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Budget fy 2018-19 – glass half empty or half full?

As was expected, the budget for FY 2018-19 turned out to be ‘people centric’ as this is the election year in Pakistan. By curtailing the tax liability of individuals and increasing minimum pensions, the government has tried to woo the voters for the upcoming elections. It remains to be seen whether the effect of increase in family disposable income is off-set by the spiraling inflation or not. The government has come under fire as the cost of relief exceeds revenue measures. The budget has also left the real estate and construction sector disgruntled as they feel they did not get the attention they deserved. On the external front, the challenge will now be for the incumbent government to bridge the widening resource gap.

Some of the key features of the budget for FY 2018-19 are summarized as under:

Head Amount (PKR) %age increase/decrease
FBR revenue target 4,435 Billion 10.50%
Natural gas development surcharge 16 Billion (63.00%)
Petroleum levy 300 Billion 200%
Public debt 406 Billion 28.90%
Debt servicing (domestic) 229 Billion 73.50%
Debt servicing (foreign) 1,391 Billion 13.00%
Pensions 342 Billion 37.90%
Defense 1,100 Billion 19.60%
Law courts 5.63 Billion 8.80%
Police 122.9 Billion 21.50%
Health 13.89 Billion 8.20%
Education 97.4 Billion 7.10%
PSDP 800 Billion (20.00%)
FATA 10 Billion
Water Division 79 Billion 200%
Power Division 36 Billion (40.00%)
Housing & Works Division 5.4 Billion (50.00%)
Railways 33.5 Billion
SDGs 5 Billion

Other talking points of the budget are as under:

  1. Corporate tax to be reduced from 30% to 25% till 2023.
  2. Super tax to be phased out by 2021.
  3. For income between Rs. 400,000 to 800,000, income tax will be Rs. 1,000 and for income between Rs. 800,000 to 1,200,000, income tax will be Rs. 2,000
  4. To facilitate public companies, the condition of distributing 40% of after tax profits is being reduced to 20%.
  5. The tax rate on transfer of banking instruments, which are more than Rs. 50,000 was reduced to 0.4% from 0.6% for non-filers.
  6. Withdrawal of 5% tax on bonus shares.
  7. Duty on CKD kits for electric cars reduced to 10% from 50%.
  8. 6% relief for RLNG imports.
  9. 104 tariff lines zero rated for custom duty.
  10. 0% tax on fresh investment in oil refining.


The budget drew mixed reaction from the trade and industry. While some say that steps taken for the correction in tax regime are in the right direction while exporters are of the view that there wasn’t much for them in the budget and that the cost of doing business has not been reduced. There are some suggestions that were accepted by the government while there are many other proposals that haven’t been implemented.

On the face of it, the budget could be termed as ‘by the businessmen’ and ‘for the businessmen’. For the small investors, the situation is very much the same. For big businesses, automobile and steel sector are major losers while chemicals and gas distribution companies are major gainers. The impact of budget on banks will be neutral as it did not come very hard on the non-filers. Due to improvement in disposable income, it is expected that middle class families may be able to save more hence some activity could be seen in mutual funds industry.

The writer is a Karachi based freelance columnist and is a banker by profession. He could be reached on Twitter @ReluctantAhsan

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