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— In the final budget announcement of its tenor, the incumbent government has envisaged a total federal expenditure of PKR4.75 trillion for FY18, 11.7%YoY higher than the revised amount during FY17.

— Achieving a sustainable growth will continue to remain the target for the government where many fiscal incentives, that were introduced in the last budget have been continued for another year.

— However, unlike the pre-budget expectations, the budget announcement fails to deliver additional incentives to the export-oriented sector to improve the overall exports and contain the escalating CAD position.

— Long term GDP growth forecasts remain at 7.0% (to be achieved by FY23); while to achieve the aggressive growth target the incumbent government has identified i) reduction in the current energy deficit, ii) improvement in law and order situation and iii) higher infrastructure expenditures.

— Growth target for FY18 is set at 6.0% as against provisional estimated growth of 5.3% in FY17. The GoP growth targets are slightly more aggressive in comparison with growth targets of IMF and WB who forecast the country’s GDP to grow by 5.2% 5.5% respectively.

— At the same time, the budget also incorporates an aggressive growth in FBR revenues where the growth in revenues is targeted at 14% while the expenses are forecasted to grow at 11%. This means the total revenue is estimated at PKR5.31 trillion (including tax estimates of PKR4.01 trillion as against the revised estimates of PKR3.5 trillion in FY17).

— Total expenditure for FY18, is budgeted at PKR4.75 trillion compared to the revised estimates of PKR4.26 trillion for FY17, showing an increase of 11.7%. Out of the total expenditures, highest increase is accorded to the development budget where PSDP allocation has been increased to PKR1.0 trillion (up 40%YoY). The defense related expenditures are estimated at PKR920 billion (up 9.4%YoY).

— Overall budget deficit for the year FY18 is targeted at 4.1% compared to provisional deficit of 4.2% in FY17, we forecast the budget deficit to clock in at 4.3%-4.5% in FY18, especially with it being an election year.

— Inflation is targeted to remain below 6% as against 4.1% in 10MFY17 (FY17 inflation targeted at 4.2%). The inflation target remains achievable but is contingent on international commodity prices, which have so far remained favorable.

— The budget remained a mix bag for market sentiments where increase in capital gain and dividend tax has been countered by expectation of higher payouts (or bonuses) by individual companies.

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