Govt hopes to boost revenue by 22pc: Budget deficit 4pc likely
By Khaleeq Kiani
ISLAMABAD, May 17: Next year’s budget is expected to have an overall outlay of about Rs1.25 trillion and a revenue target of about Rs860 billion that would be achieved primarily through extending the tax net to real estate, capital market gains and more services, it is learnt.
A senior government official told Dawn on Wednesday that next year’s fiscal deficit was expected to be around four per cent. During the current year, the fiscal deficit is expected to be 4.2 per cent against a budgeted target of 3.8 per cent.
However, he said, this deficit, excluding the earthquake’s impact, would be about 3.6 per cent.
The current account deficit would be more or less at the current year’s revised estimates of about $5 billion. The current budget had set a current account deficit of $3.2 billion.
According to him, the focus of the government in next year’s budget would be employment creation, supply side improvement, export boost and competitiveness and sustaining high growth rates.
Given the fact that 14-15 per cent impact of GDP and inflation in revenue is a usual phenomenon, the government effort would be to increase revenue collection by about 22 per cent over the current year’s revised estimates of about Rs710 billion, thus putting the revenue target at Rs860 billion for the next year.
The Central Board of Revenue, sources said, has been asked to finalise procedures for bringing in real estate, capital market gains and more services sectors in the tax net.
Major addition in revenue generation would come from services sector currently contributes only 20 per cent to the revenue against in 52 per cent share in the GDP. Compared to this, the industry which has only 18 per cent share in GDP contribute about 62 per cent to the country’s revenue.
More interestingly, the agriculture sector which accounts for over 23 per cent of GDP contributes less than two per cent to the tax revenue as if agriculturists were not part of Pakistan, a senior official said. However, the agriculture sector would continue to be an exempted area during the next year.
The target for inflation in the next year is expected to be fixed at seven per cent. The GDP growth target for the next year would be about 7.3-7.5 per cent. The public sector development programme (PSDP) and defence expenditure are expected to be around Rs350 billion and Rs280 billion respectively, against current year’s budgetary estimates of Rs272 billion and Rs224 billion respectively.
The government was eying at increasing the foreign exchange reserves to $14.8 billion by end of the current year but now feels that even $13.5 billion mark may not be achievable, owing mainly to non-issuance of about $700 million global depository receipts of OGDCL during the current year and higher than expected trade deficit.
From the populist perspective, next year’s budget will focus on five neglected sectors - village electrification, gas supplies, education, health and clean drinking water - with an objective to pass on the impact of higher growth rates to the poor people.
Besides this, the overall direction of the next year budget would be infrastructure development, energy security and skill development.
The relief to the people would come in the shape of increase in salaries and pensions, reduction and rationalisation of tax rates, increase in the size of public works programme and other populist schemes that attract maximum public support in elections.
The president and the prime minister have asked the budget-makers not to introduce any new tax in next year’s budget, but bring more sectors of the economy into the tax net by offering lower tax rates to enhance the overall tax base and tax-to-GDP ratio, the official said. He said further reduction in tariffs through rationalisation would also be another budgetary measure.
Infrastructure development, energy security, progress towards millennium development goals would be the priority areas next year for public sector investment, he said. The official said the next year’s growth target is expected to be fixed at 7.5 per cent by the National Accounts Committee, which is likely to meet later this month.
He said since the GDP growth rate was expected well below the current year’s target of seven per cent, it is logical that growth next year would be higher than 7.3 per cent assumed in the medium term development framework (MTDF), commonly known as five-year plan.
