2025-26 as a 'balanced' attempt at fiscal consolidation and economic stimulus, though they raised concerns about the achievability of the government's ambitious growth target of 4.2 percent and heavy reliance on existing taxpayers. Presenting the federal budget on Tuesday, the government announced a range of tax reforms, spending priorities, and incentives aimed at maintaining its ongoing $7 billion International Monetary Fund (IMF) loan program while also trying to revive investor sentiment and ease pressure on the salaried class. 'The budget announced by the government yesterday [Tuesday] was pretty much in line with what we were expecting, a balanced budget,' said Sana Tawfik, head of research at Arif Habib Ltd, a major Pakistani financial services company. 'The government tried to ensure that the reforms being undertaken currently are on track and Pakistan continues with the fiscal consolidation phase.' Tawfik was pointing to several key ongoing fiscal and structural reforms that align with Pakistan's commitments under the IMF program and broader efforts to stabilize the economy. These include fiscal consolidation through broadening the tax base, rationalizing subsidies, and phasing out tax exemptions; revenue mobilization though increased taxation on interest income, a phased reduction in the super tax and the removal of certain tax exemptions to improve revenue collection; and debt rationalization by managing debt servicing costs, likely by shifting to more concessional financing and restructuring high-cost debt. While presenting the budget, the government also maintained it would continue its focus on providing relief to the salaried class and try to strike a balance between austerity with social protections. Tawfik agreed that the government had attempted to strike such a balance between providing relief and raising revenue, citing relief measures for the salaried class in the budget and the phased reduction in super tax. 'The government tried to make sure that we continue with the reforms that we have undertaken in the recent past, while ensuring that we meet the targets set for the upcoming fiscal year,' Tawfik said. UNREALISTIC GROWTH TARGET? However, Tawfik was skeptical of the government's 4.2 percent GDP growth target, calling it 'unrealistic' in the current economic context. 'Agriculture has been underperforming, and industries have not been performing due to the high cost of doing business. While we have seen interest rates coming down, agriculture would be the key sector to look forward to,' she said. Arif Habib Ltd. has forecast GDP growth of around 3.6 percent for FY26, below the government's target. Tawfik also noted that while the government had projected inflation at 7.5 percent, her team expected it to be slightly lower, around 6 percent to 6.5 percent, although risks remained from global commodity prices, exchange rate pressures and the fading base effect. She also flagged a projected current account deficit for FY26, in contrast to a surplus of $1.5 billion expected this fiscal year, citing pent-up demand and increased imports. Muhammad Waqas Ghani, head of research at JS Global Capital Ltd., echoed the sentiment that the budget was more 'measured' compared to previous years. 'In the last two years, we've seen very strict budgets. This time, the government has been a little lenient. We've seen reform measures but also some relaxations,' Ghani said. He pointed to tax relief for the salaried class and incentives for the construction sector, though he noted that the Public Sector Development Programme (PSDP) allocation had decreased. 'There are many allied industries that benefit when we see measures taken for construction,' he said, while noting a less favorable outcome for the auto sector. Ghani acknowledged the government's target of a 2.4 percent primary surplus as 'optimistic,' but achievable, and described the overall budget as 'laying the groundwork' for sustained economic growth. On the 4.2 percent GDP target, he noted: 'It's an optimistic target… but with interest rates coming down, we hopefully will see contribution from [agriculture and industrial] segments, and we can get closer to the target.' STRONG SUPPORT FROM EQUITY MARKETS While the budget drew applause for investor-friendly policies and efforts toward macroeconomic stability, analysts cautioned that delivery on ambitious fiscal and growth targets remained key to sustaining momentum. The stock market, however, responded positively from the opening bell. 'As soon as the market started today [Wednesday], it rallied close to 1,400 points,' Ghani said. 