ISLAMABAD The government unveiled a consolidated budget of Rs2.897 trillion for 2009-10 on Saturday with a drastic cut in subsidy on electricity and focus on short-term relief for inflation- and conflict-hit people.
With a deficit of 4.9 per cent, the budget was unveiled in the National Assembly by Minister of State for Finance Hina Rabbani Khar.
Of the deficit, 1.5 per cent is planned to be met from external resources, mainly 'Friends of Pakistan' and money coming for internally displaced persons, which economists think will be unreliable, while the rest will be met from additional taxation and internal sources.
Economic experts say it is a highly risky budget as no one is 100 per cent sure that the money would actually come from the countries who have pledged it. At the time of earthquake, friendly countries had pledged $4 billion, which did not fully materialise.
They say in case of making budget on uncertain resources, the government will have to borrow money from domestic sources which will put pressure on interest rates. The SBP would not be able to reduce discount rate.
Therefore, a high-interest environment will continue having adverse impact on investment and growth.
It is believed the budget is neither growth-oriented nor people-friendly. As a commitment with the IMF, drastic cuts have been made in subsidies for power sector, which will result in increase in the electricity tariff.
The inflation is not going to come down, but it may go further up as the budget document reveals. The replacement of petroleum development levy with carbon tax will increase the price of oil for end-consumers. The massive cut in power subsidies will hit the small provinces harder.
Focusing on rural areas, particularly the agriculture sector, the budget ignored to a great extent the revival of the industrial sector because no relief has been announced for the textile sector which has 55 per cent share in export proceeds.
The government announced an ad hoc relief allowance of 15 pc of pay of government servants from July 1. An increase equal to one month's initial basic pay in the allowance of armed forces deployed on the western front was also announced with effect from July.
Retired government servants and armed forces personnel will also get 15 per cent increase in their net pension from July 1.
Excise duty on petroleum products will be levied in the shape of a carbon surcharge, which would eliminate the existing petroleum development levy.
The total budgetary outlay of Rs2.897 trillion is almost 27 per cent more than the current year's estimate. Budget deficit at Rs722.5 billion is estimated to be about 24 per cent higher than the current year's estimate of Rs582 billion.
As ratio of GDP, the budget deficit will slightly go up to 4.9 per cent against 4.3 per cent during the current year. The 0.6 per cent increase will be met through external financing of Rs264.9 billion and domestic financing of Rs457.6 billion.
Pakistan is likely to receive external resources equivalent to 1.2pc of its GDP (Rs178 billion) from pledges made at the Donors' Conference in Tokyo.
'We further expect resources equivalent to 0.3pc of the GDP (Rs48 billion) for expenditure on internally displaced persons. In essence the real deficit will be 3.4pc of the GDP,' the state minister said.
The budget estimates net revenues of Rs1,377.5 billion with a current expenditure of Rs1,699.19 billion. The development expenditure (including provinces) is estimated at Rs783.1 billion against the revised current year's estimates of Rs421.9 billion, showing an increase of 85pc.
The Public Sector Development Programme has been doubled to Rs626 billion against the revised estimates of Rs359 billion for 2008-09.The current expenditure has been slashed to 68pc as compared to revised estimates of 79pc of the current year.
The expenditure on general public services (including debt servicing, transfer of payments and superannuation allowances) is estimated at Rs1,189 billion -- 70 per cent of the current expenditure.
The target for FBR tax revenue has been set at Rs1.372 trillion, almost 16 per cent higher than this year's revised estimates of Rs1.179 trillion. An allocation of Rs343 billion has been made for defence spending against Rs311 billion of the current year, showing an increase of about 10.2 per cent.
Of the total tax revenue, direct taxes are estimated at Rs565 billion and indirect taxes at Rs815 billion. The budget has projected to transfer a total of about Rs735.130 billion to the provinces as their share of net proceeds of the federal divisible pool and grants, including subventions.
The education sector, including higher education, will get Rs31 billion, which is about 54 per cent higher than current year's Rs20.1 billion. A record Rs23.2 billion has been earmarked for health sector, up by 66 pc from Rs13.99 billion of the current fiscal year.
It is proposed to increase the allocation of BISP to Rs70 billion from Rs34 billion. At a later stage a health insurance of Rs25,000 per family per year will be provided.
SOCIAL SECURITY
The government will enact a legislation in the next fiscal year for creating social security protection programme for the haris.
The ministry of social welfare will be replaced by the ministry of social protection and development. An allocation of Rs35 billion is proposed in the people's works programme to create sizable employment opportunities to increase the income of the less-privileged.
