Pakistan Budget: Budget to dictate severity of slowdown
- Budgetary measures adopted by successive Governments maintain a major hold over market sentiment, where the PTI-led GoP's maiden budget (discounting the two mini-budgets) is shaping up to be the most disciplined budgetary program in recent times, where the focus will be on economic stabilization
- Reported economic metrics from the Economic Survey FY19 indicate lackluster macro picture, where slowdown is seen in reverberating across all major sectors, reflected in tapered corporate sector profitability and depressed outlook for growth
- While setting political motives against the blueprint of tough IMF conditions, we believe measures to deviate from the Fund's benchmarks are going to be severely limited, while rolling back of subsidies, concessionary tax regimes and cancellation of previously announced programs is highly likely
- In terms of sectors, Textiles remains in the limelight for proposed GoP budgetary measures while Banks, Cements, Fertilizers and other consumer oriented industries are pressed by cost escalations, facing down a terse demand environment
- Incidentally, Budget FY20 may be more consequential in terms of the long term policy action it includes, i.e. long term measures to raise the tax base and expand taxation measures to previously untaxed sectors (agriculture middlemen, raising gap between filer and non-filer tax rates, and clampdown on Benami assets post amnesty expiry)
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