Author: News Desk

The Federal Budget for FY26 is projected to have a fiscal deficit of 3.9% of GDP, the lowest since FY05. This improvement is attributed to an estimated 18.7% growth in tax revenues, a reduction in debt servicing, and curtailed pension expenses, according to a note by brokerage firm AKD Securities.  

The reduction in debt servicing, along with an increased reliance on PSDP funding through provincial shares and capital expenditures by State-Owned Enterprises (SOEs), has allowed the government to allocate the highest increase in defense spending in the last 15 years. The government aims to foster economic growth through reforms focused on enhancing agricultural productivity, revitalizing industrial activity, promoting exports, and expanding the digital and IT sectors.

The market outlook remains positive, according to AKD Securities. The increase in the tax rate on profit from debt is expected to enhance the appeal of equities. The revised taxation on mutual fund dividends, now contingent upon the proportion of income derived from debt securities and equities, is likely to encourage mutual funds to shift funds toward equities. 

Additionally, the government’s increased reliance on Islamic financing instruments is seen as beneficial for the Pakistan Stock Exchange (PSX). The documentation drive, which includes higher taxation on cash withdrawals and restrictions on asset purchases by non-filers, is expected to benefit the banking sector in the long run. 

Moreover, tax credits for interest paid on low-cost housing loans, along with the reduction in withholding tax on property purchases and the removal of FED on property transfers, are seen as positives for the cement and steel sectors.

The government has set an ambitious tax revenue target increase of 18.7% in the context of a nominal GDP growth of 12.7% for FY26. To achieve this, additional taxation measures of approximately PkR680bn are required, which AKD Securities believes can be achieved through improved revenue mobilization, particularly via FBR taxation reforms. 

The fiscal deficit also calls for comprehensive fiscal reforms, requiring coordination with the provinces, as evidenced by a 45.1% increase in provincial transfers and enhanced reliance on provinces for PSDP allocation. The National Fiscal Pact is seen as an essential step to rebalance intergovernmental relationships.

For the first time in nearly a decade of aggressive revenue measures, the government has extended some relief to taxpayers. This includes a reduced tax rate for the salaried class and a modest 0.5% reduction in the super tax rate for income between Rs200 million and Rs500 million. Additionally, customs duties, additional customs duties, and regulatory duties have been reduced as part of the tariff rationalization plan.

The budget also introduces a carbon levy on motor spirit, high-speed diesel, and furnace oil at a rate of Rs2.5/liter. The government has allocated Rs9bn in subsidies to promote electric vehicle (EV) adoption, signaling a push towards climate-friendly policies.

In terms of sector-specific impacts, AKD Securities termed the budget positive for the cement and construction materials sectors, supported by a higher PSDP allocation of Rs4.2 trillion for the upcoming year. A gradual increase in GST rates for FATA/PATA and the removal of FED on first-time property purchases are expected to support these sectors. 

The clearance of circular debt should improve cash flow in the energy sector, and the documentation drive should benefit the banking sector. However, the increase in the tax rate on profit from debt and higher withholding tax on cash withdrawals for non-filers could negatively affect banking deposit growth in the short term. 

Additionally, a higher Petroleum Development Levy (PDL) allocation will help shield OMCs and refineries from inventory losses amid declining crude prices.

The fiscal year 2024-25 has seen an unprecedented rise in the prices of building materials, food, and essential goods, primarily driven by increased taxes. The surge in material and labor costs has pushed up the price of a new 5-marla house by Rs1 to 1.5 million.

Food items have experienced significant price hikes. Milk, for instance, was priced at Rs200 per kg in July 2024 and has now increased to Rs220 per kg. Other items like butter, chicken, and eggs have similarly seen price jumps. For example, chicken prices have risen from Rs300 per kg to Rs415 per kg, and eggs from Rs240 per dozen to Rs315 per dozen.

The cost of essential food staples has also escalated, with rice prices climbing from Rs300 per kg to Rs400, while lentils such as daal gram, daal mash, and daal moong have also risen significantly. Items like sugar, flour, and ghee have similarly increased, with sugar now selling at Rs190 per kg, compared to Rs150 at the beginning of the fiscal year.

