Cabinet approves budget strategy for 2015-16

• PM stresses budget should focus on welfare, prosperity of common people
• Finance minister promises that budget will better overall economy, generate employment
• Says tax collection increased by 12.8pc with addition of 200,000 taxpayers in last two years

The Federal Cabinet which met under the chairmanship of Prime Minister Nawaz Sharif at the Prime Minister’s Office on Tuesday approved the budget strategy for 2015-16.

Addressing on the occasion, the prime minister said that the upcoming budget should focus on the welfare of common people so that the process of transferring the fruits of growing economic stability of the country is further strengthened.

Sharif appreciated the fact that key economic indicators, which had hit rock bottom two years ago have improved remarkably. He added that out-of-box solutions must be explored in designing tax proposals for broadening the base and for increasing revenues. He said that a system should be devised which results in reduction of corruption and encourage voluntary compliance from taxpayers.

The prime minister congratulated the finance minister and his team on achieving high growth and economic stability in the country. He lauded the efforts of the expatriate Pakistanis for sending their remittances to Pakistan. He directed that steps should be taken to facilitate overseas Pakistanis to send remittances through banking channels.

Moreover, the prime minister expressed satisfaction that the reduction in policy rate from 8 per cent to 7 per cent will help encourage investment in the country. The prime minister also directed the Ministry of Commerce to gear up efforts to increase exports.

The prime minister directed that the overall prosperity of the masses should be the top priority in the next budget and said that the current trend of GDP growth should continue to increase the employment opportunities for the youth. He said that we must address the issues of agriculture and manufacturing sectors to boost growth and work day in and day out to further strengthen country’s economy.

The cabinet after detailed discussion gave approval to budget strategy paper 2015-16. The meeting took note that while benefits of mega projects in the pipeline will start unfolding in next five to ten years, immediate measures were needed to encourage investment in the private sector.

Earlier, Finance Minister Senator Ishaq Dar and Finance Division Secretary Dr Waqar Masood Khan gave a detailed presentation to the cabinet members on the strategy being followed in formulation of proposals for the next budget.

The finance minister said that the government was concentrating on major policy initiatives aimed at consolidating stability and spurring growth.

“When we took the reins of the government, the economy was weak and fragile and the growth rate averaged less than 3 per cent and inflation had averaged around 12 per cent. The circular debt of Rs 503 billion was crippling the power sector and economy. The fiscal deficit was hovering around 8.8 per cent and there were predictions of default. However due to economic policies of the government, the economy is now performing well,” said Dar, adding that in the medium term the plan was to gradually grow GDP to around 7 per cent and contain inflation to less than 6 per cent.

The finance minister said the government intended to bring down fiscal deficit to 4 per cent and increase foreign exchange reserves to US $ 20 billion. “We have also set the target of increasing tax-GDP Ratio to 13 per cent and increase exports to US $ 32 billion,” he said

He briefed the cabinet that the Federal Board of Revenue (FBR)’s tax collection had increased from Rs 1,946 billion in 2012-13 to Rs 2,266 billion in 2013-14 and during the last 10 months the tax collection has reached Rs 1,968 billion with an increase of 12.8 per cent from the corresponding period of last financial year. There has been an increase of 200,000 taxpayers in the last two years, he informed.

Moreover, the finance minister said that in the first year the government achieved GDP growth rate of 4.02 per cent and during the current year it will achieve 4.24 per cent, which is highest in the last seven years.

“We have also brought down budget deficit from 8.2 per cent in 2012-13 to 5 per cent during the current year. Overseas remittances have also reached US $ 14.8 billion during the period of July- April of the current fiscal year, showing a growth of 16.06 per cent,” he said, adding that the foreign exchange reserves also reached to US $ 17.5 billion on May 25.

Dar said that the budget will bring encouraging incentives for the betterment of the overall economy and generate employment opportunities.

“We have tried to incorporate the suggestions from different sections of the economy in this budget and this is the most appropriate time to boost investment in areas which have the potential to grow at a high rate when the interest rates are historically low and we have more space available for encouraging development works.”