ISLAMABAD, May 29: The budget for 2006-07 will have seven per cent GDP growth rate, 4.2 per cent fiscal deficit target, 6.5 per cent inflation rate and a suitable increase in the defence expenditure to meet country’s security needs, says Dr Salman Shah, Adviser to Prime Minister on Finance.

“The next budget will also contain necessary legal measures about the price hike to ensure that no one indulges in profiteering and hoarding,” he asserted.

He was talking to reporters on Monday at a joint pre-budget briefing along with Minister of State for Finance Umar Ayub Khan and Minister for Information Muhammad Ali Durrani.

He pointed out that the new budget would provide relief to low income groups, salaried persons and pensioners. “It also aims at bringing stability to critical food items for low income groups by ensuring supply at affordable prices and continuing providing subsidy for power, fertiliser, fuel and other food items.”

Responding to a question, the adviser on finance said in the overall context, the defence expenditure over the last five years had come down from around 6.5 per cent of GDP to almost 3.5 per cent.

He said there was almost a freeze in the increase in defence which was even not kept up with inflation. “But Pakistan cannot be oblivious to its security and whatever is needed to modernize our armed forces, we will provide the resources,” he said, adding that the defence expenditure would be kept within the growth in the economy.

Dr Shah also said one of the important objectives of the next budget would be to strictly maintain fiscal discipline throughout the year.

The next budget, he said, would focus on maintaining a growth rate between six and eight per cent for the next couple of years, increasing per capita income, maintaining external financial stability with increase in reserves, continuing improving credit rating in international capital markets and improving competitiveness of the economy for exports and domestic markets.

The adviser said other measures would include strong growth of the Public Sector Development Programme, including mega projects and a substantial increase in the funding of Khushhal Pakistan projects for community welfare.

Giving an overview of the economy, he said the country was expected to achieve 6.6 per cent GDP growth rate during the current financial year. “The next budget will be pro-poor and caring for the masses. The GDP growth for the 2005-06 might go little higher than 6.6 per cent with the availability of more data. This year the overall fiscal deficit is estimated to be 4.2 per cent of GDP, including an expenditure related to earthquake,” Dr Shah said.

He said fiscal deficit without the earthquake would have been 3.5 per cent which was better than the fiscal deficit of 3.8 per cent of GDP last year. The adviser said the inflation target for the current financial year was eight per cent and hoped that it would be less than eight per cent by June 30 this year.

He said the last Labour Force Survey shows that 5.8 million jobs were created over the last two years due to which the unemployment rate had declined. “The Pakistan Living Standard Measure Survey shows a substantial reduction in poverty from 32.4 per cent to 25.6 per cent.”

Dr Shah said there would be a major emphasis on the human development and social sector and that the provinces would be provided significant transfers in line with the 5th National Finance Commission (NFC) award in the budget for 2006-07.

He assured that the budget would be a caring one and efforts will be made to uplift the under-privileged segments of society. “It will be pro-poor, focusing on employment generation through economic growth by raising the PSDP allocation. Also special community development programmes will be launched having good impact on employment in depressed areas of the rural community. It will provide the people opportunities to exploit their potential through skilled development, education and health programmes.”

Dr Shah, however, points out that there are also risks involved in going forward and the government will have to remain very vigilant and ensure that it maintains macro-economic stability.

These risks, he said, emanated from continued high oil prices and tension in the region which could have an economic impact in Pakistan. “We need to make sure that we take prompt action to offset any risk which hits Pakistan.

Referring to the programme of purchases for defence to modernize the armed forces, he said these were multi-year programmes and implementation was extended over a long period of time.

Earlier, the minister for information said that efforts of the government would be to ensure maximum participation of all segments of society in development of the country.