May 19, 2008	Monday	Jamadi-ul-Awwal 13, 1429

THE process of budget making has been disturbed by the withdrawal of PML(N) ministers from the PPP-led coalition.

The officials of finance ministry and the Federal Bureau of Revenue (FBR) have no clue to any shift in policy focus, after the exit of Mr Ishaq Dar and arrival of Syed Naveed Qamar.

Normally around this time, most of the issues are sorted out about the tentative size of the budget, allocation for public sector development programmes and funding requirements of ministries, divisions and provinces.

However, one of the important issues agitating many is how would the government offer any “targeted pro-poor relief” when the fiscal deficit, according to Mr Dar, has shot up to 9.5 per cent against the original target of four per cent set for the current financial year. The officials of finance ministry have estimated that Rs300 billion is needed to reduce the fiscal deficit to 6.5 per cent.

But for the next financial year, it appears, no one has any clear idea as to from where the government would manage the required budgetary support. “We are projecting 15 per cent growth to collect Rs1.2 trillion tax revenues in 2008-09. This will hopefully provide the government adequate resources to offer any relief package to the poorest of the poor”, says Secretary Revenue Division and FBR Chairman Abdullah Yousuf.

He said that the government may levy capital gain tax on stock markets and impose enhanced capital value tax (CVT) on real estates besides bringing services sector into the tax net. But he was not sure whether the government could go for imposing tax on agriculture income, though, he said, there was a great potential for that.

Since there was Rs35 billion shortfall, the government has revised downward this year’s tax revenue collection target from Rs1.025 trillion to Rs990 billion. “We have made Rs990 billion a base line to achieve 15 per cent growth in tax revenue to manage Rs1.2 trillion next year”, he said.

He said some useful inter-action took place with the business community last week in which it assured to help raise new taxes and rationalise the existing ones in the next budget.

The advisor to former finance minister Ishaq Dar, Mr Ghafoor Mirza, who continues to work in the ministry, did not see any problem in the formulation of new budgetary proposals despite the withdrawal of PML-N ministers from the coalition government. He said “pure professional exercise” was being conducted to finalise the new budget.

He did not disclose the exact amount disbursed so far out of the $3 billion assistance assured by the World Bank, Asian Development Bank (ADB), Islamic Development Bank (IDB) and other agencies. However, he said significant amount of inflows had started pouring into the kitty.

Secretary Finance Farruk Qayyum was of the view that once the financial liabilities of the government towards public corporations and private companies including Wapda and PTCL were worked out and paid off, the government would have an idea about the size of the budget next week.

Additional Secretary Budget in the ministry of finance Ayub Khan Tareen told Dawn that budget process was continuing in spite of political changes. He said daily meetings were being held with the financial and deputy financial advisors of the ministries and divisions to determine their funding requirements in the next budget.

“But the important thing is that Priority Committee of the ministry of finance is about to finalise its recommendations to allocate funds to the ministries and divisions”, Mr Tareen said. The recommendations of the committee would be placed before the Annual Plan Coordination Committee (APCC) to be held on May 23-24.

The APCC would firm up the budgetary proposals which would then be placed before the National Economic Council (NEC) - the highest decision- making body on economic matters -- in the first week of June, he added. The input of the Planning Commission was also being received for formulating the next budget, he said.

Former finance advisor Shahid Javed Burki, when approached, said he was not worried about foreign inflows. They would certainly come as Pakistan was a high profile country. “There will be short-term infusion of funds by the international world to avoid any serious instability”, said Mr Burki.

“Foreign powers do not want any chaotic situation in Pakistan and will offer funds, but I am worried about the capability of the government to set things right”. He said he and a number of experts and economists including former finance minister Sartaj Aziz, former finance advisor Dr Hafeez Pasha had made recommendations to the government about the next budget including reduction of fiscal deficit to four per cent in two years.

Likewise, he said recommendations were also made to increase the falling exports. “Then the most important recommendation is to make Punjab the engine of growth by concentrating on agriculture”, Mr Burki said. Suggestions were also given to impose regulatory duty on non-essential items.