The National Assembly Standing Committee on Finance was informed on Thursday that the government has constituted a five member Budget Review Committee under the chairmanship of the Deputy Chairman Planning Commission to review and determine the budget needs of the federal ministries and divisions for the next fiscal year.
Secretary Finance Wajid Rana assured the committee which met under Fauzia Wahab in the chair that there would be no irrational increase in the budget of the federal ministries and divisions for the next fiscal year. The committee was informed that the agriculture growth is expected to increase to 3.8 per cent against the downward revised target 2.5 per cent is to help achieve Real Gross Domestic Product (GDP) growth target of 4 per cent during the ongoing fiscal year 2011-12.
Secretary Finance informed that the directives of the federal cabinet, MoF has notified a five member committee under Dr Nadeem-ul-Haq which will have two members from government and two private sector. Explaining the reasons for re-emergence of the circular debt, he said that the main reason was tariff determination by the National Electric Power Regulatory Authority and its notification by the government. The government had been notifying power tariff 54 per cent lower than the tariff determined by NEPRA. At present the notified power tariff is 20 per cent lower than the determined tariff. Secretary Finance said during the July-January period total expenditure was targeted at 58 per cent of the total budget, however, due to the austerity measures the expenditure had remained at 53 per cent of the total budget with a saving of 5 per cent. About the utilization of Public Sector Development Program, he said no cut had been made in the development budget and the government had released Rs221 billion for the development projects.
Explaining the demand of IFIs for imposition of RGST, he said even friendly donor countries were also demanding to expand the revenue base by bringing the rich in the tax net. He said RGST was essential for documentation of economy and for increasing tax collection in coming years. He said handsome increase in revenues was made due to the withdrawal of GST exemptions announced on March 15, 2011. He said the GDP growth for FY 12 was projected to 4.2 per cent due to 3.4 per cent growth in agriculture, 2 per cent growth in LSM and 5 per cent in services sectors. Torrential rains in Sindh during August 2011 compelled the government to revise its GDP growth target to 3.6 per cent from 4.2 per cent on the basis of 2.5 per cent growth in agriculture, 1.5 per cent in LSM, and 4.4 per cent growth in services sector. The recent data of crop arrivals suggests that cotton production of 13 million bales as the cotton arrival have already reached at 12.5 million bales and positive growth in LSM sector indicates that the better crops production in Punjab particularly cotton has compensated losses in Sindh resultantly agriculture growth as well as LSM and services sector would be adjusted upward and GDP would be close to 4 per cent. The LSM data for the period July to December FY12 suggests that its output is increased by 0.83 per cent as compared to decline of 1.8 per cent in the corresponding period of the last year.
The inflation recorded in January 2011 increased to 10.1 per cent. This was primarily on account of adjustment of energy and gas prices; however, the food inflation remained at single digit 9.2 per cent. The fiscal deficit was projected 4 per cent of GDP. This was estimated to be financed through net external borrowing of Rs135 billion, non bank borrowing Rs412 billion and bank borrowing Rs304 billion. However, during the course of the period the projection for fiscal deficit has been revised to 4.7 per cent. For the period July-December FY 12, overall fiscal deficit was Rs.533 billion or 2.5 per cent of GDP, while total expenditure in first half of the current fiscal year was only 45 per cent of total planned expenditure.
The trade deficit witnessed a deterioration of 38.7 per cent as it increased from $6.5 billion in July-January FY11 to $9.05 billion in FY12. Substantial increase of 17.7 per cent in imports surpassed a healthy growth of 7.2 per cent in exports during the period under review. The current account deficit has increased to $2.633 billion during first seven months of FY12 against the deficit of $96 million in the comparable period of last year. The foreign direct investment during July-January FY12 fell 41 per cent to $597 million as compared with $1 billion in the comparable period of the last year. The worker’s remittances during July-December FY12 reached to $6.3 billion against $5.3 billion in FY11, showing an increase of 19.5 per cent. However, during July-January FY12 it increased to $7.4 billion as against $6.1 billion in the comparable period of last year showing an increase of 21.5 per cent.
