Federal Budget 2016-17: Govt eyes a handful yield by term end

  • Dar presents federal budget for 2016-17 with a total outlay of Rs 4.8 trillion, sets growth target at 5.7 per cent
  • Announces 10 per cent ad hoc relief allowance for public servants, employees, pensioners and workers
  • Khursheed Shah criticises govt for not announcing National Finance Commission Award (NFC) for two years


Federal Minister for Finance Ishaq Dar presented the budget for the upcoming fiscal year 2016-17 on Friday, with an outlay of Rs 4.8 trillion – a 7.3 per cent increase over the previous year – and a growth target set at 5.7 per cent.

With Dar’s admission that the agriculture sector’s negative growth of -0.19pc had dragged the economy down, the federal government has offered some incentives to the agriculture and manufacturing sectors. However, these incentives are restricted as the government is under an International Monetary Fund (IMF) programme and has to discipline its subsidies agenda accordingly.

The financial plan also includes revenue measures of Rs 3.6 trillion, while a sum of Rs 860 billion has been earmarked for defence, and subsidies have been limited to Rs 140.6 billion due to the conditions imposed by international financial institutions.


The GDP (gross domestic product) growth rate has been fixed at 5.7 per cent for the next fiscal year, and the fiscal deficit, which was 8.2 per cent of the GDP in the FY 2012-13, is being brought down to 4.3 per cent of the GDP in the FY 2015-16 ending June 30. The GDP growth this year, 2016-17, is assessed at 4.7 per cent. Besides, Rs 100 billion have been allocated for rehabilitation of the temporarily displaced persons (TDPs).


For public servants, employees, pensioners and workers, the government has announced 10 per cent ad hoc relief allowance on existing basic pay of all federal government employees with effect from July 1.

Also, the ad-hoc increases of 2013 and 2014 will be merged into the pay scales of the employees. Besides, special area compensatory allowance at the uniform rate of Rs 300 per month has been announced from Rs 50-210 for civil armed forces posted in border areas.


Nevertheless, the budget speech was delivered in an enabling environment as opposition benches did not interrupt the finance minister. The non-serious attitude of both the treasury and opposition could only be judged from the fact that only around 60 per cent lawmakers attended the session. Pakistan Tehreek-e-Insaf (PTI) Chairman Imran Khan did not turn up and the party was represented by his deputy Shah Mahmood Qureshi.

During the budget speech, majority of lawmakers from both sides of the political divide remained busy in chatting. Even the speaker did not direct the House to be in order. As some lawmakers felt it appropriate to move to the back benches to have chat with their colleagues, the House looked more of a chat club.

Both Opposition Leader Khursheed Shah and PTI leader Shah Mehmood Qureshi kept exchanging notes over the budget while other exceptions were Dr Farooq Sattar, Asad Umar and Mahmood Khan Achakzai.

Interior Minister Chaudhry Nisar Ali Khan and Awami Muslim League chief Sheikh Rashid looked like two isolated souls, as both the gentlemen kept idle throughout the session. Nisar did not even bother to join his treasury colleagues who at times would return to desk-thumping whenever they had time out of their chit-chat.

Once during the session, Water and Power Minister Khawaja Asif went up to Khursheed Shah and whispered in his ears.

Although Dar looked comfortable and composed during his speech despite being surrounded by lawmakers who were constantly whispering, he had to intervene and ask his own colleagues to stop talking as “the budget carried matters of public interests”.


In an unprecedented move, before the National Assembly speaker would give the floor to the finance minister for his budget speech, Opposition Leader Khursheed Shah raised a question on a point of order which was unprecedented in the parliamentary history. The speaker however gave the floor to Shah who took the government to task for presenting an anti-poor and pro-rich budget.

Shah said the government’s non-serious attitude could be gauged from the fact that the National Finance Award (NFC) had lapsed two years ago but the government was not ready to announce a fresh award, as it did not want to cater to the needs of the smaller federating units.

“This is injustice to smaller provinces. The NFC should have been announced before this budget. In my view, Panamagate should also be pointed out in the budget speech,” Shah said in a point-scoring bid.


