ISLAMABAD: The federal government is aiming for a 4.9 per cent fiscal deficit in the new budget, according to a senior government official.

He told Dawn on Monday that despite a perception that the government was planning an extravagant budget to gain popular support before general elections, the budget makers had decided to reduce the fiscal deficit by 0.5 per cent of the GDP from 5.5 pc in the current fiscal year.

He said that even though a number of key budgetary proposals would be finalised by early next week, the size of the consolidated budget (both federal and provincial) would be about Rs4.6 trillion. This will include total federal receipts of about Rs3.2 trillion that was estimated at Rs3.033 trillion early this year. The size of the federal expenditure that was originally estimated at about Rs2.74 trillion, has been increased to Rs2.91 trillion.

The size of the total federal receipts has now been revised to slightly over Rs3.2 trillion because of non-realisation of three important items — auction of third generation telecom licences, floating of OGDCL’s exchangeable bonds and uncertainty over Coalition Support fund (CSF) payments by the US.

As a result, the non-tax revenue target which was earlier estimated at Rs552 billion has been revised to about Rs737 billion because the recovery of the three revenue items has been included into next year’s revenue receipts.

The non-realisation of three non-tax revenue items during the current year has created an additional financing cushion for next year that will partially be consumed by higher tariff differential subsidy for power sector. The next year’s tariff differential subsidy is likely to be increased to about Rs150 billion against the current year’s budget estimates of Rs50 billion and revised estimates of about Rs130 billion.

The official said the exact size of the power sector subsidy would be worked out over the next two days after consultations with the ministry of water and power in the light of proposed increase in electricity tariffs over the next financial year.

The additional cushion would also be used for increasing allocations for the Benazir Income Support Programme (BISP) from the current year’s Rs50 billion to Rs60 billion next year.

He said a proposal forwarded by Minister for Religious Affairs Syed Khurshid Shah about medical insurance for all government employees has been shot down because it required comprehensive working and planning which was not possible in the remaining 10 days before the announcement of the budget on June 1

The official said there would be ‘nothing substantially new’ in the budget even though the government would have only six months or so after the approval of the budget. Some minor adjustments would be made here and there, including reduction in the number of income tax slabs, and minor reductions in income tax rates as a result of reduction in the number of slabs from 17 to 5. Likewise, an earlier proposal to reduce sales tax rate from 16 per cent to 15 per cent has also been rejected.