Finance Minister Ishaq Dar unveils Rs5.103 trillion federal budget 2017-18

• Finance minister claims 10,000MW of electricity will be added to national grid by summer 2018

Finance Minister Senator Ishaq Dar Friday unveiled the federal budget for the fiscal year of 2017-18, with a total outlay of Rs 5.103 trillion, touting 5.3 per cent GDP growth, and claiming an improvement in the country’s fiscal position and a reduction in load shedding for industries.

The opposition parties raised slogans of “Go Nawaz Go” and “Jhoota, Jhoota” to taunt Prime Minister Nawaz Sharif who was present in the house for the budget speech; later, tore up the copies of agenda and threw those in the air to lodge protest over the brutal torture on the farming community representatives earlier in the day.

As Speaker National Assembly Sardar Ayaz Sadiq moved to give the floor to the finance minister, Leader of the Opposition Syed Khursheed Shah interrupted, seeking a point of order before the budget speech could start.

However, the speaker said it was in violation of parliamentary practice as no other agenda could be taken up before the budget speech. Khursheed Shah said the opposition MPs would stage a walkout of the House in protest against the mistreatment of farmers—who were only demanding their rights—if he was not allowed to speak. The prime minister, however, interrupted and requested the speaker to allow Shah to speak.

“Today, the government created chaos in the capital by mistreating farmers, even though they were protesting outside the Red Zone. The authorities used shelling to disperse farmers and they were manhandled,” Shah said, arguing why the opposition wasn’t allowed to speak, terming it a sign of dictatorship.

While concluding his speech, Shah asked Pakistan Tehreek-e-Insaf (PTI) Deputy Parliamentary Leader Shah Mahmood Qureshi to speak. However, the speaker did not allow Qureshi to speak and gave the floor to the finance minister.

While the finance minister started the budget speech, the opposition lawmakers stood up and started chanting slogans, targeting the prime minister.

Amid slogans of “Go Nawaz Go” and “Jhoota, Jhoota”, the opposition lawmakers tore up copies of budget documents and later staged a token walkout. After registering their protest, the opposition MPs came back and started speaking loud to disrupt the budget speech. Among those speaking, Jamshed Dasti, Amer Dogar and some PPP lawmakers were visible. State Minister Abid Sher Ali went to the seat of Dasti and asked him to stop talking but Dasti strongly reacted.

The finance minister, however, looked upbeat about the federal government’s economic achievements and proudly informed the house that he was presenting fifth consecutive finance bill of the PML-N government for the first time in the parliamentary history of the ruling party.

Along with the finance bill 2017-18, Supplementary Demands for grants for 2016-17 and Excess Demands for grants for financial years 1998-99 and 2003-04 were also laid in the house, which saw the start of the proceedings around 40 minutes late of the scheduled 4pm.

The National Assembly met for two hours and 13 minutes, as Senator Dar consumed an hour and 52 minutes of the proceedings to complete his speech.

“Today, Pakistan is on the cusp of a high growth trajectory. Our GDP has grown this year by 5.3 per cent which is a 10-year high. Foreign exchange reserves are at a comfortable level, sufficient to cover about four months of imports; tax revenues have increased by 81 per cent over the last four years, translating into an average annual increase of 20 per cent,” the minister said.

He said since 2013, the credit to private sector has increased by over five times, while fiscal deficit will be around 4.2 per cent. He said there has been over 40 per cent increase in imports of capital goods this year, while gas availability has improved, and load shedding for the industry has been eliminated and substantially reduced for commercial and domestic sectors.

“Next year will be the year of complete elimination of load shedding. The writing on the wall is obvious even today—only the message has changed. Today, globally credible institutions like PricewaterhouseCoopers (PwC) have said that Pakistan economy is set to be among the 20 largest economies (G20) of the world by 2030,” the minister said.

The minister claimed the government had put the country on the path of self-sustenance, which is being internationally recognised and is reflected in the improved ratings by all major rating agencies, including Moody’s, S&P and Fitch.

“Our foreign exchange reserves currently stand at a comfortable level of $16 billion despite a larger than expected trade deficit mainly due to increased import of capital goods. If we include foreign exchange deposits with commercial banks, the total foreign exchange reserves of the country have increased to around $21 billion,” the minister asserted.

