ISLAMABAD, June 7: The government will present a Rs1.874 trillion federal budget for 2007-8 in the National Assembly on Saturday, envisaging revenue target of Rs1.025 trillion, defence spending of Rs275 billion and fiscal deficit of Rs398 billion, amounting to more than 21 per cent of the outlay.

According to sources, the budgetary outlay is almost 25 per cent higher than the current year’s estimate of Rs1.5 trillion. The budget deficit is estimated to be about 6.5 per cent higher than the current year’s estimate of Rs374 billion.

To be presented by Minister of State for Finance Omar Ayub Khan, the budget has been prepared keeping in mind the upcoming election season with populist steps offering subsidies and benefits to the working class.

New pensioner would get an increase of about 15 per cent, while a few pensioners who retired before 1980 would get about 20 per cent raise.

The CBR’s tax revenue target at Rs1.025 trillion will be almost 22 per cent higher that the current year’s original estimates of Rs841 billion. The defence spending will increase was about 10 per cent against that of the current year.

A critical feature of the budget would be a staggering 54 per cent increase in current expenditure, projected at Rs1.353 trillion, against Rs880 billion of the current year, said the sources.

The centre is projected to transfer about Rs465 billion to the provinces as their share in the federal divisible pool and grants, including subvention, against Rs398 billion during the current year, showing an increase of about 17 per cent.

The Public Sector Development Programme (PSDP) has been estimated at Rs520 billion, compared with Rs415 billion of the current year, showing an increase of about 25 per cent.

The source said a 15 per cent duty on imported and four per cent on locally manufactured cars had been proposed but there would be no new levy on up to 800cc cars. The capital value tax on cars is being removed. Measures in this regard will be approved by the cabinet on Saturday morning.

The Central Board of Revenue is expected to rationalise about 800 tariff lines in the budget, including some zero-rate slab for the industrial sector, including textiles.

A new zero-rate regime will be introduced to promote export of marble, granite and some other precious minerals, medical equipment and engineering goods.

The duties on industrial raw material not manufactured locally will be reduced.

Some of the other populist measures will include, expansion of Utility Stores services; reduction in the prices of pulses, rice, sugar, ghee and some other essential items; 15 per cent increase in government salaries; improvement in the Food Support Programme; increase in Workers’ Welfare Fund payouts by 40 per cent and raise in Employees’ Old Age Benefit Institution-based pensions.