Rs 5.246tr ‘tax-free’ budget presented

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PML-N sets new record by presenting 6th 2018-19 Budget in 5 years

Rs1.03-tr PSD; Rs4,435bn FBR tax revenue target; Rs800b development budget; Rs90b for rehabilitation
of IDPs; PSDP slashed, defence spending up; GDP growth rate set at 6.2pc; No tax on income up to
Rs1.2m; Defence budget Rs1,100b; Inflation to kept below 6pc; Net public debt targeted at 63.2pc;
Tax rates considerably lowered; Provincial share in tax revenue increased to Rs2,590b

Mohammad Arshad

Islamabad

The Federal Government, Friday, presented a relief loaded and growth oriented federal budget for the next fiscal year with an outlay of 5246 billion. The presentation of budget turned the ruling Pakistan Muslim League-N as country’s first political party which presented six budgets in its tenure.
“This is a historic moment for the parliament that the 6th budget is being presented. A government cannot run for a day without the budget. The provincial governments cannot decide their budgets without approval of the federal budget,” Ismail explained.
“In 2013 the PML-N government came to power and set up a programme for the economy. We faced certain challenges under the leadership of Nawaz Sharif. Serving the public was our only motivation,” he added.
During Ismail’s address, members of the opposition continued their protests through uninterrupted chanting. They surrounded his dais and threw papers in the air. Opposition members ripped apart copies of the budget while PML-N members encircled Ismail’s dais to keep the protesters at a distance.
The budget for the fiscal year 2018-19 unveiled a Rs1.03-trillion Public Sector Development Programme with 62% proposed to be spent on infrastructure including allocations for projects under the China-Pakistan Economic Corridor.
The proposed PSDP is Rs29 billion or 2.9% higher than the outgoing fiscal year’s original development outlay. The PSDP includes Rs100 billion in block allocations for the next government. About 17.4% of the PSDP will be funded by taking Rs180.3 billion worth of foreign loans in the next fiscal year.
The infrastructure sector has been allotted Rs575 billion or 62% of the proposed budget, social sector has been allotted Rs135 billion or 14%, science and technology has been allotted Rs12 billion or 1%. Special areas have been given Rs72 billion or 8% of the proposed PSDP.
Out of Rs1.03 trillion, the share of Planning Ministry-administrated PSDP will be Rs825 billion, down from outgoing fiscal year’s level of Rs866 billion.
The budget speech began with the finance minister recounting the government’s new tax package, through which it has lowered tax rates considerably. Ismail said the government is using data mining and other technologies to catch tax thieves.
“We have given people one last chance to declare their domestic assets. We will catch them and prosecute them if they do not avail our tax amnesty package,” he asserted.
“Due to high economic growth in the last five years, the size of the economy has increased unusually. It has risen from Rs22,385 billion in 2013 to Rs34,396 billion in 2018. The per capita income during this time has risen from Rs129,005 to Rs180,204,” Ismail announced.
Total allocations for federal ministries are estimated at Rs450.3 billion as against Rs377.8 billion in the outgoing fiscal year. The federal ministries allocations are about 43.6% of the total proposed PSDP. The corporations have been given Rs346.2 billion, Rs34.4 billion or 9% less than the outgoing fiscal year.
The infrastructure sector has been given Rs575 billion or 62% as against 67% of the total development allocated for the outgoing fiscal year. The National Highway Authority will get Rs310 billion as against Rs319 billion in the outgoing fiscal year.
Pakistan Railways will get Rs39.4 billion in the next fiscal year as against Rs43 billion in the outgoing fiscal year. The energy sector, mainly the National Transmission and Dispatch Company and Pakistan Electric Power Company, has been given Rs36.2 billion, down from outgoing fiscal year’s level of Rs61 billion.
An amount of Rs105 billion has been proposed for Finance Ministry administered PSDP. This includes Rs90 billion for security enhancement and relief for Temporarily Displaced Persons affected by Operation Zarb-e-Azb. However, the nature of this spending falls under the current expenditures but the government has clubbed it with development, which has diverted significant portion of the budget for non-development activities
The Ministry of National Health Services, Regulations and Coordination has seen major cut in its allocation. As against Rs48.7 billion, the government has proposed only Rs25 billion for next fiscal year. The Kashmir Affairs & Gilgit Baltistan Division will get Rs51.2 billion in the next fiscal year as against Rs43.6 billion in the outgoing fiscal year.
The Planning Ministry will get Rs27.5 billion as against 16.8 billion budget in the outgoing fiscal year. The Water Resources Division will get Rs79.5 billion in the new fiscal year as against its Rs36.5 billion in the outgoing fiscal year.
The government has abolished the PM’s Energy for All and Clean Drinking Water initiatives. For PM’s Global SDG’s Goals, an amount of Rs5 billion has been proposed as against Rs30 billion in the outgoing fiscal year. This money is being spent on the recommendations of parliamentarians.
The Special Federal Development Programme has also been abolished. In the outgoing fiscal year, Rs40 billion had been allocated under this head which were spent on the PM’s Directives.
The Interior Division has been given Rs24.2 billion as against Rs15.7 billion. The Pakistan Atomic Energy Commission has been given Rs30.4 billion as against Rs15 billion in the outgoing fiscal year. The Ministry of States & Frontier Regions would get Rs28.2 billion as against Rs26.9 billion in the outgoing fiscal year.
An amount of Rs10 billion has been given for the first time for the FATA Development Plan. For construction of the Sukkur-Multan section of CPEC’s eastern route, Rs30.8 billion has been proposed against the remaining requirement of Rs121.9 billion. The total cost of the project is Rs298 billion.
For the construction of Hakla-Yarik-Dera Ismail Khan motorway of CPEC’s western route, the Planning Commission has proposed Rs25 billion for the next fiscal year as against Rs38 billion for outgoing fiscal year. The total cost of this scheme is Rs110.2 billion.
