ISLAMABAD, June 3 (APP): With economy showing its six-year best performance during the outgoing financial year 2013-14, the government on Wednesday unveiled Rs 4,302 billion Federal Budget for 2014-15, focusing on growth acceleration, reduction in fiscal deficit, raising tax revenues, arresting inflationary pressure and measures to overcome energy problems. Finance Minister Senator Mohammad Ishaq Dar while delivering budget speech at the National Assembly here also announced measures for poverty alleviation, revival of the privatization programme, promotion of exports, jobs creation, and public debt management.
He said that the economy had been performing well. “We have not only restored the financial health of the economy, but have also put it firmly on the path of stability and growth trajectory… Pakistan today is much more strong, healthy and prosperous than where it was one year before.
“However, we need not be complacent with achievements so far and have to continue to strive and move forward, so that we achieve the status and stature among the nation,” he added.
Talking about the budget outlay, Dar said the gross revenue receipts of the Federal Government for 2014-15 were estimated at Rs 3,945 billion compared to the revised figures of Rs 3,597 billion for 2013-14, showing an increase of 10%.
“We have set an ambitious target for tax collections, as without collecting more taxes we cannot hope to increase development spending that is crucial for economic growth,” he remarked.
The share of provincial governments out of these taxes would be Rs 1,720 billion as compared to Rs.1,413 billion revised estimates for 2013-14, showing an increase of about 22%, he added.
Giving details about the measures to be taken during the fiscal year 2014- 15, the minister said the government would continue to reduce the fiscal deficit still further from 5.8% of GDP to 4.9% of GDP through a combination of better tax collection, fiscal discipline and tight expenditure policy.
He said the government had successfully warded off the inflationary pressures that were inevitable due to difficult decisions taken in the first budget.
The inflation had been kept firmly in the single digit territory, while the government provided Rs 20 billion in subsidy to avoid passing on the petroleum price increases impact, he added.
The minister said the government had focused on resolving energy crisis as it was attaching priority to 4Es i.e. economy, energy, education and extremism.
He said that the government inherited an energy sector that was at the brink of total collapse, load-shedding was running at 16 hours in urban and 20 hours in rural areas, with a gigantic circular debt of more than Rs 500 billion.
In addition, critical projects such as Neelum-Jehlum and Nandipur were delayed or nearly abandoned due to sheer negligence, he noted.
He said that the government settled the circular debt and added some 1700 MW in the national grid, while the government was working on a comprehensive programme to add more power, improve energy mix to reduce the need for tariff increase, attract private sector investment and invest in transmission and distribution system to improve the efficiency of the entire power sector.
Talking about the exports promotion, the minister said the budget would be laying the basic foundations for a major thrust on export promotion.
He said that there was a need to create jobs to absorb the rising number of young men and women entering the job market. Much of this activity had to take place in the private sector, “as our primary job is to provide an enabling environment for the private sector to undertake investments.”
He said the 3G-4G technologies would spur growth not only in rolling out this facility but enabling other users to improve productivity and efficiency in their operations, besides creating some 900,000 jobs in the next four years.
The Finance Minister said that there would be a significant acceleration in investment in the country in months and years ahead. “For the first time in recent history of the country, we are investing the fullest available development outlay of Rs 425 billion,” he added.
He said the government had taken immediate corrective measures to manage its public debt portfolio effectively and introduced a Medium Term Debt Management Strategy (2014-18), besides taking steps to broaden the investors’ base.
He said reaching out to the poor was a major policy objective of the government. “The main intervention we have designed for this purpose is the National Income Support Programme (NISP), which consists of Prime Minister’s Youth Program and Benazir Income Support Programme.”
He said the BISP spendings had been increased from Rs 34 billion in 2008 to Rs 75 billion. Until 2012-13, the cash-transfer programme was reaching out to 4.1 million families, which would have to be taken to 4.8 million during the current year.
“Next year we will be increasing the number of beneficiary families to 5.3 million, showing an increase of 29% since 2012-13,” he added.
The monthly stipend under the programme, he said, was initially set at Rs 1000, which continued for five years, “until we enhanced by 20% last year to Rs 1200”.
This year, he added, “we announce another increase of 25% by raising the monthly stipend to Rs 1500. Therefore, in the last two years, we have raised the monthly stipend by 50%”.
In addition, Rs 21 billion has been provided to fund the special schemes under the Prime Minister’s youth programme, he said.
The minister said a high-powered task force would be established to undertake a detailed review as a large number of social safety-net programmes were scattered across different ministries and departments to strengthen these programmes.