Rs10.8 billion has been allocated for different workers welfare development schemes in the housing, health, education and technical education sectors. The marriage grant has been increased from Rs50,000 to Rs70,000 per daughter. Construction of 9,469 housing units and flats for industrial workers is also proposed.
It has been decided to give 12pc shares to employees in the state-owned enterprises to revamp the privatisation process. The outreach of microfinance services will be increased to three million from two million borrowers.
The government announced a string of measures for boosting agriculture growth and marketing to increase the supply of food items. The allocation for agriculture sector has been enhanced to Rs18 billion from Rs14.4 billion in 2008-09.
An amount of Rs2.5 billion will ensure food security and productivity enhancement of farmers. BT cotton hybrids varieties will be offered to farmers. Livestock, agriculture and fisheries will be treated as industry.
WATER SECTOR
Rs60 billion has been allocated for water sector. As many as 32 small and medium dams, eight in each province will be financed.
Rs12 billion has been allocated for the raising of Mangla Dam, including resettlement of displaced people; Rs10 billion for improvement of water courses and Rs15 billion for canal improvement and rehabilitation of irrigation system, Rs500 million for integrated agriculture marketing and storage infrastructure, and Rs4 billion for the Benazir tractor scheme.
A phased 'special programme for food security and productivity enhancement of small farmers' covering 13,000 villages will be implemented by 2015 starting with 1,012 villages in four provinces, Azad Jammu & Kashmir, Fata and Northern Areas during the first phase at a cost of Rs8.013 billion.
An amount of Rs300 million has been allocated for capacity enhancement of dairy products, Rs400 million for poverty reduction through small holders livestock and dairy development.
EXPORT INVESTMENT
A Rs40 billion export investment support fund has been proposed. The government will contribute Rs10 billion towards this fund; another Rs10 billion will be contributed by the Export Development Fund; and the balance of Rs20 billion will be contributed by governmental agencies through mopping up of surpluses in commercial banks.
A Rs10 billion fund for credit guarantees will be established to support the SME sector. The fund will be financ ed by the government and the private sector in the ratio of 5050 over the next two years.
A Rs10 billion venture capital fund will be established for which Rs2.5 billion has been earmarked. A new DFI is being created for industrial financing. Industrial clusters will be involved for skill development to ensure ownership, monitoring/oversight and relevance of programmes.
The allocation for power sector has been doubled to Rs22.8 billion from Rs11.4 billion in 2008-09.
Currently, 15 independent private power houses with a total capacity of 2,921 megawatts are in different stages of development. Out of these, nine projects for 1,861MW will be commissioned in 2009; four projects for 776MW will be completed in 2010; while two projects for 284MW are due for completion in 2011.
To eliminate loadshedding by the end of 2009, agreements have been reached with five rental power projects for 800MW. Work on 16 hydropower projects in the private sector with a total capacity of 4,160MW has been initiated.
Two new combined cycle power projects of 500MW each in the public sector to supplement the total capacity are planned at Chichoki Mallian and Nandipur.
The government has also made an elaborate plan for electrification of all villages where electricity can be provided from grid supply. This was achieved in 6,419 new villages last year.
The induction of Khan Khwar and Jinnah Hydro projects with a total capacity of 168MW; setting up call centres in all distribution companies to improve customer services and infrastructure development to reduce energy losses will also be initiated.
The PSDP allocation of Rs4 billion has been made for the 4,500MW Diamer-Bhasha Dam project. Construction of more than 30 small and medium dams in different provinces will also been funded.
A comprehensive renewable energy policy is being formulated. A 50MW solar thermal power project will be established in southern Punjab; development of wind farms in areas in addition to Gharo-Keti Bandar, identifying new corridors of available wind potential in Punjab, Balochistan and the NWFP; solar water heaters programme; production of solar cells and modules up to an annual capacity of 80 Kilowatts; depreciation allowance for renewable energy being enhanced by 100 per cent; allowance of duty-free import of equipment under nine categories of alternative energy are being considered.
Approximately 30,000 postgraduates will be offered internships under the National Internship Programme for which the government has allocated Rs3.6 billion.
Zero rating duty on exports sector will continue as well. The FBR will pay interest on refunds delayed beyond 90 days. The limit of credit on donations in case of companies enhanced from 15 pc to 20 pc.
It is proposed to enhance the rate of withholding tax on imports of commercial nature from two per cent to four per cent. The measure would result in estimated revenue of Rs 23 billion.
Dear visitor, the comments section is undergoing an overhaul and will return soon.