Finance Minister Ishaq Dar said that despite financial hiccups, the government focused on relief measures for the masses, particularly the farming community, besides promoting investment for jobs creation and people-friendly policies for the socio-economic prosperity of the country.

The major thing in Dar’s budget speech was huge allocations for energy, infrastructure and human resource sectors, besides the priority accorded to China-Pakistan Economic Corridor (CPEC) projects.

Highlighting key economic indicators based on nine or 10 months data, Dar said the economic growth remained at 4.71 per cent during the last year which was the highest in the previous eight years. He said the performance could have improved had cotton crop not witnessed a loss of 28 per cent due to which national economic growth was reduced by 0.5 per cent.

The minister said the per capita income, which stood at $1,334 in FY 2012-13, was projected to increase to $1,561 in FY 2015 16, showing a growth of 17 per cent in dollar terms while it increased by 24 per cent in terms of rupee.

Dar pointed out that the average inflation was recorded at 2.82 per cent from July 2015-May 2016 – the lowest in a decade. He said that for the ongoing FY 2015-16, a target of Rs 3,104 billion had been fixed and considering the collections till date, it would be achieved.

Likewise, Dar said, tax revenues would be increased by 60 per cent – a historic and record increase, and added that the fiscal deficit this year was being brought down to 4.3 per cent of the GDP.

He said that the credit to private sector which was Rs 19 billion in FY 2012-13 had reached Rs 312 billion till May of the ongoing fiscal year.

Dar further said that the target for FBR revenues for the current FY 2015-16 had been fixed at Rs 3,104 billion and considering the collections to date, this target would also be achieved. “This would lead tax revenues to increase by 60 per cent,” he added.

The minister claimed that the tax to GDP ratio for FBR taxes which was 8.5 per cent in FY 2012-13 increased to 10.5 per cent in FY 2015-16.

Policy rate of the State Bank of Pakistan (SBP) was 9.5 per cent in May 2013 which has now been brought down to 5.75 per cent as of May 2016 which is the lowest rate in the past four decades.

“Exports were $20.5 billion during July-April FY 2012-13. Against this, exports for the same period in FY 2015-16 were recorded at $18.2 billion, showing a decline of 11 per cent,” the minister said as he cited the decline in global commodity prices as the main reason behind it.

He added that the imports were recorded at $33 billion during July-April FY 2012-13, compared to $32.7 billion for the same period in FY 2015-16. “Savings in the import bill of oil were nearly 40 per cent but we diverted these savings to increased imports of machinery and industrial raw materials, thus enabling more growth-oriented activities,” he further added.

Dar said that the imports of machinery over the last three years had increased by a cumulative growth of 40 per cent which was again an indication of rising investment in the economy.

“The Policy Rate of the SBP has been brought down to 5.75 per cent as of May 2016 which was the lowest during the last four decades. Imports were recorded at $ 32.7 billion during July-April FY 2015-16 while remittances have risen to $ 16 billion for the year 2015-16. For the current year, our target is $ 19 billion,” he added.

Dar said the exchange rate had shown remarkable stability over the past three years which was currently at Rs 104.7/$. About foreign exchange reserves, he said, the level of $ 21 billion had been achieved which was a historic record.

Dar said the government kept average current deficit to a very low level of one per cent of the GDP.

He said the Stock Exchange Index had surged to above 36,000 points, adding that in the same period, market capitalisation had increased to Rs 7.391 trillion.

“The merger of Lahore, Karachi and Islamabad stock exchanges which was pending for the past 15 years was completed this year. The reduction of fiscal deficit, raising tax revenues, continued focus on energy, exports promotion, poverty and unemployment, income support programme (BISP), development and promotion of the ICT sector are main elements of government’s budget strategy,” Dar noted.

About medium-term macroeconomic framework, the minister said the budget strategy was embedded in a three-year medium term macroeconomic framework, spanning over the period 2016-19. He said the increase in GDP growth, investment to GDP ratio, decrease in inflation, cut in fiscal deficit, increase in tax to GDP ratio besides enhancing foreign exchange reserves to $30 billion were the main features of the framework.