The minister said, over the past four years, Pakistani workers and professionals working abroad have contributed a substantial amount of remittances which increased from $13.9 billion to $19.9 billion.

“This 40 per cent increase was made possible due to government’s revival and payment of outstanding dues of Pakistan Remittance Initiative. The remittances for the first ten months of the current FY stand at $15.6 billion and are expected to grow in the last two months due to Ramzan and Eid despite challenging economic situation in the Gulf region,” he added.

On Pakistan Stock Exchange (PSX), the minister said the merger of the three stock exchanges was completed in January 2016 after successful resolution of issues pending for over a decade. Since then, he added, PSX has graduated from frontier to emerging markets in the Morgan Stanley Capital International (MSCI) Index.

“It has been declared as Asia’s best performer and 5^th best performing market in the world by Bloomberg. It is noteworthy that the index has increased from 19,916 on 11 May, 2013, to over 52,000 points currently. And, during this period, market capitalisation has increased from $51 billion to $97.3 billion depicting a 90% increase,” he added.

The minister said this year, 5,855 new companies have been incorporated till March. Four years ago, in the entire financial year, 3,960 companies were incorporated.

Highlighting economic targets of FY 2017-18, the minister said the increase in real GDP growth is set at 6%; investment to GDP is 17%; development budget is fixed at Rs.1,001 billion; while inflation below 6%.

“We have set budget deficit at 4.1% of GDP; tax to GDP ratio is at 13.7%; foreign exchange reserves level that can cover a minimum of four months of imports; while net public debt to GDP ratio would be below 60 per cent of GDP,” the minister added.

The minister said in order to achieve the above targets, the government has defined a strategy.

“FBR revenues are targeted to increase by 14 per cent while the federal expenditures will grow by 11 per cent. Non-tax receipts of the federal government are budgeted to increase by 7 per cent. By keeping the current expenditure under tight control, we will be able to create substantial space for development. Federal PSDP for the next year is budgeted at Rs1,001 billion. This is 40 per cent higher than revised estimates of Rs715 billion for the current financial year,” he added.

“If we add the provincial ADPs, the outlay for development of FY 2017-, it would be a whopping Rs2.1 trillion. At the same time, current expenditure will be contained below the level of inflation. Moreover, new initiatives are being announced for agriculture, financial sector, exports, textile, social sector and employment. This is being done with the aim to boost our economic activity even further,” he added.

The minister claimed 10,000MW of electricity will be added to the national grid by summer 2018.

“This will Inshallah eliminate load shedding. Investments will be made to speed up the process of development of Gwadar, including the development of airport, hospital and desalination plant. Around 5.5 million women-led families in the country, who do not have economic means for sustenance, will continue to be provided with cash transfer of Rs19,338 per annum. For this purpose, Rs121 billion are proposed to be allocated to Benazir Income Support Programme. This allocation has increased to 300 per cent of Rs40 billion in the fiscal year 2012-13,” he added.

The minister said the state will continue to subsidise bills of the low-income domestic consumers up to 300 units per month in shape of electricity subsidy.

“For the farmers in Balochistan, the federal government will pay a portion of their electricity bills to run agriculture tube wells. The federal government will continue to provide electricity subsidies on tube wells in Balochistan. The off-peak rate of Rs5.35 per unit for agriculture tube wells will continue in the FY 2017-18,” he said, adding that an amount of Rs118 billion has been proposed in the FY 2017-18 for these measures.

The minister said in order to facilitate the provision of electricity to remote areas and small cities where there are no transmission lines, the government, in partnership with the World Bank, will introduce solar-powered off-grid electricity system for residents of small towns and cities in sparsely populated areas of the country, with special focus on Balochistan.

The minister said from July 1, 2017, ZTBL and National Bank of Pakistan will launch a new scheme for small farmers with holdings of 12.5 acres, who will be provided agricultural loans at a reduced rate of 9.9 per cent per annum.

“Moreover, a small loan of up to Rs50,000 per farmer will be provided; two million loans shall be provided by ZTBL, NBP and other banks; State Bank of Pakistan will monitor the implementation of this new scheme. In order to facilitate the farmers, the volume of agriculture credit is being enhanced to Rs1,001 billion from the last year’s target of Rs700 billion which will be an increase of 43%,” he added.

