May 24, 2003	Saturday	Rabi-ul-Awwal 21,1424

ISLAMABAD, May 23: The government is expecting about Rs177 billion overall budgetary deficit (about 4 per cent of the GDP) during 2003-04 to maintain a steady progress towards achieving five-year targets under the poverty reduction programme agreed with the international financial institutions.

Finance ministry sources told Dawn on Friday that total expenditure for 2003-04 has been estimated at Rs937 billion against revenue estimates of about Rs760 billion. Total revenue receipts include tax revenue, surcharges and non-tax revenues.

The Musharraf government had reached an agreement with the IMF under the PRGF to reduce fiscal deficit during the period of the programme.

The IFIs have been insisting on cutting down non- development expenditure to spare more funds for development activities. However, officials in the finance ministry said that non-development expenditure has already been squeezed to a maximum and there was no further room for reduction in defence budget until relations with India improved while government intended to get rid of costly debt as soon as possible. Tight fiscal policy and quick debt reduction would continue at least for another year,” said an official.

These officials argue that Pakistan has been pursuing fiscal discipline consistently during the last three years that resulted in economic turnaround, which needed to be continued so that reforms process was not derailed.

During the current fiscal year, Pakistan wanted to achieve 4.7 per cent fiscal deficit target. The first nine months (July- March) period figures show that Pakistan is performing well and its fiscal deficit stood at 3.3 per cent against the target of 3.5 per cent for this period.

The government had announced 4.4 per cent fiscal deficit target in the 2002-03 budget that was later increased to 4.7 per cent due to continued losses of power utilities, which are estimated to consume around Rs55 billion by end of the current fiscal year.

Besides a normal 10 per cent increase in tax revenue, the government is also expecting a sizable revenue generation as a result of new fiscal measures and bringing new items into the tax net.

The finance minister has already announced that the new income tax law would be enforced from the next fiscal year that would be based on a complete self-assessment scheme.

The CBR is expecting to achieve Rs460 billion tax collection target during the current fiscal year. This coupled with more than expected income from the petroleum surcharges would help the government to achieve its desired fiscal deficit target despite continued budgetary support to Wapda and KESC.

The support would continue for at least another year but the government is expecting to contain this to a manageable level.