A range of fruits and vegetables has also seen sharp increases. Onions have gone up from Rs50 to Rs60 per kg, while tomatoes have seen a jump from Rs50 to Rs80 per kg. Fruits like apples and guavas are now priced higher, with apples increasing from Rs200 per kg to Rs300-350 per kg, and guavas from Rs150 to Rs250-300 per kg.

On July 1, 2024, a kilogram of iron bars cost Rs220, but it now stands at Rs260. Similarly, cement prices have climbed from Rs1,150 per bag to Rs1,450, while the cost of a gravel trolley has increased from Rs11,500 to Rs15,000, and sand prices have risen from Rs9,000 to Rs11,000 per trolley.

As the fiscal year ends, anticipation of the upcoming 2025-26 budget looms large, with an expected price hike of 20% to 40% on many goods due to new taxes. This has already led to supply shortages in the market, with several items, including cigarettes, being sold illegally on the black market.

In the past three weeks, national and international companies have suspended the supply of products in preparation for the budget, with new prices to be set once the general sales tax and other taxes come into effect. 

Despite the price hikes, carbonated drinks have seen a rare price reduction, with bottles now selling for Rs200, down from Rs270 in July 2024. However, analysts warn that a new wave of inflation is likely to follow once the new budget is announced.

Attock Refinery Limited (ARL) has disclosed a reduction in its refinery’s throughput, citing a decline in crude oil receipts. 

The company, in a statement to the Pakistan Stock Exchange (PSX) on Wednesday, revealed that this issue has persisted for some time and worsened during the Eid holidays. The refinery’s throughput has been significantly impacted due to low crude stock levels, leading to reduced production.

However, ARL has assured its stakeholders that the issue is temporary, with an expectation that the situation will improve within one week.

Following the announcement, Attock Refinery experienced a decline in its stock price, which stands at Rs 677.00 as of 11:50 am on Wednesday, reflecting a loss of Rs22.55 (-3.22%).

According to the PSX website, ARL has a market capitalisation of Rs72.18 billion, with a total of 106,616,250 shares outstanding. Notably, 40% of the shares are in free float, amounting to 42,646,500 shares, which indicates a good level of market liquidity. 

Attock Refinery was incorporated on November 8, 1978 as a private limited company and was converted into a public company on June 26, 1979. It is principally engaged in the refining of crude oil. The refinery is a subsidiary of The Attock Oil Company Limited, England and its ultimate parent is Coral Holding Limited, a private limited company incorporated in Malta.

Gold prices in Pakistan fluctuate frequently based on international market trends. The rates listed are provided by local gold markets and Sarafa Markets in various cities.

The government has approved a 10% salary increase for federal employees (Grade-1 to Grade-22) and a 7% pension hike for retired government servants under the federal budget for fiscal year 2025-26. The raise was introduced after Prime Minister Shehbaz Sharif intervened during a cabinet meeting, rejecting a proposed 6% increase and insisting on the higher 10% raise.

In addition to salary and pension increases, the government has also introduced pension reforms aimed at reducing the financial burden on the exchequer. 

The reforms include the elimination of multiple allowances, limiting the family pension period to 10 years after the death of a beneficiary, and linking pension increases to the Consumer Price Index (CPI). 

The government also proposed imposing a 5% tax on pensions exceeding Rs10 million annually for pensioners below the age of 70, with no tax on low- to medium-income pensioners.

While the federal budget includes various provisions for government employees, it notably lacked a specified increase in the minimum wage, which remains at Rs37,000. Additionally, differently-abled employees will receive a higher monthly conveyance allowance of Rs6,000, an increase of Rs2,000 from the previous amount.

Prime Minister Sharif, addressing the cabinet meeting, emphasised the sacrifices made by the salaried class and the common man during difficult economic times. He questioned the contributions of the wealthy in comparison to the salaried individuals, who have contributed Rs400 billion in taxes. 

The Prime Minister stressed that despite the financial challenges, the country’s key economic indicators have shown improvement, and Pakistan is now on a path to economic recovery.

The government also proposed a 30% disparity reduction allowance for eligible employees to eliminate salary differences. A special relief allowance has been suggested for armed forces personnel in recognition of their services to national defense, with the expenses covered under the defense budget for the year.

• Railway Workers Union and Education Pensioners Association criticised the lack of significant pension reforms, calling the budget’s proposals “ridiculous

The federal budget for fiscal year 2025-26 has faced significant backlash from business leaders, industrialists, and employee unions, with many criticizing the government’s approach as ineffective in addressing key economic challenges.

