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Pakistan Economic Outlook 2035: A Vision for Growth and Poverty Reduction

Khashif Sarfraz
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Introduction:

The National Economic Council (NEC) recently approved the Pakistan Economic Outlook 2035, a visionary concept aimed at propelling the country’s economy to reach $1 trillion and reducing poverty to 15% by the target year. The achievement of these ambitious goals is contingent upon political stability, and failure to ensure stability may have dire consequences, as outlined in the Planning Commission’s documents. In this blog post, we explore the key objectives, challenges, and potential pathways to realizing Pakistan’s economic aspirations.

Aiming for a Trillion-Dollar Economy and Poverty Reduction:

Led by Prime Minister Shehbaz Sharif, the NEC, a constitutional body responsible for macroeconomic planning, endorsed the Pakistan Economic Outlook 2035 concept. The plan also included the approval of the Annual Plan 2023-24, which set a GDP growth target of 3.5% and an inflation target of 21% for the upcoming fiscal year.

The Need for Reforms and Political Stability:

In the absence of significant reforms, Pakistan’s economy is projected to grow by a mere 3.5% annually over the next 12 years. To double the size of the economy to $1 trillion, immediate reforms are crucial. Political instability, rapid population expansion, underutilization of the youth demographic, inadequate human resources, and policy discontinuity pose significant challenges to achieving these goals.

Implications of Inaction:

Without implementing reforms, Pakistan’s population is projected to reach 340 million by 2035, making it the fastest-growing nation globally. Furthermore, the economy will exhibit a low growth rate of 3.5%, leading to a rise in unemployment to approximately 9%. The absence of structural transformation could result in 40% of the population living below the poverty line.

Envisioned Transformational Scenario:

To achieve accelerated economic growth, the Pakistan Economic Outlook 2035 emphasizes an average annual growth rate of around 6% and progress in all sectors. The size of the economy is projected to experience significant expansion starting from 2027. Additionally, export growth is a key focus, with the goal of increasing exports from $51 billion to $127 billion through sectoral reforms and resource mobilization.

Importance of Increasing Exports:

Failure to enhance exports to $100 billion in the next eight years could hinder Pakistan’s ability to break free from the debt trap. Insufficient growth in exports may lead to volatility in the external sector, impacting debt, deficits, and currency values.

Challenges in Governance and Infrastructure:

Structural transformation is crucial to mitigate poverty and unemployment. It is essential to improve governance, enhance the capacity of the civil apparatus, and address pending cases in the judiciary. The concept paper highlights the need for additional judges and police stations to meet future demands.

The Path to Transformation:

The government must choose between a business-as-usual approach or adopting a transformative path. The former is unlikely to unlock Pakistan’s true potential, while the latter offers a chance to achieve sustained high GDP growth and become one of the top 25 economies globally. The government’s commitment to Vision 2025 was pivotal, but a lack of continuity hindered progress. Investing in human capital development and adopting productivity-enhancing measures are crucial steps in achieving long-term economic growth.

Conclusion:

The Pakistan Economic Outlook 2035 envisions a prosperous future for the country, marked by a trillion-dollar economy and a reduced poverty rate of 15%. However, achieving these goals requires political stability, export growth, and enhance the capacity of civil apparatus. Investing in human capital development and adopting productivity-enhancing measures are crucial steps in achieving long-term economic growth.

Pakistan's Key Interest Rate Expected to Remain Unchanged Amid High Inflation: Analysts

Khashif Sarfraz
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Introduction:

Pakistan’s central bank is anticipated to maintain its key interest rate at 21% in light of aggressive rate hikes implemented since April last year. These measures were implemented to combat record-high inflation amidst the nation’s worst-ever economic crisis. As the country grapples with economic challenges, analysts weigh in on the potential impact of maintaining the current policy rate.

Record-High Inflation and Aggressive Rate Hikes:

Pakistan has witnessed a substantial increase in its key interest rate, with a staggering 1125 basis points (bps) hike since April 2022. In response to the nation’s severe economic crisis and soaring inflation, 17 out of 18 analysts surveyed expect no change in the key rate on Monday, while one analyst predicts a 100 bps hike.

