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Alfalah CLSA: Incoherent federal and provincial policies at peak

Super tax is estimated to collect PKR 100 billion and Punjab government has announced PKR 100 billion electric subsidy

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One of the largest Institutional brokers and international broker-dealer networks in Pakistan, Alfalah CLSA shared a piece of information in a tweet that federal government has imposed 10 percent super tax that is estimated to bring tax revenue of PKR 100 billion. On the other hand, Punjab government has announced PKR 100 billion electric subsidy for consumers of up to 100 units. They added, “incoherent federal and provincial policies at peak.”

Read more: Exploring the effectiveness of super tax

They have produced a report titled “Dirty politics creating bad economics” which analyzes measures taken by the PDM government.

It discusses the freezing of energy tariffs, where the former PTI government under pressure from then opposition (PDM government) froze retail fuel prices and power tariffs. Regardless of the fact that, with record high public debt/ fiscal deficit, Pakistan does not have the luxury to finance such subsidies.

The current coalition government is also not passing fuel prices to the consumers in order to maintain their political capital. This has caused an impasse with the IMF and has panicked the situation in forex and equities market. Importantly, Pak Rupee and KSE100 have fallen by 8.4 percent and 6.7 percent since the coalition government took the charge.

It also mentioned that another such decision was increasing the number of working days from five to six in a situation where government should have prioritized energy rationing.

Furthermore, the revival in IMF program would be a significant but sustained move to historic valuations and is only possible if energy/ public sector structural reforms and external account vulnerabilities are referred (either in the form of increasing exports/ remittances or declining international commodity prices to mean).

They concluded the assumption that super tax is on rich, as ‘incorrect.’ There are orphans, pensioners, retired professionals, widows and many deserving poor individuals who own shares in listed companies, most of these companies will either not payout or pay minimal dividends in June results.

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