The Salient Features of Budget 2019 – Pakistan

budget 2019


Making a budget that fits in line with the state’s benefits and something that suite both the public and the business community is indeed one of the greatest hassle for any government. Giving the economic conditions, where every state-owned institution is either collapsed or bankrupt, where 99% of rich elite don’t pay taxes, and where the trade deficit is touching the skies with exports crumbling around 24.8 billion; the 2019 budget has so far been the most idolized and criticized at the same time.

Before we get into the details, it is important to know that Pakistan just went out on a last bailout package with the IMF, and afterwards, it has to survive on its own. It means, Pakistan should have enough reserves at the end of May 2020 to survive for the next fiscal year.

Without getting into the complexity of the situation, let’s analyze the core features of 2k19 budget presented by the Tehreek-Insaf government.

Out of 7000 Billion budget presented by Hammad Azhar, the government has allocated 2891 billion for the loan repayment.

10% Cut in the Salaries of the Ministries:-

This may not sounds that great to anyone because 10% wouldn’t really make a big difference. However, this particular feature has always shown a drastic increase over the last decade.

Rs 2891 allocated for the loan repayments

As the long term commercial loans were cleverly converted into the short term loans, PTI had no choice other than returning the payment worth of 1538 Billion in May 2019. Now, it has to pay back another $28.91 Billion at the end of the 2019-2020 fiscal year.

Note: Pakistan debt stands at $33 Billion (33,000 Arab) that includes the different loans taken from the IMF and from different bonds.

No Hike in Sale Tax:-

Yet another a positive spark, the government hasn’t increased the sale tax from even a bit and is fixed at 17 GST.

A sigh of Relief for restaurants as tax go down by 10%

Previously, restaurants owners were paying 17.5% of tax on the food supplied, but as now, it has reduced to 7.5%.

Tax withdrawn on petroleum Products:-

The 3% taxes imposed by the previous government on the petroleum products, including Diesel and other lubricants, have now been abolished.

Minimum Wages promoted to 17500:-

Although, surviving on Rs 17,500 in the current inflation looks near to impossible. According to many economic experts, it should have been lifted to 20,000 minimum. The Rs 2,500 increase in the salaries is still the highest increase as budget have allocated. However, it isn’t really enough.

FED reduced on imported vehicles:-

Remember, the locally assembled cars will have little to no effect from this move. However, the reduction of FED on imported vehicles that has reduced from 10% to 5% for cars comprising engine capacity of 2000 cc or less, and to 7..5% for car having capacity of more than 2000c, will certainly lower their prices .

The rumors about the addition of new taxes on cars especially in regards to the seats have been denied by the federal minister.

Exemption of Taxes on LNG

The government has maintained a little to no tax on the LNG production.

No decrease in Defense Budget

Prior to claims made by the government officials regarding the decrease in the Defense budget, it didn’t happen like it was expected.  In fact, the military budget has increased from Rs 1,100 Billion (Previous year) to Rs 1,152.54 Billion for the current fiscal year.

Rs 48 Billion allocated for the neglected ‘Tribal Areas’

This was necessary. People of Tribal areas have laid immense sacrifices on the war of terror. The government has enhanced the budget for the development of the tribal areas from Rs 10 Billion to Rs 48 Billion. This move will certainly drive prosperity to the most affected areas of Pakistan.

Cut in Custom Duties on the Import of Paper, Machineries, pharmaceuticals, Refineries, and textile.

Duties on Pharmaceutical products have been reduced by 3% while they are completely exempted on ingredients imported for the production of paper. Moreover, the government has abolished extra taxes on machineries needed for textile industries. The reduction in these taxes will eventually promote investment in the industrial sectors.

Rs. 3/Kg Tax Imposed on Sugar

This wasn’t expected, but the government still raises the price of sugar by Rs 3. It increased by 8kg on the last year of PMLN Tenure.

14% FED on Beverages

The government has decided to attack soft drinks with heavy exercise duties. Almost a 14% FED is imposed on all type of beverages that’s going to make them very expensive.

Rs 10 Imposed on a Packet of 20 Cigerettes

This is the only area where the government has imposed a major tax and has received the lowest criticism from the public. A packet of gold Leaf will cost you around Rs 160 – 170.

A 2.4% of GDP is expected for the current fiscal year as the government has decided to lower the budget for various development projects. Last year, it was 6.2%. This might be the lowest GDP of Pakistan as the lowest it got was 2.6% under the tenure of PPP.

The government has set inflation to be between 11-13%. The highest it reached was 11.5%.

Heavy taxes on essential goods including oil, sugar, rice etc. have deeply angered the public and have worsened their lives. It’s getting worse for the middle class to survive in such intense inflation.

Whether the government will succeed in up lifting the state-owned institutions and bringing people into the tax net is yet to be seen, however, it should certainly focus on reducing the inflation.

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