LAHORE, June 2: Adviser to Prime Minister on Finance and Economic Affairs Dr Salman Shah has said the federal budget will focus on the under-privileged segments of society with major emphasis on human resource and skill development.
Speaking and answering questions at a pre-budget seminar organised by the Press Information Department here on Friday, he claimed that not only pays and allowances and pensions of the government employees would be enhanced, but the minimum wages of industrial workers would also be raised. The teachers would be offered better salaries.
He said savings’ profit rates could go up and the withholding tax could be made adjustable. An increase in interest rate was being opposed on the grounds that it could slow down the growth.
He said the foreign exchange reserves stood at $13 billion and the government was considering fixing the reserve level equivalent to the import requirements for six months and utilise the excess amount because the return on maintaining the reserves was negligible compared to investment.
The major emphasis of the budget would be on human resource development through increased opportunities for education and training and growth of services sector for ensuring sustained economic development and creating new job opportunities. He said the government had decided to concentrate on HRD because the country had the advantage of having a large population.
As for education, he said President Gen Pervez Musharraf had ordered raising the budget allocation to four per cent of the GDP.
The adviser said the government had decided to encourage public-sector investment in infrastructure development. The experiment had been successful in many countries and could be a success in Pakistan as well. He also said the engineering industry growth could facilitate growth of vendor industry and create jobs, besides making the prices of products competitive due to economy of scale.
He said the subsidies and grants had been reduced to Rs200 billion per annum owing to privatisation of banks and public-sector units. These were being paid mainly on power and fuel. The subsidy being paid to the Karachi Electric Supply Corporation alone before privatisation was more than the development budget of Sindh.
The power sector, he said, would continue receiving a subsidy of Rs60 million even after the KESC privatisation. The government was also providing subsidy on 30,000 tons of sugar being sold through the utility stores.
According to Mr Shah, around 65 per cent of the revenue was being collected through indirect taxes and only 35 per cent through direct ones. The percentage of direct taxes could be increased only by bringing the sectors not paying the taxes in the net. The ratio of indirect taxes was higher than that in the developed countries, but it was much lower than neighbouring Afghanistan where 100 per cent government revenue came from the tax on trade, which was an indirect tax.
He said the general sales tax did not affect the poor segments of society because it was related to consumption. Over 35 million people living below the poverty line consumed less and paid less GST.
The Rs450 billion Public Sector Development Project allocation was four to five per cent of the GDP and its ratio required to be enhanced. The PSDP allocation included Rs50 million to be spent on rehabilitation of the quake victims.