'We are in an IMF program and we're seeing a decent budget this time. All of these things point to the fact that the market is going to reach new heights in the coming months.' Indeed, despite macroeconomic challenges, the budget drew strong support from equity markets. A post shared by Arab News Pakistan (@arabnewspk) 'Measures we have seen so far are broadly positive for the stock market,' said Tawfik. 'The government kept capital gains tax and dividend income tax unchanged, which the market had feared would be increased.' Sector-specific measures were seen as favorable for cement, steel, and textile sectors, particularly with subsidies for low-cost housing and removal of sales tax exemptions for certain regions, which levels the playing field for local manufacturers. 'Intraday today, market has gone north of 124,000 points, and we have seen an intraday surge of 2,000 points,' Tawfik said. DIVIDED BUSINESS COMMUNITY The reaction from Pakistan's business chambers, however, was more mixed. Both the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), and the Karachi Chamber of Commerce and Industry (KCCI), warned that unless structural reforms were implemented and energy costs reduced, the budget may not succeed in spurring industrialization or export growth. The FPCCI welcomed certain relief measures, particularly for the salaried class and property sector, but flagged concerns about revenue expectations. 'We welcome steps to end harassment of taxpayers,' said Atif Ikram Sheikh, President FPCCI, noting the simplified tax return form as a positive step. However, he added: 'The increase in tax collection target by Rs2,500 billion ($8.8 billion) is unrealistic.' The FPCCI also expressed disappointment over the absence of support packages for key sectors such as IT, minerals, fishing, and e-commerce. The KCCI, by contrast, issued a harsh critique of the budget, calling it disconnected from ground realities. 'This is a camouflage budget,' said Zubair Motiwala, Chairman of the Businessmen Group (BMG) at KCCI. 'There is no meaningful relief for the business community or the common man. Instead of reforms to expand the tax base, the government is squeezing existing taxpayers.' KCCI President Muhammad Jawed Bilwani added: 'Electricity bills are unaffordable, interest rates are high, and there's no relief for the industrial sector. Without addressing the cost of doing business, you cannot expect growth or job creation.'
Express Tribune
2 days ago
- Business
- Express Tribune
Transport, communication show mixed performance
The finance minister's Economic Survey 202425 reveals a mixed performance in Pakistan's transport and communication sectors. While Karachi Port showed growth in cargo handling and Pakistan Railways posted higher earnings, challenges persisted. Notably, cargo at Port Qasim declined by 1.6%, and National Highway Authority (NHA) projects dropped from 123 to 105, indicating a slowdown in infrastructure development. Transport and communication remain central to the government's development priorities, as reflected in the Public Sector Development Programme (PSDP) for FY202425. An allocation of Rs161.26 billion was made for 105 NHA projects, including Rs149.28 billion for ongoing works and Rs11.98 billion for new schemes. This marks a reduction of 18 NHA projects compared to the previous year's PSDP, which had set aside Rs156.50 billion for 123 projects. Of that, Rs99.36 billion was allocated for 68 ongoing schemes and Rs48.12 billion for 52 new ones. Three Build-Operate-Transfer (BOT) schemes were also included with a budget of Rs9.02 billion. Currently, the NHA manages 48 national highways, motorways, and strategic roads spanning 14,480kms. Despite fewer projects, the overall allocation rose from Rs156.50 billion to Rs161.26 billion, indicating a shift toward fewer but potentially larger or high-impact initiatives. Pakistan Railways operates 449 locomotives over a network of 7,791kms. In JulyMarch FY2025, gross earnings reached Rs65.17 billion, up from Rs53.7 billion in the same period last yeara notable improvement in operational revenue. Pakistan International Airlines (PIA) recorded mixed results. The national carrier's operating revenue declined by 16.8% in CY2024 to Rs204.16 billion, down from Rs238.5 billion in 2023. However, PIA cut operating expenses by 20.8%, bringing them down to Rs194.8 billion. This cost control enabled PIA to report an operating profit of Rs9.3 billiona rare positive despite falling revenues. Speaking to The Express Tribune, Arif Habib Limited's Head of Research Sana Tawfik said the transport and communication sector showed moderate progress in FY2025, supported by the government's Rs268 billion development allocation. Key entities like the NHA, Pakistan Railways, and PNSC sustained operations under CPEC and regional connectivity plans, though fiscal constraints and delays