Regarding development plan, the finance minister said the government would focus on water, power, highways, railways and human development sectors which contribute most to economic development.

The minister said a special development programme had been devised for temporary displaced persons (TDPs) and security enhancement. “To cater to the needs of hosting, rehabilitation and return of TDPs and security enhancement, a special development programme of Rs 100 billion has been provided in the budget,” he said.

About China-Pakistan Economic Corridor (CPEC) projects, Dar said the $46 billion investment would result in improvement of economies of the four provinces and special areas of the country. He said that keeping in view the significant role Gwadar has to play for strengthening economy, the government has taken development of this area very seriously.

In order to strengthen exports and remove bottlenecks, the minister announced a number of measures to increase exports. “In a bid to further enhance the export competitiveness of the textile sector, measures including setting up of technology upgradation fund, duty-free import machinery, withdrawal of customs duty on manmade fibers, plant breeders right act have been announced,” he added.

Dar said that agriculture was the backbone of the country’s economy and keeping in view difficulties faced by this sector, special steps were being taken, including concessions of taxes and duties, reduction in prices of fertiliser, enhancement in the target of agriculture credit, reduction of cost of credit, credit guarantee scheme, concessional electricity tariff for agriculture tube-wells, concession of customs duty for dairy, livestock and poultry sectors; concessions of customs duty for fish farming, relief on cool chain machinery, exemption of sales tax on pesticides and exemption to silos.

As for industrial development, the minister said, special measures were being taken, including enhancing tax credit on employment generation, tax credit for making sales to registered persons, tax credit for balancing, modernisation and replacement of plant and machinery, tax credit for establishing new industry, tax credit for expansion of existing plant or new project, exemption on investment in green-field industrial undertakings, reduction in customs duty on raw materials and machinery, abolition of regulatory duty on bead wire and protection of local industry.

Shedding light on estimates of revenues and expenditures of the next budget, the minister said that gross revenues receipts for 2016-17 were estimated at Rs 4,915 billion, compared to the revised figures of Rs 4,332 billion for 2015-16.

“The share of provincial governments, out of these taxes, will be Rs 2,136 billion. For the year 2016-17, net resources left with the federal government will be Rs 2,781 billion compared to the revised estimates of Rs 2,481 billion for 2015-16 showing an increase of 12.1 per cent,” the minister said.

He added that total expenditure for 2016-17, was budgeted at Rs 4,395 billion compared to the revised estimates of Rs 4,095 billion for 2015-16, showing an increase of 7.3 per cent.

Dar said the current expenditure was estimated at Rs 3,400 billion for 2016-17 against a revised estimate of Rs 3,282 billion for 2015-16, showing an increase of 3.6 per cent.

The minister said that defence budget was being increased from Rs 776 billion for 2015-16 to Rs 860 billion for the next fiscal year which was an increase of about 11 per cent.

About development budget, Dar said against a revised estimate of Rs.661 billion for the PSDP during 2015-16, the federal government allocated Rs 800 billion for 2016-17, showing an increase of nearly 21 per cent.

“This also includes the Special Development Programme for security enhancement as well as rehabilitation and resettlement of TDPs,” the minister added.

Dar said several measures had been proposed in the budget to save energy and promote alternative sources of energy, including concessions of customs duty on local manufacturing of LED lights, incentivising import of items used in renewable sources of energy technologies, extension in relief on import of solar panels and exemption to dump-trucks for Thar coalfield.

The minister further said that for the Prime Minister’s Health Insurance Scheme, the government would provide insurance cover for tertiary healthcare and hospitalisation for several ailments. During 2015-18, the minister said around Rs 9 billion premium would be paid through this scheme.

About PM’s special schemes, he said for the next financial year, an outlay of Rs 20 billion had been allocated for these schemes.

Dar said the federal government had started the implementation of Gender Responsive Budgeting at the federal level, adding, “We are inviting the provincial governments to be part of these reforms.”

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