AKD Securities Limited – Off the Analyst’s Desk

Karachi, September 18, 2018 (PPI-OT): Finance Supplementary (Amendment) Bill 2018 – Initial Impressions

The GoP has announced its mini budget today, rationalizing the earlier announced FY19 budget by PML-N. While balanced on focus items, outcome remains a question mark, particularly with respect to utilization of technology to increase revenue. Key steps announced in the budget include:

Revenue measures to raise an additional PkR183bn revenue with PkR92bn from administrative measures while rest would be primarily earned through RD on imports.

PSDP allocation of PkR725bn (down 9% from Budget’19 allocation)

Withdrawal of duty RD on inputs for export oriented industries.

Removal of restriction on non-filers on purchase of cars and property.

Petroleum development levy collection reverted to PkR200bn from previously budgeted PkR300bn.

PkR6-7bn subsidy on urea (production as well as imports)

Rate of WHT on non-filers for banking transactions has been once again reinstated at 0.6% (previously 0.4%).

Insurance cover of PkR540k per family via Sehat Insaf Card to people in FATA and Islamabad territories.

Release of PkR4.5bn for the completion of housing schemes for underprivileged.

Minimum pension increased by 10% for EOBI pensioners.

Increased tax on cigarettes, import of luxury items and cell phones.

Duty doubled on import of +1800cc cars

Salary tax rates maintained on salary of PkR200k/month or below

The budget speech should result in a relief rally at the PSX where market had been weighed down by broader expectation of a difficult budget announcement. That said, beyond the immediate rally, we see imminent macro pressures particularly fiscal funding and its repercussions to restrict upside.

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AKD Securities Limited – Off the Analyst’s Desk

Karachi, September 18, 2018 (PPI-OT): Finance Supplementary (Amendment) Bill 2018 – Initial Impressions

The GoP has announced its mini budget today, rationalizing the earlier announced FY19 budget by PML-N. While balanced on focus items, outcome remains a question mark, particularly with respect to utilization of technology to increase revenue. Key steps announced in the budget include:

Revenue measures to raise an additional PkR183bn revenue with PkR92bn from administrative measures while rest would be primarily earned through RD on imports.

PSDP allocation of PkR725bn (down 9% from Budget’19 allocation)

Withdrawal of duty RD on inputs for export oriented industries.

Removal of restriction on non-filers on purchase of cars and property.

Petroleum development levy collection reverted to PkR200bn from previously budgeted PkR300bn.

PkR6-7bn subsidy on urea (production as well as imports)

Rate of WHT on non-filers for banking transactions has been once again reinstated at 0.6% (previously 0.4%).

Insurance cover of PkR540k per family via Sehat Insaf Card to people in FATA and Islamabad territories.

Release of PkR4.5bn for the completion of housing schemes for underprivileged.

Minimum pension increased by 10% for EOBI pensioners.

Increased tax on cigarettes, import of luxury items and cell phones.

Duty doubled on import of +1800cc cars

Salary tax rates maintained on salary of PkR200k/month or below

The budget speech should result in a relief rally at the PSX where market had been weighed down by broader expectation of a difficult budget announcement. That said, beyond the immediate rally, we see imminent macro pressures particularly fiscal funding and its repercussions to restrict upside.

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