Macro Bites

Macro Bite # 76

3 min read
If you’re looking to buy a laptop, run a beauty salon, or hire an Ertugrul actor for your TV ad, then 2022 isn’t off to a great start for you. That’s because the mini-budget that has just been presented by the government is levying new taxes on all the above-mentioned activities and more.

The Finance (Supplementary) Bill 2021 calls for a 17% sales tax on over 150 items, to raise nearly PKR 350 billion in government revenue. The imposition of new taxes isn’t much of a surprise, since it was a key condition for the resumption of IMF assistance. However, some of the fields where sales tax is being levied or raised will be particularly detrimental to ordinary citizens.

Seeds, tools and chemicals in the agriculture sector will now face a 17% GST, while a 10% tax will be imposed on flour mills, both of which are likely to hurt consumers in the form of higher prices for basic staples and vegetables. Imported laptops and phones will be subject to a 5% and 17% levy respectively, which means two crucial components of the global ICT economy just got a lot more expensive. The tax on laptops will particularly hurt, as their prices have already escalated in recent years due to currency depreciation, compounded by a dearth of locally manufactured laptops. Poultry, imported infant formula, and dairy products are likely to get more expensive too, not promising for a country with already poor nutritional outcomes.

WEEKLY DATA WATCH


KSE-100 rose this week, as the mini-budget and SBP autonomy bill virtually confirmed the revival of IMF assistance. PKR appreciated slightly this week, due to suspected intervention by the State Bank in the currency market. Local gold prices rose marginally this week.

The annual change in Sensitive Price Index rose to 20.05% vs. 19.83% last week. The poorest of the country (Q1) were disproportionately affected with a change of 21.92% vs. 20.10% for Q5. On a weekly basis, prices fell for all quintiles by 0.50%.

Increase in prices of Chicken (+2.16%), Eggs (+1.45%) and Sugar (+0.64%) contributed to weekly inflation. A fall in the price of Tomatoes (-30.9%), Chilli Powder (-5.78%) and Potatoes (-7.92%) helped moderate inflation this week.

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What Else We’re Reading (Local)

  • Airlift’s valuation may soon hit USD 1 billion, but is the company as successful as it seems? (Profit)
  • Has the Government of Pakistan been able to make any progress on its bold promise of 5 million affordable homes by 2023? (Business Recorder)

What Else We’re Reading (International)

  • The Indian stock market posted its biggest annual gains since 2017, in anticipation of a post-Covid economic revival. (Bloomberg)
  • Afghanistan’s former president, Ashraf Ghani, gave his first broadcast interview since fleeing Kabul in August. (WSJ)

Asad Pabani

Journalist, researcher and documentary filmmaker. Prior works featured in Dawn, Soch Videos and Pioneers Post.

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