Pakistan is targeting the fastest growth in more than a decade, proposing cutting taxes to boost exports and support farmers in its spending plan as it wraps up a three-year, $6.6 billion International Monetary Fund loan programme.
Pakistan proposed a zero-rated sales tax regime for exporters of textiles, leather, surgical instruments, sports goods and carpets, Finance Minister Ishaq Dar said Friday while presenting the government’s 4.89 trillion rupee ($46.7 billion) budget for the fiscal year starting July 1. The fiscal deficit is estimated to decrease to 3.8 per cent next year from an estimated 4.3 per cent, he said. The spending plan will probably be approved by Parliament this month.
“In three years we have achieved stability, now we will go for growth,” Dar said in Parliament in Islamabad. “We need to increase growth and job opportunities.”
Gross domestic product is forecast to expand 5.7 per cent in the year starting July 1 on higher infrastructure spending, Prime Minister Nawaz Sharif said this week ahead of the budget presentation.
According to a report on Bloomberg, if Sharif is successful, it will be the first time in at least a decade that any Pakistani government has hit a growth target. Nonetheless, the economy’s accelerating expansion since he took office in 2013 has put Pakistan’s stocks and currency among Asia’s best performers during that time.
For the coming year, Sharif aims to spend 1.68 trillion rupees to build roads, dams and ports, a 14 per cent increase. The nation is also looking to add power plants to end electricity shortages in two years, while also maintaining a fight against militants who have killed 60,000 people since 2001.
Investments from China are also set to rise. The $45 billion China Pakistan Economic Corridor is getting under way and will contribute to growth, Sharif said last month.
“Chinese investment will start kicking in that will help end the energy crisis and there is a possibility of a rebound in agriculture,” said Yawar uz Zaman, head of research at Karachi-based Shajar Capital Pakistan. Even so, the government may struggle to reach its target, he said.
The government will provide about 73 billion rupees in subsidies to decrease fertiliser prices and electricity tariffs for tube wells used in farming, Dar said.