Karachi: The Pakistan Business Council (PBC) has raised concerns over the newly approved federal budget for 2024-25, describing it as regressive and potentially damaging to foreign direct investment (FDI) and exports.
Ehsan Malik, Chief Executive of PBC, criticized the budget, stating it maintains regressive elements similar to those proposed earlier. “Sacred cows seem unaffected while essential national priorities remain neglected,” Malik remarked. He expressed apprehension that the budget fails to incentivize exports and investment, which could deter existing multinational corporations from continuing their operations and discourage new FDI.
Malik highlighted several budgetary measures that could contribute to inflationary pressures and hinder efforts to reduce the policy rate. He noted disparities in tax concessions, citing continued sales tax exemptions for ex-Fata/Pata regions contrasted with increased taxation impacting sectors such as iron, steel, and other crucial industries.
The PBC CEO voiced concerns over potential market distortions, warning that higher taxes on safe and now sales-taxed packaged milk could favor loose and often adulterated milk, exacerbating nutritional challenges in the country. Additionally, Malik criticized the imposition of higher advance taxes on prepaid telecom bundles, which could reduce consumer affordability and impact the profitability of formal sector operators.
Furthermore, Malik expressed fears of a brain drain as professionals seek opportunities abroad or in the informal sector to avoid escalating taxes. He criticized the piecemeal approach of higher export taxes without addressing broader issues of export competitiveness, such as energy costs, credit availability, and export rebates. According to Malik, Pakistan lags behind competitors like Bangladesh, India, Vietnam, Indonesia, and Egypt in these critical areas.
Malik emphasized the importance of attracting and retaining FDI, arguing that punitive measures like disallowing a quarter of advertising and sales promotion expenses for multinationals paying State Bank of Pakistan-approved royalties could deter future investments. Such policies, he warned, could significantly impact multinational corporations’ profitability, reducing their incentive to invest further in Pakistan.
In conclusion, the PBC cautioned that the federal budget’s current trajectory could undermine Pakistan’s economic prospects by stifling FDI, hampering export growth, and exacerbating inflationary pressures. Malik urged policymakers to reconsider these measures in favor of a more holistic approach that promotes economic competitiveness and sustainability.
