LAHORE, June 2: Adviser to the Prime Minister on Finance Dr Salman Shah has said that the next federal budget would have a record outlay of Rs1.9 trillion with the largest-ever public sector development programme of Rs724 billion and subsidies of Rs200 billion.
He was addressing an event titled ‘Budget 2007-8: a milestone in continuation of economic reforms’ here on Saturday.
He said that the government was trying to finance the public sector development programme from the private sector through public private partnership.
The fiscal deficit had been limited to 4 per cent. The debt-to-GDP ratio would be reduced and foreign exchange reserves would exceed $15 billion by the end of June. The country would exceed 6 per cent growth target due to bumper crops of wheat, sugarcane and pulses.
He said that Pakistan’s international credit rating had improved because of policies of privatisation, liberalisation and deregulation.
He said that housing finance facility required to be increased and the government would announce loan facility for low-cost houses in the federal budget.
He said that the government would set up a micro-finance bank for advancing small loans while the National Bank of Pakistan would raise the allocation for its micro-finance Rozgar Scheme to Rs100 million.
The tax-to-GDP ratio was currently 10.5 per cent and the ratio of direct taxes was 42 per cent and income tax and GST was at 40 per cent.
The government intended to raise the tax-to-GDP ratio to 14-15 per cent during the next five years.
He said that the size of middle class had grown to 60 per cent of population and its share in national income had increased from 42 per cent to 56 per cent. Share of lower class, constituting 20 per cent of population, had increased from 5 per cent to 12 per cent.
He said that government had decided to set up special economic zones for foreign investors and the first zone would be established near Lahore with Chinese assistance.
Ihtasham ul Haque adds from Islamabad: The budget focuses on improving governance, removing economic inequality and alleviating rural poverty in 2007-08, Dr Salman Shah told Dawn here on Saturday.
He said that the government will borrow roughly Rs 60-70 billion from the international lending agencies to finance its next year budget.
He said since budget deficit target for next fiscal year is being kept at 4 per cent of the GDP, certain funding will have to be arranged from foreign agencies. The fiscal deficit in 2006-07, he said, was likely to be ended up at 4.2 per cent by June 30. He did not believe that Rs272 billion fiscal deficit recorded in the first nine months of the currently financial year was a matter of concern. “Our improved revenue collection position, regular foreign inflows and more foreign direct investment (FDI), which was likely to be over $6 billion by the end of the current fiscal year, will offset negative effects on the economy.”
He admitted that some major targets relating to trade deficit, current account deficit, imports, exports, inflation, industrial production and large scale manufacturing would be missed during the current financial year. “But we should look at the positive side which is better GDP growth, good agriculture growth and the improved performance of the services sector,” he said.
He said that energy crisis was a serious challenge and the likely demand supply gap of 2,500MW in next year, will be narrowed by helping to have more power projects.
The advisor on finance defended the government's decision to have separate Rs204 billion budget for corporations, especially Water and Power Development Authority (Wapda), Oil and Gas Development Company Limited (OGDCL) and National Highway ŠAuthority (NHA).
“This is how the total development budget would reach to record level of Rs724 billion in 2007-08,” Dr Shah said.
He assured that leakages and element of corruption in the development projects would be minimised by having a ‘strict monitoring system in place’.