limited faster growth. Tawfik noted that consistent service across road, rail, maritime, and postal networks maintained essential connectivity. Future growth, she added, hinges on quicker execution of strategic projects aimed at cutting transport costs, digitising supply chains, and adopting energy-efficient freight solutions. She stressed that targeted investments in high-speed corridors, digital infrastructure, and cross-border trade routes are essential for improving efficiency, attracting private investment, and positioning Pakistan as a regional trade and logistics hub. The Pakistan National Shipping Corporation (PNSC) operates 10 vessels with a combined 724,634 DWT capacity. PNSC's profit fell to Rs8.98 billion during JulyMarch FY2025, compared to Rs14.28 billion last year. The decline is attributed to a reduced fleet sizedown from 12 ships last year. Port Qasim Authority handled 33.8 million tonnes of cargoincluding bulk, liquid bulk, and general cargoin JulyMarch FY2025, a decrease of 1.6% from 34.3 million tonnes the previous year. In contrast, Karachi Port's cargo and container handling rose to 40.4 million tonnes in JulyMarch FY2025, compared to 38.9 million tonnes last year, showing resilience in maritime operations. KTrade Securities equity trader Ahmed Sheraz said the sector showed steady progress with Rs161.26 billion allocated for highways, Pakistan Railways earning Rs65.17 billion, and PIA posting a Rs9.3 billion profit. However, lower cargo handling at some ports signals trade challenges. Growth in broadcasting, with PEMRA's Rs2.1 million revenue and the expanded reach of Pakistan Broadcasting Corporation (PBC), highlights untapped potential. PEMRA currently oversees 139 satellite TV stations and 34 channels with broadcasting rights, down slightly from 140 and 35 last year. It contributed Rs2.1 million to the national exchequer in JulyMarch FY2025, compared to Rs2.75 million last year. JS Global's Head of Research, Waqas Ghani, noted that Pakistan's Rs268 billion allocation for transport and communication supports the URAAN Pakistan initiative to enhance connectivity, trade, and digital access. Pakistan Railways' improved 21% year-on-year earnings reflect growing efficiency and confidence in rail transport. PBC manages around 80 units across 32 stations. In FY2025, it received Rs6.4 billion, with 96% of funds released by March 2025 to support operations and content production.
Business Recorder
04-06-2025
- Business
- Business Recorder
New record-high at PSX as KSE-100 zooms past 121,000
Buying rally continued at the Pakistan Stock Exchange (PSX) on Wednesday amid reports that talks with the International Monetary Fund (IMF) over the incoming federal budget had been successful, with the benchmark KSE-100 Index settling at a new record high. Positive momentum was observed throughout the trading session, pushing the benchmark index to an intra-day high of 121,882.47. At close, the benchmark index settled at 121,798.86, an increase of 1,347.99 points or 1.12%. 'Valuations have become attractive, which is driving the current buying momentum,' said Sana Tawfik, Head of Research at Arif Habib Limited (AHL), while speaking to Business Recorder. On Tuesday, PSX closed at a new all-time high level, driven by positive expectations from the upcoming budget and news of the Asian Development Bank's (ADB) approval of $800 million for Pakistan. The benchmark KSE-100 Index jumped 1,573.07 points or 1.32% to close at 120,451 points, crossing the 120,000-point mark for the first time on a closing basis. Internationally, Asian stocks inched higher on Wednesday and the dollar wobbled near six-week lows as traders braced for higher US duties on steel and aluminium, the latest chapter in the trade war saga that has rattled the markets for much of the year. South Korea's stocks and its currency surged as liberal presidential candidate Lee Jae-myung's election victory raised hopes of swift economic stimulus, market reforms and easing policy uncertainty. The benchmark KOSP jumped more than 2% to its highest since August 2024. That left the MSCI's broadest index of Asia-Pacific shares outside Japan 0.6% higher. Japan's Nikkei rose 0.8%, while Taiwan stocks jumped 1.6% after artificial intelligence behemoth Nvidia boosted US stocks overnight. Data on Wednesday showed US job openings increased in April, but layoffs picked up, indicating a slowing labour market as tariffs impact the economic outlook. Investor attention has been on a possible call between US President Donald Trump and Chinese leader Xi Jinping sometime this week as tensions between the world's top two economies simmer. Trump on Friday accused China of violating a Geneva agreement to roll back tariffs and trade restrictions.
