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Business Recorder
11-06-2025
- Business
- Business Recorder
KCCI says budget lacks steps for economic growth
KARACHI: The Karachi Chamber of Commerce and Industry (KCCI) has criticised the federal budget 2025-26, describing it as a 'more enforcement, less progressive' budget that lacks substantial measures for economic growth. Speaking to the media after the budget announcement by Federal Finance Minister Muhammad Aurangzeb, Chairman Businessmen Group (BMG) Zubair Motiwala, alongside KCCI President Muhammad Jawed Bilwani and other industry representatives, acknowledged the budget's technical soundness but expressed concerns over its limited focus on growth-oriented policies. Motiwala highlighted a significant imbalance in the budget's approach, noting that while import-related incentives have been proposed, there are no corresponding relief measures for exports. 'This is technically a sound budget but measures for economic growth are missing in it,' he stated. The business leader criticised the budget as a 'camouflage' document, suggesting that crucial details would emerge only after implementation. He expressed disappointment that despite the federal minister's emphasis on digitalisation, FBR's strict enforcement, and revenue collection, no attention was paid to exports growth and industrialisation. 'No measures were proposed in this budget for reduction in cost of doing business and cost of production.' Chairman BMG criticised the government for setting overly ambitious goals despite the country's poor economic performance in the previous fiscal year, during which all major targets, including GDP growth and fiscal consolidation, were missed. He questioned the rationale behind increasing the targets without providing any practical explanation of how these would be achieved, especially in a fragile economic environment dominated by uncertainty, high inflation, and IMF-imposed constraints. While acknowledging positive developments such as the reduction in interest rates, current account surplus, and a $2 billion increase in foreign reserves, he criticised the government's decision to increase gas tariffs. 'Prime fuel for export sector is gas and the government is increasing the tariff instead of reducing it.' The KCCI leader expressed disappointment over the agriculture sector's poor performance, which showed a depressing growth of just 0.6 percent against the ambitious target of 13 percent. He also criticized the allocation of only Rs1000 billion for the Public Sector Development Program (PSDP) calling it woefully inadequate, particularly in light of the deteriorating state of infrastructure. 'It is surprising to see a meagre allocation of Rs2.783 billion for climate change in a country which has witnessed increased frequency of climate-related disasters,' he added. While acknowledging that the budget was presented under strict IMF conditions, he said that despite being technically compliant, it fails to address the pressing needs of Pakistan's industrial sector or its citizens. He described the budget as one that may satisfy external lenders but does not offer any practical hope for businesses or the wider population. Vice Chairman BMG Anjum Nisar underscored the importance of establishing a fair and transparent taxation system that does not rely on intimidation or arbitrary enforcement. He warned that the environment being created through the proposed fiscal measures could foster fear among businesses instead of encouraging growth. He said that Karachi remains the economic lifeline of Pakistan and deserves special attention to unlock its full potential. Rather than continuously burdening it with revenue responsibilities, the government should empower it with infrastructure investment and policy support to enable it to contribute even more to the national economy. President KCCI Muhammad Jawed Bilwani rejected the budget, stating it completely failed to offer any meaningful relief to the industrial sector or the general public. He said the government's claim of reduced inflation does not align with the realities faced by households, where electricity bills remain unaffordable and basic necessities are out of reach. He criticised the lack of measures to reduce electricity tariffs and interest rates, which are key drivers of the high cost of doing business. He emphasised that without addressing these core issues, neither industrial expansion nor job creation is possible. The high cost of energy and borrowing has severely impacted the viability of businesses, and without urgent intervention, many enterprises may not survive. Bilwani expressed concern over the government's over-reliance on remittances and IMF programs to manage the economy, calling it an unsustainable and short-sighted approach. He stressed the need to develop a conducive environment for industrial growth, which is the only way to improve key economic indicators. He also criticised the minimal allocation for long-delayed infrastructure projects like K-IV, terming it a sign of the government's disregard for Karachi's needs and its vital contribution to the national economy. Despite repeated demands from the business community, no concrete steps have been taken to broaden the tax net or introduce structural economic reforms, which remain essential for long-term economic stability, he said, raising concerns about agricultural governance, noting that while the sector didn't perform when it was a federal subject, its transfer to provincial governments under the 18th Amendment has not yielded the expected improvements. Calling the entire budget an eye wash, Bilwani expressed frustration over the government's failure to implement serious measures for broadening the tax base, noting that the country continues to rely heavily on home