Dar unveils Rs 3.591t federal budget

Finance Minister Senator Ishaq Dar on Wednesday unveiled the federal budget for the year 2013-14 with an outlay of Rs 3.591 trillion, a projected gross domestic product (GDP) growth of 4.8 percent, a fiscal deficit of 8 percent and a target to curtail inflation at 9.5 percent.
Irrespective of tall claims made during election campaigns by the Pakistan Muslim League-Nawaz (PML-N) leadership, Dar told lawmakers in the National Assembly (NA) during his budget speech that the government was presenting a business-friendly budget, but hastened to add that a one percent rise in general sales tax (GST) was also being imposed, taking it from a current16 percent to 17 percent.
The government also allocated Rs 1.1 trillion for Public Sector Development Program (PSDP) of the federal and provincial governments with the federal government bagging Rs 540 billion and the provincial governments getting a total of Rs 615 billion.
The landmark budget, as Information Minister Pervez Rashid termed it while talking to reporters, also pushed the revenue target to Rs 2.475 trillion while Rs 75 billion was allocated for Income Support Fund. Even though pensions were increased by 10 percent, no raise in salaries of civil servants was made.
In stark contrast to past budget sessions, when the PML-N used to hold protest demonstrations, the Pakistan People’s Party (PPP), Pakistan Tehreek-e-Insaf (PTI), Mutahidda Qaumi Movement (MQM) and other smaller parties expressed resolute responsibility by keeping pin-drop silence while the budget was being announced.
The only noise at times was created by desk-thumping by PML-N lawmakers while the finance minister was delivering his speech.
The budget envisages a record allocation of Rs1.155 trillion for PSDP with an aim to stimulate the economy which presently depicts a bleak picture. A massive chunk of Rs 225 billion will be spent on the energy sector.
The government allocated Rs 627 billion for defense as compared to Rs 570 billion in the preceding year. As an austerity measure, Dar proposed to bring down expenditures of Prime Minister (PM) House by 45 percent, which he claimed will result in national savings of Rs 40 billion. There will be a complete ban on purchase of new cars for PM’s office but the ban will not be applicable for law enforcement agencies and other inevitable requirements, he added.
Tax exemption for luxury cars was proposed to be abolished while 1,200 cc hybrid cars are being exempted from import duty. A concession of 50 percent has been proposed for 1,200 to1,800 cc cars while Rs 20,000 in tax will be applicable on purchase of 1,000 cc cars.
A withholding tax on wedding ceremonies being held at commercial venues has also been proposed along with taxes on foreign movies and dramas. Taxes on cigarettes, pan and chaliya have also been increased.
GDP growth rate target for 2013-14 has been projected at 4.8 percent and revenue target at Rs 2.475 trillion. The non-tax income will be Rs 800 billion. The government has also allocated Rs 185 billion for power subsidy.
Dar maintained that the circular debt amounting to more than Rs 500 billion will be eliminated in 60 days. The budget also proposes to abolish the ministers’ discretionary funds. The government will initiate a ‘Prime Minister Laptop scheme’ in the days to come, he added.
Customs’ duty on water filtration equipment has been decreased while the people’s works program has been renamed as ‘Tamire Watan Pakistan program’. Dar further said auction for 3G technology will be held soon and borrowing from the State Bank of Pakistan (SBP) will be reduced.
The rate of inflation will be kept in single digits and a 9.5 percent target has been set for the year. He said the government inherited a battered economy and the average rate of inflation stood at 13 percent in last five years.
The minister said Rs 926 billion has been allocated for debt servicing and that minimum pension has been raised from Rs 3,000 to Rs 5,000 while Rs 225 billion has been reserved for development in the energy sector.
Dar said by focusing on economic growth and resolving the energy crisis, the government would be reducing fiscal deficit and tackling public debt for putting the economy back on track. He vowed improvement in tax collections and reduction in non-development expenditures.
He stated that GDP growth had remained below three percent in the recent past and when compared to a population growth of about two percent, real growth had been just one percent.
He said the government would fulfill all promises made during the election campaign, saying that the budget for the fiscal year 2013-14 was a manifestation of those pledges.
He said the first priority of the government would be to make the country self-reliant and the government would not involve in over-spending like the previous government, causing massive damage to the economy.
He was of the view that doing business was not the job of the government so it would make the private sector a center of economic activity and introduce reforms in the market system. He said the government would not indulge in business and would only intervene in sectors where the private sector has a limitation. These, he said, included sectors such as education, health, population and infrastructure development.
He said the government would also improve infrastructure, particularly in the energy sector.
Dar said the government introduced the concept of a medium-term plan for improving the economy.
According to Medium Term Macroeconomic Framework (MTMF), by 2015-16, GDP growth rate would increase to 7 percent, inflation will be brought down to single digits, investment to GDP will be increased to 20 percent and fiscal deficit will be reduced to 4 percent.
While describing salient features of PSDP, Dar said Pakistan had abundant water resources and it inherited a countrywide system of irrigation and dams at the time of partition which was followed by building of Mangla and Tarbela dams which are the lifeline of the economy.
The government has allocated Rs 59 billion for water projects including expansion of Mangla and Tarbela dams, Diamer-Bhasha Dam, Gomal Zam Dam and various other dams and irrigation projects, he added.
The minister informed the House that Rs 225 billion has been allocated for the energy sector, Rs 160 billion via PSDP and Rs 65 billion would be generated by Gencos and Discos.
Funds have also been allocated for Neelum Jhelum Dam, Thar coal project, Chashma nuclear power plant, modernisation of power stations and building of grid stations, he added.
The finance minister said the federal government would provide Rs 21 billion to the health sector for programs of immunisation, mother and child care, family planning, reduction of blindness, and other national health objectives.
The federal government, he said, would also assist provinces in population welfare projects.
Ishaq Dar expressed disappointment that during the last five years, investment in industrial sector decreased and the sector grew, on average, by 1.8 percent only.
The industrial sector is the mainstay of the economy and the engine for economic growth and job creation, he said, adding that laws would be improved to make export processing zones more attractive for investors and the special industrial zone in Gwadar would be given more incentives.
Terming human resource development vital for the national economy, he said total allocations for development of human capital would be Rs 57 billion and Rs18 billion was allocated for higher education.
According to a study, number of students in higher education will increase from one million to 1.2 million and 6,200 scholarships would be provided to bright students. Referring to the building of unprecedented Islamabad-Lahore Motorway by the PML-N government in the late 90s, the finance minister said Rs 63 billion has been allocated for building of highways and roads.
He said roads in far flung areas and link roads connecting farms to markets will be built to create economic opportunities and alleviate poverty.
“One of the government’s main strategic goal would be to link Gwadar Port to the northern areas, making Gwadar a gateway to Central Asia and access point for markets of Europe,” the minister said.
He said Rs 31 billion was allocated for railways to improve the mode of transportation, which he said was a remarkable institution at the time of partition, but was now in shambles. “Destruction of railways is not acceptable for us,” he remarked.
He said governments around the world were making investments in railway as it was considered environment friendly but in Pakistan, these affairs were in a bad state due to lack of resources, falling revenues and absence of double tracks.
The minister said the state of affairs was so bad that the government allocated Rs 34 billion for salaries and pensions of railways employees every year.
“Pakistan Railways is not a poor department and it connects far flung areas of the country, but there is a need to considerably improve its working,” he added.
He said railways employees were disappointed but the real problem was not one of resources, adding that things could be changed through leadership and vision.