Stabilizing Inflation and Global Commodity Prices:

Analysts generally agree that with inflation reaching its peak and global commodity prices showing signs of decline, there is no immediate urgency for further interest rate hikes. In May, inflation surged to a record high of 37.97%, making it the highest in South Asia, surpassing Sri Lanka’s annual inflation of 25.2% in the same month. However, experts anticipate a decrease in inflation due to the high base effect.

Economic Outlook and Monetary Tightening:

Fahad Rauf, head of research at Ismail Iqbal Securities, expects June’s inflation rate to be around 30%, compared to the previous month’s 38%. He also points out that the country’s GDP growth was a mere 0.3% and may be revised to a negative figure once the final/revised GDP numbers are released next year. On the other hand, Shivaan Tandon, an economist at Capital Economics, suggests a 100 bps rate hike. Tandon argues that the central bank cannot afford to keep the policy rate unchanged, citing the necessity to curb high inflation and support the currency through monetary tightening. Rate hikes may also serve as a signal to potential creditors about the authorities’ commitment to addressing external imbalances.

Policy Decision and Economic Reforms:

The central bank’s policy decision follows the annual budget presentation to parliament, which is scheduled for Friday. The government aims to strike a delicate balance between satisfying the International Monetary Fund (IMF) through necessary reforms and implementing measures to win over voters in an impending election expected by November. With limited foreign reserves, barely sufficient to cover a month’s worth of imports, Pakistan is taking steps to secure a $1.1 billion loan as part of a $6.5 billion IMF bailout package. These measures involve increasing taxes, removing blanket subsidies, and lifting artificial curbs on the exchange rate.

Conclusion:

As Pakistan grapples with its worst-ever economic crisis and soaring inflation, the decision to maintain the key interest rate at 21% reflects a cautious approach by the central bank. While some experts argue for further rate hikes to combat inflation and support the currency, others believe the current plateauing of inflation and declining global commodity prices provide room for stability. The upcoming budget presentation and reforms will play a crucial role in addressing the nation’s economic challenges while striving for long-term sustainability and meeting IMF requirements.

Pakistan's Broken Promises: Violations of UN Internet Access Agreement Exposed

Khashif Sarfraz
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In a concerning revelation, Pakistan has been found to violate the United Nations’ commitment to free internet access, despite pledging support for the 2021 UN resolution on human rights and the internet. A recent study conducted by cybersecurity company and VPN provider, Surfshark, exposed the discrepancy between countries’ stated positions and their subsequent implementation of internet restrictions.

Surfshark’s analysis, which compared countries’ stances with data from their Internet Shutdown Tracker, unveiled that 15 countries, including Pakistan, had voiced support for the UN Human Rights Council (HRC) Resolution but had later imposed internet restrictions, effectively breaking their word. Pakistan emerged as one of the major offenders, violating the resolution on seven separate occasions, with three incidents occurring within the past month during the arrest of former prime minister Imran Khan.

Notably, in 2022, Pakistan witnessed three instances of internet restrictions. One occurred during Khan’s organized march to the capital, while the other two coincided with live broadcasts of Khan’s speeches. Among the countries that deviated from the 2021 resolution, Pakistan ranks third in terms of the number of restrictions imposed, following Sudan and India.

Gabriele Racaityte-Krasauske, a spokesperson for Surfshark, expressed concern over the contradiction between countries publicly supporting the resolution while simultaneously imposing internet restrictions. The UN resolution aims to condemn such shutdowns and limitations on online speech, making these actions all the more disconcerting.

The countries that proclaimed their support for the 2021 UN resolution but subsequently violated it include India, Sudan, Cuba, Uzbekistan, Burkina Faso, Pakistan, Senegal, Russia, Brazil, Armenia, Indonesia, Mauritania, Nigeria, Somalia, and Ukraine.

