Experts see limited impact of budget FY25 on poverty reduction, job creation

ISLAMABAD   -   The newly unveiled FY25 budget has sparked a mix of reactions, with a significant number of experts expressing concerns over its potential effectiveness in addressing job creation and poverty reduction. While the budget introduces measures aimed at economic stabilization, many argue that it falls short of offering tangible solutions for millions of jobless individuals and fails to make a substantial dent in poverty levels, reported a news website.

The budget outlines several fiscal initiatives. Notably, the government has increased the allocation for the Benazir Income Support Program (BISP) to Rs592 billion, a substantial rise from the previous Rs466 billion. While this move is expected to provide temporary relief to the poorest households, experts warn that it does not equate to sustainable poverty alleviation. Senior economist Dr. Anila Siddique said, “Increasing BISP allocations might prevent starvation in the short term, but it won’t lift the families above the poverty line. Long-term solutions require more than cash transfers; they need investments in education and job creation.” Currently, only a fraction of BISP beneficiaries, around 9.4 million as of May 2024, receive funding for their children’s education. This is a long-term investment that may yield results in future, but its immediate impact on poverty reduction is minimal.

“Educating children is crucial, but we are looking at a long horizon before these children enter the workforce and start earning a sustainable income meanwhile, their parents remain dependent on the government aid,” noted Dr Anila. Further complicating the situation is the budget’s tax policies. The wholesale withdrawal of tax exemptions has increased the input costs for many industries, which, coupled with the high rate of civil servants’ salary increases, is likely to exert additional pressure on the private sector wages. This could potentially lead to higher operating costs and discourage new hiring. “The industries are already struggling with high operating costs. Additional burden from increased taxes and wages might force businesses to cut back on hiring or even lay off workers to maintain profitability.” Hamid Haroon, former economist at the World Bank, said the FY25 budget set a GDP growth target of 3.5% with an average inflation rate of 12%. However, the high targets for tax revenue collection, including an indirect tax target of Rs7.46 trillion, raise concerns about feasibility of these goals.

He said high tax targets in an inflationary environment could stifle economic activity, making it harder to achieve the growth targets. Hence, a more balanced approach is needed that considers the current economic realities and prioritizes sustainable growth.

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