May 26 - June 01, 2008

LAHORE: With the country's bourses facing pressure these days on account of various internal and external factors, brokers as well as investors of stock market have not pinned high hopes with the budget for the year 2008-09.

The shares transaction cost has already swelled while total turn over in the stock exchange which was Rs 400-500 million per day a few months ago has now reduced to mere Rs 200 million per day.

The market people are perturbed over the reports of imposition of Capital Gains Tax (CGT) from the first day of financial year 2008-09. The Government had exempted levy of CGT till June 30, 2008 and the ex-Finance Minister Ishaq Dar announced not to extend exemption of CGT. This announcement had created panic like situation for the stock market people and increasing oil prices, high inflation, depreciation in the value of Pak rupee and some other factors caused negative vibes on the stock market business.

Capital Vision Securities Limited's Equity Research Head Mirza Mohammad Irfan Baig told Pakistan and Gulf Economist that the stock market people are facing difficult situation mainly due to high transaction cost in stock business while the reports of imposing Capital Gain Tax on stock earnings are matter of grave concern for the market people. He said stock market people deserve to be given some incentives through exemption in corporate tax and significant cut in Capital Value Tax and withholding tax. Both these levies have almost doubled the cost of transaction of shares reducing total turn over of the market about 55 percent i.e. Rs 400-500 million to 200 million shares per day.

He was of the view that Capital Gains Tax, if imposed, would ruin the stock business rendering the poor small investors to starvation. He said Capital Gains Tax should not be levied for the survival of stock business.

To a query, he said the country's economy was facing heavy pressure due to inflation, continuous rise in oil prices and other factors. Therefore, market people have not pinned high hopes with the Budget 2008-09. However, if some major decisions were taken, it may help the bourses to opt the right track.

When interviewed small investors at the Lahore Stock Exchange told this scribe that they were facing difficult situation for the last two-three months due to pressure on doing business in stock exchange. Earlier, they said they used to make their both ends meet through earnings from stock market, but now they are considering to opt some other business for their livelihood.

Moreover, analysts told that food inflation, energy crisis and other budgetary issues affecting the common man and the government needs to devise short term and medium term measures to improve and invigorate the economy as well as ensure that the common man can be provided relief against current economic pressures.

They say the government should immediately address problems of the common man as well as salaried people. They called upon the budget-makers to give maximum subsidy to poverty stricken public that is in deep trouble due to increasing inflation rate and dearth of employment opportunities in the country.

They were of the view that the democratic government should make the budget process inclusive and all legislators and political parties should be involved and given ample time to review and give their feedback on the budget from all angles.

They further demanded that the budgetary allocations for education sector should be doubled to achieve the objective of 100 percent literacy rate by 2015. Similarly, allocations for health sector need to be increased from 0.57 percent to at least 2 percent of GDP. Adequate funds should be allocated to reduce maternal mortality rate up to 200 per 20, 000 live births by 2011 while allocations should be made in the budget for providing interest free loans to small farmers and all the previous agriculture loans on small farmers should be waived off, they added.