Surfshark’s Internet Shutdown Tracker data further reveals that these 15 countries collectively experienced a total of 66 internet disruptions during or after the adoption of the resolution. India emerged as the most frequent violator, with 21 internet disruptions recorded since the resolution’s adoption in 2021. Sudan follows closely with nine restrictions, the first of which occurred amid the 2021 military coup.

While Nigeria and Ukraine had pre-existing restrictions at the time of the resolution’s adoption, they have not imposed any new limitations since then. Nigeria’s ban on Twitter, initiated a month before the resolution’s adoption, lasted until January 2022. As for Ukraine, it enforced a blockade on popular Russian apps in 2017 as part of sanctions following the annexation of Crimea, which remains in effect.

The Surfshark study sheds light on the disconcerting reality of countries reneging on their commitment to uphold internet freedom. It calls for renewed attention to the issue and underscores the importance of holding nations accountable for their actions, ensuring that the promise of a free and open internet is upheld globally.

Note: The information provided in this blog post is based on Surfshark’s research and data.

Exploring Google Bard: A Comparative Analysis with ChatGPT

Khashif Sarfraz
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Introduction:

As AI chatbots continue to advance, two prominent players in the field, Google and OpenAI, have introduced their own powerful language models: Bard and ChatGPT, respectively. In this blog post, we will delve into the features, design, and response time of these AI-powered chatbots to determine which one comes out on top.

The Interface and Design:

Google Bard boasts a visually appealing and user-friendly interface. Its bright and inviting design makes engaging with the chatbot an enjoyable experience. However, when compared to ChatGPT, Bard falls short in terms of certain essential features, such as conversation history, which can be a valuable tool for users to reference previous interactions.

Unique Features:

Bard distinguishes itself from other chatbots by offering integration with popular voice assistants like Alexa and Google Assistant. This integration allows users to interact with Bard using voice commands. Additionally, Bard provides the convenience of editing already-asked questions and restarting conversations from any point. Another notable feature is the option to search the web for more information on a specific response, thanks to the integration with Google’s search engine.

Response Time and Accuracy:

While Bard generates coherent and contextually relevant responses, some users have noted that its response time is slightly slower compared to ChatGPT and Bing AI. Nevertheless, Bard’s responses often display a human-like tone, and the chatbot readily admits mistakes and apologizes when necessary. It showcases the potential for improvement and refinement as Google continues to develop and enhance the model.

Information and Knowledge Base:

Bard proves to be a knowledgeable chatbot, capable of providing insights and examples on a wide range of topics. It demonstrates proficiency in discussing history essays and offering political opinions on leaders, backed by supporting examples. However, it is worth noting that Bard lacks information about ChatGPT itself, as it fails to comment on the OpenAI language model.

Data Privacy:

Users should be aware that Google currently retains user data, including edits made to prompts during conversations. It is essential to exercise caution and refrain from sharing personal or sensitive information when interacting with Bard.

Sharing and Accessibility:

Similar to ChatGPT, Bard allows users to copy responses for their own use. Moreover, it offers additional convenience by enabling direct sharing of responses via Gmail drafts or Google Documents.

Conclusion:

While Google Bard encountered a rocky start with an incorrect response during its launch, it demonstrates potential for improvement as Google continues to refine the model. With its visually appealing interface, integration with voice assistants, and the ability to search the web, Bard offers a unique user experience. However, ChatGPT, developed by OpenAI, remains a strong contender with its established features, including conversation history. Ultimately, the choice between Bard and ChatGPT will depend on individual preferences and specific requirements. As both models evolve, the future of AI chatbots appears promising, offering enhanced capabilities and faster response times.

Anticipated Tax Measures in the Upcoming Budget: What to Expect

Khashif Sarfraz
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Introduction:

As the fiscal year 2023-24 approaches, speculations are rife about the tax measures that will be included in the upcoming federal budget. Aimed at achieving the tax revenue target and fostering economic growth, these measures cover a wide range of sectors. While the official budget release will provide the final details, here’s an overview of the expected tax measures based on recommendations from analysts at Topline Securities.