In Karachi, Businessmen Group (BMG) Chairman Zubair Motiwala called the budget a “camouflage” that failed to provide any meaningful relief to businesses or the public. He argued that the government’s ambitious tax collection targets and focus on digitalisation were unrealistic, given the country’s fragile economic environment, high inflation, and IMF-imposed constraints. 

Motiwala raised concerns that the government’s reliance on extracting more revenue from already compliant taxpayers would burden the formal sector, stifle economic growth, and discourage investment.

The Overseas Investors Chamber of Commerce and Industry (OICCI) echoed similar sentiments, expressing disappointment over the limited progress in addressing corporate tax inequities. 

The OICCI emphasized the need for a comprehensive overhaul of tax structures to attract foreign investment and enhance Pakistan’s competitiveness. It also lamented the absence of a strategy to formalize Pakistan’s large informal economy, which remains a critical avenue for increasing revenue.

Meanwhile, support for small and medium-sized enterprises (SMEs) was a focal point in the budget, with the government announcing plans to boost SME financing and promote exports. However, Federal B Area Association of Trade and Industry President Shaikh Muhammad Tehseen called on the government to engage more with stakeholders to ensure the success of these initiatives. He stressed the need for reduced production costs, including lower interest rates, utility charges, and petroleum prices to support SMEs.

Employee unions, including the All Pakistan Clerks Association (APCA) and the All Government Employees Grand Alliance (AGEGA), also strongly rejected the budget. They condemned the modest 10% salary increase for government employees, calling it inadequate in the face of soaring inflation. 

Union leaders, such as Shehzad Manzoor Kiyani of APCA, compared the salary hikes of MPs and ministers to the meager adjustments for workers, describing the budget as a “severe joke.” They warned that the budget would deepen poverty, with many families already struggling to meet basic needs.

Pensioners, represented by organizations like the Railway Workers Union and Education Pensioners Association, criticised the lack of significant pension reforms, calling the budget’s proposals “ridiculous.” They expressed anger over what they perceived as favoritism toward the political and business elite, with no real relief for pensioners and low-income workers.

In Rawalpindi, a protest led by unions such as the Pakistan Workers Federation and the All Government Employees Coordination Council gathered hundreds of workers demanding urgent action. They called for salary and pension increases in line with inflation, a higher minimum wage of Rs60,000, and an end to the privatization of public institutions. Labour leaders warned of a nationwide protest if their demands were not addressed.

The budget’s focus on digital initiatives and the promotion of a cashless economy has also faced criticism. Critics argue that these measures alone will not stimulate exports or drive industrialization, essential for sustainable economic growth. Despite the government’s push for digitalization, many believe that broader structural reforms are necessary to address the country’s deep-rooted economic challenges and ensure equitable growth across all sectors of society.

The Punjab government is preparing to present its Rs 1,200 billion budget for the fiscal year 2025-26 on June 13, with the Finance Department finalizing the arrangements.

According to reports, the budget documents have already been sent for printing, and Finance Minister Mujtaba Shujaur Rehman is currently drafting his speech for the upcoming budget presentation. Sources indicate that Chief Minister Maryam Nawaz Sharif has instructed that no new taxes be introduced in the upcoming fiscal year.

Proposals from the Board of Revenue and the Punjab Revenue Authority suggesting new tax measures have been rejected. Instead, the government is focusing on reviewing existing taxes to assess possible changes to their rates.

The budget’s key allocations include increased funding for health, education, and tourism. The education budget will see an increase of Rs 110 billion compared to the previous year, while the health sector is set to receive an additional Rs 90 billion. The tourism sector is expected to receive a 600% increase in funding, with an estimated budget of Rs 35 billion.

One of the key initiatives under the new budget is the expansion of healthcare facilities in Lahore’s Nawaz Sharif Medical City, where additional hospitals will be built under a public-private partnership model. The provincial government is also planning extensive sanitation and clean drinking water schemes across Punjab.

Infrastructure development will be a major focus, with plans to expand the transport network to additional cities and undertake road and infrastructure projects in 66 cities across the province. The government aims to promote inclusive growth and enhance public services without imposing new tax burdens on the population.