For land acquisition of the Sukkur-Hyderabad section of CPEC Rs10 billion have been proposed for the next fiscal year as against the requirement of Rs22 billion. For land acquisition of Islamabad Raikot section for CPEC Rs1.5 billion have been proposed.
For construction of the Eastbay road project of Gwadar Rs6 billion have been proposed for the next fiscal year. For Pak-China technical and vocational centre Rs625 million have been proposed.
While presenting the budget in the National Assembly the newly appointed Finance Minister Dr Miftah Ismail said that the federal gross revenue receipts were estimated at 5661 billion rupees as compared to 4992 billion rupees in the outgoing year.
“This includes FBR’s tax estimates of 4435 billion rupees as against revised estimates of 3935 billion rupees for the current financial year. Out of the total revenues, the provincial governments’ share is estimated to 2590 billion rupees as compared to 2316 billion rupees revised estimates for the current financial year” he added.
“This is a historic moment for the parliament that the 6th budget is being presented. We cannot interrupt the 5.8 per cent GDP growth. However the next government will have the right to make changes to the budget,” he assured the opposition. “Today’s budget is a reflection of Nawaz Sharif’s vision. We are missing him here today.”
“In 2013 the PML-N government came to power and set up a programme for the economy. We faced certain challenges under the leadership of Nawaz Sharif. Serving the public was our only motivation,” he added.
Ismail said the government is using data mining and other technologies to catch tax thieves.”Due to high economic growth in the last five years, the size of the economy has increased unusually. It has risen from Rs22,385 billion in 2013 to Rs34,396 billion in 2018. The per capita income during this time has risen from Rs129,005 to Rs180,204,” Ismail announced.
The target GDP growth rate for the upcoming fiscal year has been set at 6.2pc against FY17-18’s target of 6pc. The total tax target is Rs4,888.6bn, of which the FBR taxes comprise Rs4,435bn. The non-tax revenue target has been set at Rs1,246bn, according to a copy of the budget 18-19. The provincial share in tax revenue will be increased from Rs2,316bn to Rs2,590bn, Ismail added.
The government also intends to restrict the overall fiscal deficit to Rs1890.2bn or 4.9pc of the GDP, down from the revised estimates for the year 2017-18 which stood at 5.5pc, and inflation to below 6pc, Ismail said.
The government estimates forex reserves to come to about $15bn in FY18-19. The target tax to GDP ratio is 13.8pc, while the target net public debt to GDP ratio 63.2pc, the finance minister announced.
“The objective of the medium term macroeconomic policy, besides improved economic growth, is to correct the balance in the external account,” Ismail said. “The fiscal deficit will be reduced in the next three years and the environment for investment will be improved.”
Agricultural production is slated to increase, Ismail said, with the government intending to continue implementing an agricultural policy in FY18-19 “until we end the tradition of subsidies”. Loans to the agriculture sector will increase to Rs1,100bn, he said.
“I am happy to announce that while we had proposed a 3pc sales tax on fertilizer, the PM has approved sales tax of 2pc only on the recommendation of Sikandar Bosan, the food security minister.” “The government wants to introduce renewable energy in all sectors,” Ismail added. “It is proposed that the 16pc duty on charging stations for electric cars be ended.”
In the aftermath of the 7th NFC, the provinces have been issued an extra Rs2,500bn in eight years, and the federal government will have a reduced share in the NFC, he said.
Karachi package
A large-scale desalination plant will be set up in Karachi to end the city’s water woes, Ismail said. Rs5bn will be allocated for the construction of roads, fire brigades and bridges in the coming fiscal year. Rs8bn will be set aside for expansion of the Expo Centre, he added.
A special package called the 100,100,100 programme focusing on children’s development was announced by Ismail. Under the package, the government is targeting 100pc admission, attendance and graduation of children in schools. The government will pay for the transportation of female students to school, he added.
Another special package amounting to Rs10b – along with a supplementary grant – was announced for children’s health. “40pc of children experience stunted growth,” the finance minister said. “It will be tolerated no more,” he said, adding that stunting would end by 2020. “This is the prime minister’s promise.”
The PM’s National Health Programme, under which 3,000,000 families across Pakistan are already receiving coverage, will be extended to all districts in the country and will help us achieve the Sustainable Development Goals, Ismail announced. “A survey will be held every two to three years to provide us better statistics,” he added.
“Today we are the 24th largest economy in the world,” Ismail told the lower house. “The GDP growth rate was 5.4pc last year – it has now grown to 5.8pc, the highest in 13 years,” he recalled. “In the last five years, inflation has been kept below 5pc which was up to 12pc when we took over. The budget deficit will remain restricted to 5pc this year,” he said. “The State Bank policy rate was 5.7pc which was the lowest in decades, coming down from over 9pc. The lowest interest rate in history has brought an increase in businesses” he explained.
“Exports have been under pressure… Imports have increased 17pc because of high machinery imports,” he said, adding that the current account deficit had increased Rs12bn in the first nine months of FY17-18.
“The government has made all efforts, and I am sure that foreign exchange reserves will be higher in June than they are today. In the ongoing year, foreign investment has risen from $1.9bn to $2.1bn.”
“The objective of the medium term macroeconomic policy, besides improved economic growth, is to correct the balance in the external account,” Ismail said.
“The fiscal deficit will be reduced in the next three years and the environment for investment will be improved.” “The government will continue investment in social protection and the Benazir Income Support Programme, and will take steps for the underprivileged communities through targeted subsidy schemes. The federal government also intends to provide income support to more than 5m families, and has allocated funds to the Baitul Maal and Poverty Alleviation Fund for this purpose.

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