1. Tax on Undistributed Reserves:

A new advance tax is expected to be imposed on both listed and unlisted companies, with rates of 5 percent and 7.5 percent respectively. This tax will be adjustable when dividends are distributed. The government is yet to decide whether it will be retrospective or apply only to companies that have not distributed profits recently.

2. Continuation of Super Tax:

The government is likely to continue imposing the super tax on companies, following the model introduced in the previous fiscal year. The super tax was previously imposed on specified sectors with earnings exceeding a certain threshold.

3. Shift from Final Tax Regime (FTR) to Minimum Tax Regime (MTR) for Exporters:

Exporters may be required to pay taxes on their taxable income rather than the current system of paying tax on proceeds deducted by banks. This shift aims to promote documentation within the export sector.

4. Asset Tax/Wealth Tax:

The proposal suggests the imposition of a Minimum Asset Tax (MAT) on movable and immovable assets owned by resident individuals exceeding Rs. 100 million. Additionally, the government is considering the imposition of a wealth tax, known as the Income Support Levy, on all assets, including agriculture, with rates ranging from 0.25 percent to 2 percent.

5. Higher Tax on Non-Filers:

To promote documentation, higher taxes may be imposed on non-filers, particularly on transactions involving the buying and selling of immovable property.

6. GST at 18%:

The government plans to maintain the standard rate of General Sales Tax (GST) at 18 percent, focusing on increasing withholding taxes where applicable.

7. Tax on Agri Income:

Although demands exist to impose higher taxes on agricultural income, provincial governments currently have the authority to levy taxes on such income. However, provinces have shown reluctance to revise the rates.

8. Increase in Valuation of Immovable Properties:

The valuation of immovable properties is expected to increase from July 2023. This aligns with taxation reforms pursued by the Federal Board of Revenue (FBR) under the Pakistan Raises Revenue Project (PRRP) in collaboration with the World Bank.

9. Tax on Deemed Rental Income:

A 1 percent tax on deemed rental income for land held by non-filers has been recommended by the Reforms and Resource Mobilization Commission (RRMC).

10. Tax on Banks:

Continuation of the Super Tax and potential imposition of new taxes on the banking sector are possibilities that cannot be ruled out, given the increased profitability of the sector.

Conclusion:

While the official budget release will provide the complete details, the anticipated tax measures discussed here shed light on the potential fiscal changes in the upcoming fiscal year. It’s important to note that these expectations are subject to change until the official budget is released. The government’s focus on achieving tax revenue targets, promoting documentation, and fostering economic growth will guide the implementation of these tax measures.

Christian Pulisic Looks to Move Past Challenging Season at Chelsea

Khashif Sarfraz
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Introduction:

Christian Pulisic, the Chelsea forward, is eager to put a demanding season behind him as he prepares to represent the United States in the upcoming CONCACAF Nations League finals against Mexico. Pulisic endured a tough campaign at Chelsea, with limited starts and struggles with form and fitness. As he returns to international duty, the 24-year-old aims to regain confidence and rediscover his passion for the game.

A Challenging Season at Chelsea:

Last season, Pulisic made just eight Premier League starts for Chelsea, facing difficulties in maintaining form and fitness. The club’s turbulent campaign, marked by the dismissal of four different managers, concluded with a disappointing 12th-place finish in the table. Pulisic’s future at Stamford Bridge remains uncertain, and there are reports linking him with a move to Juventus in Italy.

Fresh Start with the National Team:

Speaking from Los Angeles, where the United States is preparing for the CONCACAF Nations League semi-final clash against Mexico, Pulisic expressed his excitement about representing his country. He views international duty as an opportunity to gain playing time and rediscover his confidence. Pulisic is determined to showcase his abilities and contribute to the team’s success, aiming to reignite his love for the game after a challenging period.

Uncertainty Surrounding Club Future:

Pulisic dropped a hint about the possibility of leaving Chelsea after spending four years at the club. He acknowledged that his recent seasons did not unfold as planned and emphasized his current focus on the national team. While he remains a Chelsea player and plans to return, Pulisic acknowledged that circumstances can change, leaving the door open for potential developments. As of now, he is committed to the national team and is eager to enjoy his time on the field.

