On Monday, Saifuddin Sheikh, Executive Director of Pakistan Economy Watch (PEW), said that the budget attempts to develop the economy through borrowing, which is not a good option. He said that almost all the tax revenue will be spent on debt servicing while borrowing will be the only option to run the government. He added that imposing withholding tax on cash withdrawals from banks would be a disastrous decision that has damaged the economy.
In a statement issued today, Saifuddin Sheikh said that imposing a tax on bank withdrawals will decrease bank deposits, increase money in circulation, and the government will have difficulty borrowing from banks. He added that the central bank would have to print excess currency and hike interest rates, increasing inflation.
He noted that an increase in salaries and pensions would also increase inflation; in these circumstances, the government’s estimate of 21% inflation would prove wrong.
The super tax will affect the investment, production, profit and employment in the industrial sector, he said, adding that the controversial measures will reduce the size of the documented economy while the undocumented economy will grow.
Taxes have not been imposed on the retail, wholesale and agriculture sectors as expected, so black money will be directed towards those sectors that will escalate inflation. Saifuddin Sheikh said that the population growth rate in the country is the highest in the world, and the people’s real income has stayed the same in the last five years.
The income of the masses is constantly decreasing, and the public will not benefit from the current budget, but on the contrary, their income will decrease.