Analysis by Faisal Shaji
Head of Research Standard Capital
· The finance minister of newly elected government is unveiling FY14 budget with probable outlay of Rs 3.475trn.
· The budget deficit is expected to be Rs 1.6trn which is 6.2% of GDP.
· FBR collection is estimated at 2.475trn
· Rs.150bn is expected to be earmarked for power sector woes.
· The defence expenditure is expected to be lower i.e. Rs 627bn.
· A major portion of outlay of Rs 3.457trn will be earmarked for interest payment i.e. Rs 1.15trn.
· Government is set to allocate Rs 540bn for PSDP which is 50% higher than last year.
· The financing of budget deficit would be through domestic sources such as Rs 892bn through bank borrowing and Rs486bn through non- banking channels.
· As for the revenue side only Rs 81bn is expected through privatization proceeds which is very less to ward off budget deficit.
· The GDP growth is envisaged at 4.4% with 3.8% contribution from agriculture sector 4.5% from manufacturing and 4.6% from services.
· The current account deficit is estimated at 1.1% of GDP.
· The finance minister has given an olive branch by saying that chronic circular debt of Rs 503bn shall be repaid/ resolved in 60 days. But electricity prices would be increased in phase wise manor by Rs.6/ unit.
· At present economy has grown only by 3% wherein agriculture has grown by 3.3% and industries at abysmally low of 2.9%.
· Finance minister said that Pakistan has lost $100bn in war against terror.
· The tax to GDP ratio is shamefully low at 9%.
· Foreign exchange reserve with SBP is reduced to $6bn which is an alarming situation.
· Now the next budget deficit target is envisaged at 4.7%.
We believe power sector to benefit from warding off circular debt amount and other energy chain companies would also normalize production capacities. We like entire energy chain companies including HUBC and PSO.