Sole Focus on Representing the United States:

When questioned about the uncertainty surrounding his club future, Pulisic made it clear that his immediate priority is the national team. He stated that thoughts about next season are in the back of his mind, emphasizing his singular focus on the upcoming matches and his desire to win games for his country. Pulisic’s commitment to the United States reflects his determination to excel and contribute to the team’s success in the CONCACAF Nations League finals.

Conclusion:

Christian Pulisic’s return to international duty provides a fresh start for the talented winger after a challenging season at Chelsea. As he joins the United States in the CONCACAF Nations League finals, Pulisic aims to regain his confidence, enjoy playing the game, and contribute to the team’s victories. While his future at Chelsea remains uncertain, Pulisic’s focus is firmly on representing his country and achieving success in the upcoming matches.

Shahid Afridi Criticizes Bangladesh Cricket Board for Excuses Over Asia Cup Participation

Khashif Sarfraz
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Introduction:

Shahid Afridi, the former Pakistan cricketer, has voiced his criticism towards the Bangladesh Cricket Board (BCB) for allegedly making excuses regarding their participation in the upcoming Asia Cup matches in the United Arab Emirates (UAE). Reports suggest that Bangladeshi players are hesitant to play in the UAE due to concerns about the scorching September weather. Afridi emphasizes the importance of professionalism, urging cricketers not to base their decision to play solely on weather conditions.

The Asia Cup Conundrum:

Afridi’s remarks follow the recent decision by the Board of Control for Cricket in India (BCCI) to refuse sending their team to Pakistan for the 2023 Asia Cup. In an attempt to find a solution, the Pakistan Cricket Board (PCB) proposed a hybrid model for the tournament, splitting it into two phases. The initial phase would be held in Pakistan, excluding India, while the second phase would take place in the UAE.

Professionalism over Weather Concerns:

Addressing the reported concerns over weather conditions, Afridi highlights the importance of professionalism among cricketers. He emphasizes that professional players should not base their decision to play solely on weather conditions. Afridi draws from his own experiences, recalling matches played in Sharjah in scorching temperatures. He points out that such challenges test the players’ fitness levels and serve as an opportunity to showcase their resilience.

Excuses or Valid Concerns?

Afridi dismisses the reported concerns about the weather as mere excuses. He suggests that players can come up with various reasons if they wish to avoid playing, but weather conditions alone should not be a determining factor. By challenging the notion that weather should dictate participation, Afridi highlights the need for a professional approach to the game.

Proposed Solutions and ACC’s Stance:

In the ongoing discussions, Jay Shah, the BCCI secretary and ACC chairman, has reportedly proposed that the tournament should be held at a single venue, specifically Sri Lanka. The other participating nations have agreed to this proposal, as per an Indian media report. If the PCB chooses not to comply and withdraw, the tournament would feature India, Sri Lanka, Bangladesh, and Afghanistan, with a decision pending on the inclusion of a fifth team.

Conclusion:

Shahid Afridi’s criticism of the Bangladesh Cricket Board sheds light on the ongoing complexities surrounding the participation of teams in the Asia Cup. While the reported concerns about weather conditions have emerged as a potential obstacle, Afridi emphasizes the need for professional cricketers to rise above such factors and prioritize their commitment to the sport. As discussions continue and proposals are presented, the final format and participating teams for the Asia Cup are yet to be confirmed.

Elon Musk Reveals China's Plan to Initiate AI Regulations

Khashif Sarfraz
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Introduction:

In a recent Twitter Space conversation with Democratic presidential candidate Robert F. Kennedy Jr., billionaire entrepreneur Elon Musk revealed that the Chinese government intends to implement regulations pertaining to artificial intelligence (AI) within the country. During his visit to China, Musk had productive discussions with senior Chinese leadership regarding the risks associated with AI and the necessity for oversight and regulation. This development signifies China’s proactive approach to managing the potential impact of AI technology.

