Pakistan’s yearly budget announcement on June 12 could give an impetus to the domestic steel, construction and sectors, feel the steelmakers in the country. The budget, however, had very little in store for the auto sector. The Asian country presented its budget for the fiscal year 2020-2021 ending in June, outlaying a total of PKR7,295bn ($44bn), down by 11pc from PKR8,238bn last year.
Davis learned from sources that the country has abolished an additional customs duty (ACD) of 2pc levied earlier on steel scrap imports. A 5.5pc tax on raw material arriving at ports has been lowered to 2pc which could benefit importers in the near term.
These reductions will save around PKR1,200/mt for shredded scrap importers and around PKR4,000/mt for re-rollers in taxes shares a trader. The move, he shares, will take the edge off from the depreciation of the Pakistani currency for scrap importers. The nation’s currency was valued at PKR164.50 against $1 on June 14 from PKR155.25 in November end.
Importers are also likely to benefit from a reduction in regulatory duty from 12.5pc to 6pc on hot-rolled coils (HRC) and from 17.5pc to 11pc on iron and steel under PCT codes 7208 and 7225 & 7226, respectively.
Around 20,000 items under raw materials have been fully exempted from the customs duty. Their HS codes, however, are yet to be confirmed.
For the construction sector, a subsidy of PKR30bn has been earmarked for the Naya Pakistan Housing Authority (NPHA) which will focus on low- cost housing. This could drive the demand for construction raw material, including steel in the coming days.
For automobiles, a 7.5pc and 25pc FED has been levied on double cabin two-axle pick-up vehicles manufactured locally and those imported, respectively.
The country has set a GDP growth target at 2.1pc for FY21 against the provisional growth of -0.38pc in FY20. The drivers for FY21 growth will be a 2.8pc growth in agriculture, 0.1pc growth in industry and 2.6pc growth in services. With no new taxes introduced in this budget, the government refers to it as a “Tax-Free Budget”. Market participants believe the country’s economy wouldn’t have to face immediate inflationary pressure with this budget.
Pakistan estimates its total revenue for 2020-21 to be at PKR6,573bn, an increase of 19pc over the prior year’s budget estimates.