KARACHI: Bulls took command on the Pakistan Stock Exchange (PSX) on Thursday as the market witnessed a rise of over 2,800 points, which analysts attribute to the government's willingness to unlock a deal with the Monetary Fund International (IMF) after the budget.
The federal government has set a challenging tax revenue target of Rs 13 trillion in the budget for the next fiscal year, an increase of almost 40% from the current year.
The benchmark KSE-100 index jumped 2,803.17 points or 3.85% during intraday trading to 75,600.60 points, from the previous close of 72,797.43 points.
“The market has increased as the budget is expected to reach Pakistan [the] IMF [deal]”said Samiullah Tariq, head of research at Pak-Kuwait Investment Company. geo.tv.
Tariq noted that alternative investment avenues have been taxed and that concerns related to taxes on capital gains and dividends have “gone away with the clarity of the budget.”
Key objectives for the next fiscal year include bringing the public debt-to-GDP ratio to sustainable levels and prioritizing improvements in Pakistan's balance of payments situation, the budget document showed.
Finance Minister Muhammad Aurangzeb, presenting the budget, projected a sharp fall in the fiscal deficit for the new financial year to 5.9% of GDP, from an upwardly revised estimate of 7.4% for the current year.
The federal government will also look to broaden the tax base to avoid overburdening existing taxpayers to meet its targets, Aurangzeb said.
Pakistan is in talks with the lender for a loan of between $6 billion and $8 billion as it seeks to avoid a default for an economy growing at the slowest pace in the region.
The fiscal target increase is comprised of a 48% increase in direct taxes and a 35% increase in indirect taxes over the current year's revised estimates. Non-tax revenues, including oil taxes, are projected to increase by a whopping 64%.
Aurangzeb said sales tax would increase to 18% on textile and leather products as well as mobile phones. He also announced an increase in the tax on capital gains made from real estate.
Raza Jafri, chief executive of EFG Hermes Pakistan, said the market is reacting positively to the soft changes in CGT for taxpayers, in stark contrast to fears in the run-up to the budget.
“Measures to pursue non-tax filers and, to some extent, retailers and the real estate sector, are also being taken positively, although risks remain regarding their applicability.
In its current form, it is a budget that should help secure an IMF program. The government now needs to stand firm and move forward with implementation and compliance,” he added.
More to continue…