China’s AI Regulatory Initiative:

While Elon Musk did not provide further details, he emphasized the significance of his discussions during his trip to China. According to Musk, the Chinese government has expressed its intention to introduce AI regulations within the country. This move reflects the recognition of the need to ensure responsible development and deployment of AI technologies.

Musk’s Engagement with Chinese Officials:

During his visit, Musk had the opportunity to meet with several senior Chinese government officials, including those from the foreign, commerce, and industry ministries. He also had a meeting with Chinese Vice Premier Ding Xuexiang. These discussions likely revolved around the risks associated with AI and the importance of establishing guidelines to address those risks.

China’s Approach to AI Regulation:

China has been actively considering measures to manage AI technologies. In April, the Cyberspace Administration of China (CAC) released draft measures for governing generative AI services. The CAC emphasized the importance of conducting security assessments before launching AI offerings to the public. Additionally, the administration highlighted the need for AI-generated content to align with China’s core socialist values. Providers of AI products are also expected to ensure the legitimacy of data used for training and take measures to prevent algorithmic discrimination.

Global Efforts in AI Regulation:

China’s initiative to implement AI regulations aligns with the global trend of governments recognizing the importance of oversight in emerging technologies. As AI continues to gain momentum in investment and popularity, governments worldwide are exploring ways to mitigate potential risks associated with its use. The recent release of OpenAI’s ChatGPT, a language model similar to the one powering this blog post, has further accelerated interest in AI applications.

Conclusion:

Elon Musk’s discussions with senior Chinese officials have shed light on China’s commitment to establishing regulations for artificial intelligence. The country’s proactive approach highlights its recognition of the potential risks and the need to ensure responsible AI development and deployment. As China moves forward with its regulatory framework, it joins other nations in navigating the complexities of AI governance. These efforts aim to strike a balance between fostering innovation and safeguarding against potential drawbacks, ultimately shaping the future of AI for the benefit of society as a whole.

Apple's Autocorrect Tweak: Putting an End to "Ducking" Frustration

Khashif Sarfraz
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Introduction:

At Apple’s recent event for developers, one notable announcement caught the attention of iPhone users worldwide. The tech giant unveiled a tweak to its autocorrect feature, addressing a long-standing frustration for many. The notorious substitution of the expletive “ducking” instead of a more colorful word will soon become a thing of the past. Apple’s software chief, Craig Federighi, assured users that the updated keyboard will learn the intended word, offering a solution to this common annoyance.

Autocorrect Quirks and Challenges:

The iPhone’s autocorrect feature has had its fair share of quirks over the years. While aiming to assist users by automatically correcting misspelled words, it sometimes substitutes what it deems a logical option, which ends up altering the meaning of a phrase or sentence. This can lead to humorous or frustrating situations, often resulting in follow-up messages lamenting the infamous “damn autocorrect.”

The “ducking” Substitution:

Among the numerous autocorrect blunders, the substitution of “ducking” for a more explicit term has become particularly notorious. Users have found themselves rewriting their texts or expressing their exasperation at their devices. Unfortunately, the iPhone cannot correct one’s verbal exclamations, adding to the frustration.

Apple’s Response:

Recognizing the need to address this issue, Apple has taken steps to refine its autocorrect function. The upcoming software update will allow the keyboard to learn the intended word, preventing the unwanted substitution of “ducking” and restoring the original meaning to users’ messages. This improvement reflects Apple’s commitment to enhancing the user experience and making texting more seamless and accurate.

Beyond Autocorrect Apple’s Recent Announcements:

While the autocorrect tweak stole the spotlight during the event, Apple had several other exciting announcements in store. They introduced a highly anticipated mixed-reality headset, shared details about desktop revamps, and unveiled upgrades to their laptop lineup. These developments indicate Apple’s dedication to pushing boundaries and delivering innovative technology to its loyal customer base.

Impressive Market Performance:

Apple’s success is not limited to software updates and new product launches. On the same day as the event, the company’s shares reached an all-time high, nearly hitting the remarkable $3 trillion market valuation mark. This remarkable growth, with a 280% increase over the past five years, is a testament to the enduring popularity and market share dominance of the iPhone.