Business Recorder
24-05-2025
- Business
- Business Recorder
Pakistan budget 2025-26: expenditure likely to fall by massive Rs2 trillion, says report
Pakistan government is anticipated to unveil a budget outlay of Rs16.9 trillion for the upcoming fiscal year 2025-26, suggesting a notable reduction of 10.6% (or Rs2 trillion) compared to Rs18.9 trillion originally budgeted for FY2024-25, according to a local research house report. Arif Habib Limited's (AHL) report titled 'Pakistan Budget FY26 Preview - budget braces for balance' anticipated a notable reduction in total expenditure (budget outlay) in the wake of a significant cut in mark-up payment on the debt. IMF, govt to continue FY26 budget discussions 'over the coming days' The markup payment on the existing debt is likely to reduce to Rs8.5 trillion in FY26, compared to Rs9.8 trillion originally budgeted for FY25. 'It would be a balanced and a better budget (compared to FY25) considering a significant reducing in cost of borrowing in the wake of halving of the central bank's benchmark policy rate to 11% at present compared to 22% in the previous June,' AHL Head of Research Sana Tawfik said while talking to Business Recorder. The government is scheduled to unveil the budget for FY2025-26 on June 10. The reduction in the estimated expenditures would allow the government to shift its 'focus on fiscal discipline and reforms to stabilise the economy while offering targeted relief,' the report said. The AHL report estimated the overall budget would carry a fiscal deficit of Rs6.2 trillion, while collection of revenue (including non-tax revenue) totaling at Rs17.8 trillion in FY26. The budget deficit is calculated through subtracting provincial transfers estimated at Rs8.04 trillion and estimated provincial budget surplus at Rs950 billion from the gross revenue at Rs17.8 trillion for FY26. Tawfik added 'the other notable measures to be taken to balance the budget would be including tax relieves such as reduction in rate of super tax, rates of income tax for salaried class people, and rationalisation of tax rates on other heads'. The AHL anticipated numbers for the upcoming budget slightly differed with the ones reported in the media citing official sources in recent times. The research house said it projected numbers for the upcoming budget considering lower collection of revenue by the Federal Board of Revenue (FBR) at Rs11.83 trillion in the outgoing fiscal year 2024-25 compared to the one targeted (revised one) by the government at Rs12.37 trillion for the year. AHL report anticipated the markup payment on the existing debt would reduce to Rs8.5 trillion in FY26. The report said the government budgeted collection of revenue by the FBR at Rs14.3 trillion for FY26. The estimated number is based on the likely 'measures including GST [goods and services tax] on petroleum products, tax on retailers and wholesalers, and withdrawing exemptions.' 'The FBR tax to GDP ratio is projected at 11.3% in FY26 compared to 10.3% in FY25.' The government has budgeted current expenditure at Rs 16.2 trillion in FY26 considering decline in markup payments due to a significant reduction in interest rates, according to the report. It calculated the overall budget deficit at Rs6.5 trillion (or 5.1% of GDP). 'The drivers of increase the fiscal deficit would be including rise in current expenditure and decline in non-tax revenue (to Rs3.9 trillion) mainly due to projected reduction in SBP (State Bank of Pakistan) profits.' The research house estimated federal development budget (PSDP/public sector development programme) at Rs1.1 trillion, collection of revenue in petroleum development levy (PDL) at Rs1.4 trillion and SBP profit at Rs1.5 trillion in FY26. It forecasted new tax measures worth Rs869 billion in the budget for FY26 including income tax on retailers and wholesaler, imposition of GST at 3% on petroleum products, and removal of tax exemptions and duty for the Federally Administered Tribal Area (FATA) and the Provincially Administered Tribal Areas (PATA) region, according to the report. 