remittances rather than expanding domestic revenue sources. However, not all business associations shared the KCCI's pessimistic assessment. The President of the Karachi Customs Agents Association (KCAA) termed it a 'public friendly budget,' welcoming its potential to provide relief to common citizens, particularly the salaried class. The KCAA president also praised the government's decision to reduce overall customs tariffs to rational levels over the next five years, describing the budget as 'so far so good.' Meanwhile, Mashood Khan, an expert of auto sector said that the FM's budget speech closely mirrors the IMF's recommendations. The downward trend in additional customs duty, regulatory duty and customs duty will likely hit local manufacturing instead of exports in the future, foreseeing severe consequences for our local manufacturing industry. He said that the auto parts and other manufacturing sectors would face significant challenges, urging FM to revisit the budget before seeking approval from the National Assembly. Copyright Business Recorder, 2025
Express Tribune
10-06-2025
- Business
- Express Tribune
Businessmen air concern over budget measures
Listen to article Reacting to the federal budget for fiscal year 2025-26, business leaders and industrialists raised concerns, citing increased burden on taxpayers and the lack of incentives for economic growth. Businessmen Group (BMG) Chairman Zubair Motiwala, while calling it a "camouflage budget," expressed serious reservations about its unrealistic targets and the absence of any meaningful relief for the business community or the common man. The budget includes various announcements related to digitalisation and promoting the cashless economy. These measures alone are insufficient for stimulating exports or driving industrialisation, which are critical for sustainable economic growth, he stated. Addressing a press conference at the Karachi Chamber of Commerce and Industry (KCCI) after the finance minister's budget speech on Tuesday, he criticised the government for setting overly ambitious goals despite the country's poor economic performance in the previous fiscal year, during which all major targets, including GDP growth and fiscal consolidation, were missed. Motiwala questioned the rationale behind increasing targets without providing any practical explanation regarding how these would be achieved, especially in a fragile economic environment dominated by uncertainty, high inflation and the IMF-imposed constraints. He remarked that for achieving the elevated tax collection target, the government seems to be relying largely on extracting more revenue from the existing pool of compliant taxpayers, rather than expanding the tax base. He feared that instead of introducing meaningful reforms to bring untaxed sectors into the fold, the budget would result in increased discretionary powers for tax officials, burdening documented businesses and discouraging the economic activity. "This strategy of squeezing the formal sector could result in contraction of economic output rather than expanding it." The Overseas Investors Chamber of Commerce and Industry (OICCI) has expressed disappointment over the government's limited progress in addressing inequitable corporate tax rates in the recent budget. While a marginal reduction in super tax was acknowledged, the OICCI reiterated the need for a comprehensive overhaul of tax structures to enhance Pakistan's competitiveness and attract foreign investment. The chamber noted the absence of a meaningful reduction in government expenditure, which could have helped narrow the budget deficit. Fiscal discipline remains critical to ensuring macroeconomic stability. The OICCI urged the government to prioritise expenditure rationalisation in its budgetary measures. It regretted the missed opportunity to broaden the tax base, particularly the absence of a concrete strategy to document Pakistan's Rs9 trillion cash-based informal economy – a critical measure for meaningful revenue enhancement and economic formalisation that the chamber had consistently advocated for. Federal B Area Association of Trade and Industry President Shaikh Muhammad Tehseen commented that the federal government's announcement of the initiative to promote SMEs is a welcome move for owners of small and medium-sized businesses. He urged the government to engage relevant stakeholders and incorporate their recommendations to ensure the success of the proposed business scheme, support the export-based sector and generate jobs for the youth. According to the budget speech, on the directives of the PM, the Small and Medium Enterprises Development Authority (Smeda) has prepared a three-year business plan for 2024-27, which includes increasing SME financing, enhancing exports, building inter-industry linkages and promoting female inclusion in business. The speech also mentioned the success of the SME Risk Coverage Scheme, which generated more than Rs311 billion in assistance for over 95,000 SMEs by May 2025. The government's target is to increase SME financing to Rs1,100 billion by 2028. "The government should focus on reducing the cost of production to ensure benefits for industries, particularly through lower interest rates, utility charges and petroleum product prices, which will support the struggling SME units and attract both local and foreign investors to establish SMEs," Tehseen said. SITE Association of Industry (SAI) President Ahmed Azeem Alvi stressed the need for clearer policies, faster tax refunds and digital reforms to support exporters and industries. He said the government has recognised the need for relief within the Customs sector and intends to implement reforms. However, he noted that the full impact of these measures will only be clear once detailed budget documents are released.