User Control and Options:

It’s worth noting that iPhone users have always had the freedom to disable the autocorrect feature on their devices. This option allows users to embrace their creative expressions without any interference. However, with the upcoming tweak, Apple seeks to strike a balance by refining the autocorrect functionality to enhance accuracy while still accommodating individual preferences.

Conclusion:

Apple’s decision to address the long-standing autocorrect annoyance demonstrates the company’s commitment to continuously improving user experience. By eliminating the “ducking” substitution and fine-tuning the autocorrect feature, Apple aims to make texting more seamless and accurate for its vast user base. As users eagerly await the software update, they can look forward to a future of texting without unintentional word substitutions and the frustration that often accompanies them.

Proposed 18% Sales Tax on Milk Sparks Concerns: Impact on Consumers and Food Industry

Khashif Sarfraz
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0

Introduction:

In a move that could significantly impact consumers and the food industry, the Pakistani government is considering implementing an 18% sales tax on packaged milk in the upcoming budget. The Federal Board of Revenue (FBR) has proposed this tax measure, aiming to generate over Rs30 billion in additional taxes annually. However, concerns have been raised by Finance Minister Ishaq Dar regarding the potential impact on consumers in a country already grappling with high inflation. This proposed tax comes at a time when the food industry is still recovering from the burden of heavy taxation on juice products.

Challenges for the Food Industry:

The food industry has been hit hard in recent months, with the imposition of a 10% federal excise duty and now the proposed sales tax on milk. This double blow has had adverse effects on businesses and farmers, leading to reduced demand for products such as mangoes. The timing of these tax policies raises concerns, as Prime Minister Shehbaz Sharif’s government engages in diplomatic efforts to promote Pakistani mangoes while simultaneously implementing taxation policies that harm domestic farmers and the food industry.

Implications for the Dairy Sector:

The FBR’s proposal includes abolishing the zero-rating facility for the dairy sector, which currently allows milk producers to claim refunds on their purchased inputs. If the proposed 18% sales tax is implemented, packaged milk prices could increase by Rs46 per litre, potentially impacting both consumers and milkmen who may have to raise prices to compensate for the tax burden. Recognizing these concerns, the government is unlikely to endorse the FBR’s proposal, as per sources.

Inflation and Nutritional Challenges:

With Pakistan experiencing historically high inflation, imposing taxes on essential food items, particularly in an election year, could have significant implications for the government. The zero-rating facility for the dairy industry was introduced to support its growth, and taxing these products would increase costs for consumers, potentially reducing demand and affecting dairy farmers and the industry as a whole. This comes at a time when Pakistan already faces considerable challenges of malnutrition, particularly in rural areas where access to nutritious food is limited.

Plight of the Fruit Juice Industry:

The food industry’s struggles extend beyond the dairy sector. The imposition of a 10% federal excise duty on fruit juices has led to a decline in sales, adversely affecting the packaged juice industry. This decline has resulted in losses for farmers and risks closure or reduced production capacity for fruit pulping units in Punjab. The juice industry, a significant contributor to tax revenues and employment, has been severely affected, hampering investments and growth plans.

Supporting the Food Industry:

Market players in the value chain emphasize the need for the government to withdraw the federal excise duty on the packaged juice sector to revive the industry and support medium-sized fruit growers. Proper storage facilities and initiatives that reduce fruit wastage are crucial for the fruit value chain, as Pakistan is known for producing high-quality fruits, some of which are exported. By addressing the concerns of the food industry, the government can foster growth, generate employment, and bolster the country’s economy.

Conclusion:

The proposed 18% sales tax on milk and the existing federal excise duty on fruit juices present significant challenges for consumers, farmers, and the food industry as a whole. Balancing the need for revenue generation with the impact on consumers and industry players is crucial. As the government finalizes the budget, it is essential to consider the implications of these tax measures on inflation, nutrition, and the overall economy. Finding a sustainable solution that supports the growth of the food industry, ensures affordable access to essential food items, and addresses the nutritional needs of the population should be a priority for policymakers.

 

Published in The Express Tribune, June 6th, 2023.

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