The minister said through a reduction in tax rates and subsidy, the price of per bag of urea shall be maintained up to Rs1,400 per bag in the FY 2017-18.

“Prices of NP, NPK, SSP and CAN fertilisers will also be maintained at their current price levels through appropriate tax adjustments. Use of Land Revenue Records for mortgage financing: In order to facilitate the farmers in obtaining credit from banks, the State Bank of Pakistan shall take steps to align the banking system with the Land Record Management Information System for mortgaging of a property by the banks/farmers,” he added.

He said the government will continue provision of subsidised tariff on agri-tube wells at the rate of Rs5.35 per unit in FY 2017-18.

To fulfil the needs of infrastructure, the government has decided to establish Pakistan Development Fund (PDF) to provide long-term infrastructure financing for the commercially viable public sector and PPP projects. Moreover, Pakistan Infrastructure Bank (PIB) will also be established to provide infrastructure financing for commercially viable private sector projects. This effort will be spearheaded by the IFC with 20 per cent equity of the government through PDF, while the remaining share will be the private sector,” he added.

In the information technology sector, the minister said new measures for this sector are being taken, including setting up an IT software park in Islamabad with the help of South Korean government at a cost of Rs6 billion.

“The start-up software houses shall be exempted from income tax for the first three years; exports of IT services from Islamabad and other federal territories shall be exempted from sales tax; IT export houses/companies shall be allowed to open foreign exchange accounts in Pakistan on the condition that deposit in these accounts shall only be allowed through remittances from abroad in respect of their export earnings. They will be allowed to use these accounts for meeting business related payments outside Pakistan,” he added.

The minister said the government has decided to provide a relief to common man by reducing the withholding income tax on cell phone call from 14 per cent to 12.5 per cent and Federal Excise Duty from 18.5 per cent to 17 per cent.

“In order to encourage the use of Android phones, customs duty shall be reduced from Rs1,000 to Rs650. Import duty is being reduced on mobile telecom products,” he added.

“By 2018, Inshallah 10,000MW of additional electricity will become part of the national grid. Additionally, financial close has taken place for 15,000MW of electricity generation projects beyond 2018. In this regard, the government is proposing Rs401 billion for power sector development, including investment of Rs317 billion to be undertaken by WAPDA for the next year,” he added.

He said work on two Karachi nuclear power projects with combined capability of 2,200MW and Chashma Civil Nuclear Power plant with 600MW capacity will be continued.

“The gap between generation and demand of electricity is only one facet of the challenge that we face. In the past, no significant investments were made in the areas of transmission and distribution. The result is that even if we improve our generation, we will not be able to deliver electricity to the consumer,” he added.

The minister said Pakistan is likely to become a water scarce country if investments in this sector are not made. The government is, therefore, placing increased emphasis on building dams and canals/water courses.

“The government is allocating Rs38 billion for the development of water sector. Key projects such as the extension of right bank outfall drain (RBOD-II), RBOD-I and Kaachi Canal will be given the largest share in the water sector portfolio. Priority will be accorded to completion of Kaachi Canal,” he added.

He said, collectively, these three projects will be allocated Rs17.7 billion. In addition, a number of water sector projects in Balochistan, Khyber Pakhtunkhwa, Punjab and Sindh will be continued to address the water shortage in the provinces.

The minister said the total revenue is estimated at Rs5,310 for the next fiscal which includes FBR tax estimate of Rs4,013 billion as compared to revised estimate of Rs3,521 billion.

“As compared to revised estimates of FY 2016-17, the total revenue is being increased by 12.1 per cent. While the FBR tax revenue is estimated to increase by 14 per cent,” he added.

On relief measures for the government employees and pensioners, the minister said the government has decided and give a 10 per cent ad-hoc relief allowance on the merged salary to all civil and armed forces employees.

“For Armed Forces, Zarb-e-Azb allowance, that I have already discussed, would be in addition to this. Moreover, 10 per cent increase is also being proposed in pensions. The orderly allowance is being revised from Rs12,000 to Rs14,000,” he concluded.

Later, the speaker adjourned the proceedings.