Business Recorder
10-06-2025
- Business
- Business Recorder
KCCI sounds alarm on ‘camouflage' Budget 2025-26
Chairman Businessmen Group (BMG), Zubair Motiwala, while terming the federal budget 2025-26 a 'camouflage budget,' expressed serious reservations over its unrealistic targets and the absence of any meaningful relief for the business community or the common man. According to a press statement, he noted that while the budget includes various announcements related to digitalisation and promoting a cashless economy, these measures alone are insufficient to stimulate exports or drive industrialisation, which are critical for sustainable economic growth. Finance Minister Muhammad Aurangzeb announced Pakistan's federal budget 2025-26 'for a competitive economy' on Tuesday, targeting a modest 4.2% growth for the coming fiscal year, compared to 2.7% expected in the outgoing FY25. Addressing a press conference at the Karachi Chamber of Commerce and Industry (KCCI), Chairman BMG criticised the government for setting 'overly ambitious goals' despite the country's poor economic performance in the previous fiscal year, during which all major targets, including GDP growth and fiscal consolidation, were missed. He questioned the rationale behind increasing the targets without providing any practical explanation of how these would be achieved, especially in a fragile economic environment dominated by uncertainty, high inflation, and IMF-imposed constraints. Missed Opportunity: OICCI slams Budget FY26 for ignoring informal economy Motiwala was joined at the press conference by Vice Chairman BMG Anjum Nisar, President KCCI Muhammad Jawed Bilwani, Senior Vice President Zia ul Arfeen, Chairman Policy Research & Advisory Council Younus Dagha, former presidents Junaid Esmail Makda, Muhammad Idrees, Iftikhar Ahmed Sheikh, and members of the KCCI Managing Committee. Chairman BMG pointed out that the government's approach to achieving the elevated tax collection target seems to rely largely on extracting more revenue from the existing pool of compliant taxpayers rather than expanding the tax base. Motiwala feared that instead of introducing meaningful reforms to bring untaxed sectors into the fold, the budget would result in increased discretionary powers for tax officials, further burdening documented businesses and discouraging economic activity. He warned that this strategy of squeezing the formal sector could result in shrinking economic output rather than expanding it. Chairman BMG lamented the lack of any significant policy direction aimed at boosting exports or industrialisation. He said the government appears to be moving towards an import-dependent model, ignoring the need to reduce the cost of doing business, especially in energy-intensive sectors like textiles. 'No announcement was made to address the high cost of gas, which continues to make Pakistani products uncompetitive in international markets. He emphasised that without reducing gas tariffs or easing the interest rate environment, the government's growth targets will remain unattainable,' said Motiwala. He criticised the negligible support provided to the export-oriented textile sector, which he noted is the backbone of the country's economy. A meaningful reduction in gas prices, particularly for industrial users, could have yielded positive results, but unfortunately, it was not announced. The allocation of only Rs1,000 billion for the Public Sector Development Program (PSDP) was also called out as woefully inadequate, particularly in light of the deteriorating state of infrastructure. While acknowledging that the budget was presented under strict IMF conditions, he said that despite being technically compliant, it fails to address the pressing needs of Pakistan's industrial sector or its citizens. Motiwala described the budget as one that may satisfy external lenders but does not offer any practical hope for businesses or the wider population. Meanwhile, President KCCI Muhammad Jawed Bilwani rejected the budget, stating it completely fails to offer any meaningful relief to the industrial sector or the general public. He said the government's claim of reduced inflation does not align with the realities faced by households, where electricity bills remain unaffordable and basic necessities are out of reach. Bilwani decried the lack of measures to reduce electricity tariffs and interest rates, which are key drivers of the high cost of doing business. Moreover, Bilwani expressed concern over the government's over-reliance on remittances and IMF programs to manage the economy, 'calling it an unsustainable and short-sighted approach'. He also criticised the minimal allocation for long-delayed infrastructure projects like K-IV, terming it a sign of the government's disregard for Karachi's needs and its vital contribution to the national economy. He added that despite repeated demands from the business community, no concrete steps have been taken to broaden the tax net or introduce structural economic reforms, which remain essential for long-term economic stability.
