ISLAMABAD, May 15: The next federal budget will focus on five neglected sectors — village electrification, gas supply, education, health and clean drinking water — with an objective to pass on the benefit of increase in growth rates to the poor. A senior government official told Dawn that Prime Minister Shaukat Aziz had recently asked his budget making team to focus on the five points in next year’s allocations to bring about a change in the life of the poor. The other point on which the team had been asked to concentrate was infrastructure development, he said.

The official said that the public sector development programme (PSDP) and defence allocations would be increased substantially. The overall size of the budget, the source said, would be more than Rs1000 billion (one trillion) compared with current year’s Rs903 billion. He said the challenging area for the government would continue to be revenue collection. He said the Central Board of Revenue was expected to collect about Rs590 billion against the budget target of Rs580 billion during the current fiscal. However, revenue did not increase in proportion to growth rates. He said the revenue target of Rs580 billion for the current year had been set on a GDP growth rate target of 6.4 per cent.

At the expected growth rate of more than 7.5 per cent, the revenue collection should not have been less than Rs660 billion. The official said that while priority would continue to be given to human development and housing and construction industry there would be no more fiscal incentives for the construction industry. However, documentation and procedural improvements would be made. This was because the industry has expanded a lot and required corrective measures. For example, he said, the tax incentives had been misused by the cement industry and had not been passed on to consumers.

The official said the government had been under criticism for the last three years from almost every quarter that there had been no noticeable improvement in the quality of life of the people and poverty had not been reduced despite macro economic stability and higher-than-targeted growths for the third year in a row.

The government, the official said, had realised that areas having a larger impact on the life of the common people should be tackled upfront. According to a report, major pro-poor indicators showed a dismal performance in the first six months of the current fiscal despite an overall increase in poverty related expenditures. While the inflation touched the seven year peak, the performance of health, education, land distribution, delivery of justice and Zakat and other non-budgetary transfers could not match even last year’s results. Except for agriculture, the performance of almost all sectors was much less than desired.

Even the industrial sector, whose performance is impressive when compared with annual targets, has lost momentum. “The growth (of large scale manufacturing) seems to have weakened somewhat. This declaration appears to be largely attributable to capacity constraints (electronics, automobiles and fertilizers), as well as high base effect,” says the report.

The index of industrial production (IIP) grew by 15.4 percent during the first half of the current fiscal against a target of 9.8 per cent but lower than 21 per cent of the same period last year.

Large investments in the textile industry and high cotton output doubled the growth rate of textile sector to 15.9 per cent during the first half of the financial year “although it was disconcerting that the production of large units in value-added items recorded a negative growth”.

On the macro-economic indicators, the growth rate of large scale manufacturing (LSM) exports, and private sector credit declined when compared with the first half of the last year.

The fiscal deficit and trade deficit as percentage of the GDP were higher than last year while current account balance went into deficit compared with surplus last year. The LSM growth in the first six months of the current fiscal was 16.1 per cent against 17.9 per cent last year; exports increased by 10.5 per cent compared with 13.2 per cent last year and tax revenues increased by 7.4 per cent compared with 9.7 per cent in the same period last year.

The fiscal deficit as percentage of the GDP increased to 1.3 per cent from 0.6 percent of the first six months of last year and trade deficit increased to 2.5 per cent of the GDP this year compared with 0.9 per cent of same period last year.