He said the government was making adequate provisions in the budget for the development and promotion of information and communication technology.
The minister also elaborated on medium-term macroeconomic framework, which envisaged GDP growth to gradually rise to 7.1% by FY 2016-17. Inflation would be maintained in single digit throughout the medium term, investment to GDP ratio would rise to 20% at the end of medium term and fiscal deficit to be brought to down to 4% of GDP by 2015-16.
In addition, tax to GDP ratio would be increased 13% by the year 2016-17 while Pakistan’s foreign exchange reserves would be increased to more than $22 billion at the end of 2016-17.
He said the most important sub-sector claiming resources in development plan was the water sector, where the government was investing Rs 42 billion for projects whereas a sum of Rs 205 billion would be invested in the power sector.
He said the government was also focussing on regional connectivity and for which there was a need to develop state of the art rail, road and energy infrastructure.
He said a sizeable allocation of Rs 20 billion had been made for 188 projects of the Higher Education Commission, which would support development plans of different universities all over the country.
He said on the current side also a hefty allocation of Rs 43 billion was made for the HEC, thus a combined outlay of Rs 63 billion would be made for higher education.
He said the current budget allocated Rs 26.8 billion for the health sector programmes with special focus on polio eradication.
On agriculture front, the minister announced many schemes for the agriculture development, including Credit Guarantee Scheme for Small and Marginalized Farmers which would benefit 300,000 farmers, with Rs 30 billion disbursements and Reimbursement of Crop Loan Insurance Scheme (CLIS) Premium.
He also announced Livestock Insurance Scheme, reduction in sales taxes on tractors, establishment of commodity warehouses / receipt financing mechanism amd agriculture credit upto Rs 500 billion.
Ishaq Dar said that for overcoming the housing problems, Low Cost Housing Guarantee Scheme, revival and restructuring of HBFC and Prime Minister’s Low Cost Housing Scheme would be initiated.
Talking about the taxation proposals, the minister laid taxation proposals before the Parliament. These included that “the share of direct taxes in overall taxes shall be increased; the incidence of tax measures will be on those outside the tax net and those already in the net will be protected; the non-compliant taxpayers will have to bear a cost of non-compliance, which will raise their cost of doing business; the tax regime will be simplified and inequities created by SRO based concessions and distortionary provisions will be removed through a phased plan.” In addition, he said, the tax revenues would be increased so as to improve the tax to GDP ratio while without compromising the basic character of simplified and distortion-free tax regime, appropriate incentives will be provided for facilitating foreign investment in the country, development of less developed areas, agriculture sector etc.
He said the Prime Minister had approved recommendation given by the committee with representative from trade and industry, to phase out the concessions in taxes over a period of three years.
He said the thrust of the government was to promote growth and equity in the economy and proposed tax measures were another step in this direction.
“We believe that the engine of growth has to be the private entrepreneurship and all measures are being taken to promote it across the board i.e. from SMEs to the large industrial undertakings,” he added.
The Finance Minister also highlighted relief measures introduced through the budget 2014-15 which include relief for capital market, investment incentives for Foreign Direct Investment, incentive for joint ventures between companies and AOPs, incentives for agriculture, reduction in the Corporate Tax rate, reduction in the Withholding Tax on marriages and functions, relief for the disabled persons, reduction of taxes on telecommunication sector and removal of income support levy.
The minister also announced Advance Tax on First and Business Class Airline Tickets, Advance Tax on Purchase of Immovable Property, Advance Tax on Electricity Bills over Rs.100,000 per month, Higher Advance Tax on Interest Income and Dividends, Higher Advance Tax on Cash Withdrawal by Non-filers, Higher Advance Tax on Car Registration by Non-filers, Removal of Inequities, Taxation of Accounting Income, Removal of Tax Loopholes, Tax Rates for Services, Changes in Final Tax Regime, Application of Tax on Foreign Institutional Investors and Mandatory Requirement of NTN The minister also announced a 10% ad-hoc relief for all federal government employees with effect from July 1, 2014 , a 10% increase for employees in Grade-1 to 15 drawing fixed medical allowance of Rs 1000 per month and 5% increase in conveyance allowance to those employees working in Grade-1 to 15.
In addition, he announced that the post of superintendent was being upgraded from Grade-16 to Grade-17 while one pre-mature increment would be allowed to employees of Grade-1 to 4. For welfare of the labour class, and in line with the increase in pay of government employees, the minimum wage rate was also being increased from Rs 10,000 to Rs 11,000, he added.