Business Recorder
26-05-2025
- Business
- Business Recorder
Raast to reform: Digitizing Pakistan's economy
Digital payment systems are rapidly transforming economies across the globe by enhancing transparency, reducing informality, accelerating the velocity of money, and spurring inclusive economic growth. In this context, Pakistan's digital payment platform, Raast, has rapidly emerged as a cornerstone of the country's digital financial infrastructure. With over 43 million consumers, 841,000 merchants, and 36 banks onboarded, Raast now processes more than 4.5 million daily transactions. Its adoption has seen exponential growth, with transaction volumes surging to 371 million and values reaching PKR 8.5 trillion in Q1 FY25 alone. Unlike costly international card networks, Raast offers zero-cost, QR-code, and IBAN/mobile-based transactions backed by national scalability and full government integration. Since its inception, Raast has processed over PKR 34 trillion, significantly reducing reliance on cash and foreign payment networks. However, despite Raast's technical success, Pakistan continues to lag in overall digital payment adoption. This gap stems from a combination of structural and behavioural barriers. Structurally, the country suffers from low levels of digital and financial literacy, weak incentives for merchants, and fragmented onboarding processes. Behaviourally, Pakistan's heavy reliance on cash transactions presents a significant obstacle to economic progress—perpetuating informality, limiting tax revenues, and stifling investment potential. Currently, 25 percent of the country's total money supply—over PKR 9 trillion—is in cash circulation, far above the regional average of approximately 6.5 percent. This cash dominance contributes to one of the lowest tax-to-GDP ratios (10 percent) and one of the largest informal sectors (57 percent) among peer economies like India and Brazil. These challenges are further compounded by policy inertia and institutional hesitation, primarily driven by IMF-imposed revenue targets. India's remarkable success with its Unified Payments Interface (UPI) offers valuable lessons and actionable frameworks that Pakistan can adapt by leveraging Raast. Since its launch in 2016, UPI has reshaped India's financial landscape—processing an astounding USD 5.8 trillion by 2024, generating estimated savings of USD 109 billion and accounting for 83 percent of all digital payments in the country. This transformation was driven by strategic government spending, regulatory incentives, and tax benefits targeted at merchants, consumers, and financial institutions. As a result, cash transactions in India declined significantly, with the cash-to-GDP ratio falling from 14 percent to 11.5 percent, signaling a significant shift toward formal and traceable economic activity. Likewise, Pakistan can take targeted steps such as enforcing digital payment thresholds, offering tax liability reductions for merchants using digital platforms, and reducing withholding tax on digital transactions between suppliers and retailers. A Raast-based payment ecosystem offers zero-cost transactions, nationwide scalability, universal interoperability, and full government integration—unlike traditional card-based systems, which are costly, urban-centric, and result in significant foreign exchange outflows. By localizing payment infrastructure, Raast helps conserve foreign exchange, expand financial inclusion, and foster sustainable digital infrastructure. Pakistan must also consider disincentivizing cash usage to accelerate adoption by introducing incremental withholding taxes on cash payments. Furthermore, promoting widespread integration of merchants with the FBR's e-invoicing and digital POS systems could create a strong multiplier effect, enhancing transparency and fiscal accountability. Significantly, the revenue streams targeted for relaxation contribute minimally to overall tax collections. Thus, offering these incentives would not substantially impact fiscal revenues nor violate IMF conditionalities. On the contrary, such reforms could expand the economic pie by reducing informality and increasing the volume of digital transactions. Estimates suggest Raast could generate over PKR 1.1 trillion in annual economic benefits—partly through tax savings for the government but primarily through broader multiplier effects and reductions in