'Budget aligned with IMF [International Monetary Fund] rules, no tax amnesties, resolution of circular debt, and a National Fiscal Pact devolving spending to provinces among other measures.' Construction sector: builders, developers call for 15-year tax policy The report said the government projected economic growth at 3.6% in FY26 compared to estimated 2.68% in FY25. It anticipated average inflation reading would rise to 6.29% in FY26 from 4.63% in FY25, while current account deficit (CAD) to be recorded at $1.5 billion in the next fiscal year starting July 1, 2025 compared to a projected surplus of $1.6 billion in the outgoing fiscal year 2024-25. 'Govt is expected to broaden the tax base through the introduction of new regimes, adjustments in tax rates, and enhanced collection mechanisms. At the same time, the government will try to provide targeted relief to vulnerable segments of society.' 'The budget is likely neutral to positive for the stock market (Pakistan Stock Exchange) and overall economy,' the report said.
Express Tribune
24-05-2025
- Business
- Express Tribune
SBP injects record Rs12.82 trillion
Listen to article In an unprecedented move to help fund the government's fiscal deficit, the State Bank of Pakistan (SBP) injected a record-breaking Rs12.82 trillion into the banking system on Thursday through Open Market Operations (OMOs), marking one of the largest liquidity injections in recent history. Of the total injection, Rs12.42 trillion was provided via conventional reverse repo OMOs. This included Rs11.9 trillion through 21-day loans at an interest rate of 11.03%, and Rs521.1 billion through 7-day loans at 11.10%. An additional Rs396 billion was injected using Shariah-compliant Mudarabah-based OMOs, reflecting the SBP's strategy to cater to liquidity needs in both conventional and Islamic banking sectors. Since the International Monetary Fund (IMF) restricts the government from borrowing directly from the central bank, SBP injects liquidity into commercial banks, which then invest this capital into government treasury instruments, effectively financing the fiscal deficit indirectly, according to sources familiar with the matter. A revenue shortfall by the Federal Board of Revenue (FBR) is contributing to the funding gap, with actual collections hovering around Rs11.8 trillion against the FY2025 target of Rs12.3 trillion, said Sana Tawfik, Head of Research at Arif Habib Limited (AHL). She added that SBP profits of Rs2.5 trillion have already been transferred to the Ministry of Finance in the first nine months of FY2025 as non-tax revenue, while the petroleum levy brought in Rs833 billion during the same period. Meanwhile, the Pakistani rupee gained marginally against the US dollar on Friday, appreciating 0.03% to close at 281.97 in the inter-bank market, up from 282.06 a day earlier. Gold prices surged in domestic markets in line with global trends as geopolitical risks increased. According to the All-Pakistan Gems and Jewellers Sarafa Association (APGJSA), gold per tola jumped Rs3,500 to Rs351,000, while the 10-gram rate increased by Rs3,000 to Rs300,925. Globally, gold prices rallied 2% on Friday, heading for their best weekly performance in six weeks. This rise was triggered by investor anxiety following US President Donald Trump's renewed threats of imposing steep tariffs, including a 50% levy on European goods, and warning Apple Inc. of further tariffs unless it shifted manufacturing to the US. "Gold is up today due to strong safe-haven demand," said Adnan Agar, Director at Interactive Commodities. He noted international gold prices hit a high of $3,364 and hovered around $3,361 per ounce during trading. The market opened at $3,300 and touched a low of $3,286 earlier in the session.
