KARACHI: With consumers already bearing the brunt of food inflation, market observers do not expect a significant price reduction in the federal budget for fiscal year 2022-23 (FY23) to be announced today, given the strict International Monetary Fund (IMF) conditions that the government must meet in order to secure a loan.
The market is already abuzz with the reports of the increase in general sales tax, withholding tax, and customs duty, and the imposition of windfall profit tax.
“I do not believe the government will take any extraordinary measures to provide significant price relief to consumers,” said Fahad Rauf of Ismail Iqbal Securities Research, implying that the government’s relief may focus on increasing payments under the Benazir Income Support Programme, the Ehsaas Programme, power and gas tariff cuts for low-income people, and some cuts in utility store items.
He said that tax revenue collection is projected at Rs7.25 trillion for FY23, up from Rs 6.1tr, thus signalling the imposition of additional taxes of over Rs400 billion in the budget for FY23 to meet the revenue target.
“This is an IMF budget that may not have any cushion for the general public relating to any huge price drop in various essential items,” Rauf said, adding that consumers would not see any government step that could cut the price of cooking oil from Rs600 per litre to Rs300 per litre.
He forecasted that the June consumer price index (CPI) may clock in to 16pc, which may hover between 19-20pcin July due to rising petroleum, utility, and food prices. The next five to six months appear to be extremely difficult, which will irritate consumers,” Rauf said. CPI in May was 13.8pc.
He suggested that the government consider providing maximum relief in utility charges and prices of essential items to low-income people while taxing the wealthy, including the real estate sector.
The General Secretary of Karachi Retail Grocers Group, Farid Qureishi, ruled out any incentives from the government for the masses to control prices, which have been continuously under pressure due to the rupee’s fall against the dollar and rising diesel prices.
The government, he said, is not in a position to give huge subsidies to bring down prices. Instead, the government is thinking of raising taxes and duties on various products, he feared.
Anis Majeed, patron of the Karachi Wholesalers Grocers Association, said the government should make efforts to limit further increases in the prices of essential items by controlling the rupee-dollar parity and diesel prices, and avoid increasing taxes and duties on local goods.
Umer Islam Khan, Secretary General of the Pakistan Vanaspati Manufacturers Association (PVMA), stated that reports are circulating ahead of the new budget announcement regarding a 10pc increase in customs duty from Rs7,190 per tonne on imports of palm oil, a 1pc increase in GST, a 6pc increase in withholding tax from 2pc to 6pc, and a 3pc windfall profit tax.
Published in Dawn,June 10th, 2022