transaction costs across the economy. The economic rationale is compelling: transitioning toward a cashless economy, as demonstrated by India's experience, significantly boosts the velocity of money. Faster circulation enhances consumption, stimulates business expansion, and strengthens economic dynamism—ultimately increasing tax revenue and supporting long-term growth. In essence, Raast—supported by innovative policy interventions and strategic incentives—has the potential to reshape Pakistan's economic landscape. Pakistan can unlock the true promise of digital financial inclusion by enabling businesses and consumers to shift away from cash, reducing informality, and enhancing transparency. With a clear understanding that short-term tax relaxations can yield long-term economic dividends, the country is well-positioned to negotiate pragmatic reforms and fully realize Raast's transformative potential. Copyright Business Recorder, 2025
India.com
18-05-2025
- Business
- India.com
IMF Turns Screws, Slams Pakistan With Fresh Conditions, Warns Conflict With India Could Sink Bailout
New Delhi: As Pakistan's economic frailty teeters on the edge, the International Monetary Fund (IMF) has signalled a hardening of stance. It has slapped Islamabad with 11 fresh policy requirements to unlock its next bailout tranche. This brings the total number of conditions to a staggering 50. The latest decision reflects the global lender's growing unease not just over Pakistan's economic mismanagement but also in the wake tensions with India. Beyond fiscal and structural reforms, Pakistan's geopolitical behaviour is now on the radar. The warning is clear: if tensions with India persist or worsen, Pakistan's already-weak fiscal programme could unravel altogether. The message is as political as it is financial. India's precision airstrikes under 'Operation Sindoor' on May 7, in response to the April 22 Pahalgam terror attack, rattled not only Islamabad but also international observers. Pakistan's attempted retaliation via drones and missiles only worsened the outlook. And while a ceasefire was announced on May 10, the IMF is unconvinced the calm will last. The IMF's decision, as per reports, is directly linked Pakistan's conflict posture that will risk in budget execution, foreign reserves and reform timelines. Notably, the IMF has flagged Pakistan's ballooning defence expenditure, which is projected to exceed Rs 2.5 trillion for 2025-26, as a key vulnerability. That is an 18% hike driven by military tensions, even as the country struggles to provide electricity and curb inflation. Behind the scenes, the reports suggest, IMF staff were alarmed by the Pakistan's government's plans to shift funds away from development to defence after the flare-up with India. They view it as Pakistan's economic indiscipline. They say it is about choices Pakistan is making in the face of a crisis. Following are the new IMF-imposed reforms – Parliament must pass the upcoming Rs 17.6 trillion federal budget – with strict adherence to IMF benchmarks; Its provinces must enforce agricultural income taxes long evaded by feudal power brokers; and a long-awaited governance roadmap must finally be published. Long a black hole of subsidies and inefficiencies, the power sector also faces tighter scrutiny. Tariffs are set to be rebased annually, gas prices adjusted bi-annually and legal frameworks tightened around captive power and surcharges. The Rs 3.21 per unit cap on electricity debt servicing will be lifted – a move likely to raise bills for already-struggling households. But perhaps most symbolic of the IMF's micromanagement is its directive on used cars: Pakistan must ease import restrictions, extending allowances from three to five years by July 2025. It's a small move with big implications for middle-class consumers and the import-heavy auto sector. For Prime Minister Shehbaz Sharif, the squeeze is real. With falling reserves, investor skepticism and now increasing external conditions tied to regional behaviour, his government walks a tightrope. Any misstep – military or economic – could cost Pakistan dearly in the court of international lenders. As global attention focuses on Pakistan's next move, one truth is becoming harder to ignore – the country's economy is no longer a matter of balance sheets and budgets, it is now a geopolitical bargaining chip. And the IMF is calling the shots.
