Pakistan Strategy_Budget FY21- Caveats of COVID-19, (AKD Daily, Jun 10, 2020)
Pakistan Strategy: Budget FY21–Caveats of COVID-19
- Managing IMF mandates, constraining deficits and negative externalities of the ongoing COVID-19 pandemic are pillars guiding policy making for Budget FY21, to be released on 12th June (Friday), where we see a trade-off between welfare incentives to support social safety nets vs. incentives for industry
- Widely reported targets for revenue collection, disbursement and outlays necessitate additional levies of PkR400-500bn at the very least, with a key facet to closely monitor under PTI-led GoP has been measures to enhance documentation (major procedures introduced in FY20 budget, watered-down subsequently after facing severe blowback)
- Delays in additional revenue generating measures may be seen, while Banks (as possible source of additional levies, ala WHT on withdrawal, Super tax seen in the recent past), agri-industries (Fertz and Tractors) are seen as being prominent, while pharma/healthcare space may see limited upsides from higher public sector spending
- Lax market moves, combined with thinning volumes underpin our stance on FY21 Budget losing its relevance to wider fundamental forces, where the GoP has to abide by often contradictory principles, all underpinned on post COVID-19 lockdown recoveries. Hence, the likelihood of additional re-alignment as the year progresses gains prominence.
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