FY13 Budget caught in election-year politics: Rs 2.96trn outlay with Rs1.105trn deficit

ZAHEER ABBASI

ISLAMABAD: Finance Minister Dr Abdul Hafeez Shaikh unveiled 2012-13 federal budget of Rs 2.960 trillion with a deficit of Rs 1.105 trillion, 50 percent of total envisaged Federal Board of Revenue tax collections, fuelling concerns that reliance on domestic borrowing would continue that would result in inflation and restrain growth.

Finance Minister acknowledged the inability of the government to bring the rich into the tax net and few seem lend credence to his claim that the government succeeded in achieving macroeconomic stability on the face of growing energy crisis, widening balance of payment position, rising current account deficit and sliding rupee against the dollar. The  minister barely audible amid deafening protest by the opposition and some scuffles between the treasury and opposition members announced a 20 percent increase in salary of civil servants and tax relief measures for the honest tax payers. He also disclosed an ambitious revenue target of Rs 3.2334 trillion for the next fiscal year with Rs 2.384 billion tax collection by the Federal Board of Revenue (FBR). The minister said that federal outlay of Rs 2.960 trillion for next fiscal year is 0.6 percent higher over the revised outlay of Rs.2.940 trillion for the outgoing financial year.

Hafeez Shaikh said that a sum of Rs.1, 459 billion will be transferred to provinces next fiscal year, over 21.3 percent higher compared to Rs 1, 203 billion for outgoing fiscal year. Net federal revenues are estimated at Rs. l,775 billion for next fiscal year, 16.1 percent higher compared to Rs.1, 529 billion for the current fiscal year. The budget deficit estimated at Rs.1185 billion is projected to decline to 4.7 percent or Rs 1105 billion for next fiscal year with an estimated provincial surplus of Rs.80 billion. The government has further revised upward the budget deficit for the current fiscal year to 5.5 percent of GDP, excluding debt consolidation of Rs.391 billion, which is 1.9 percent of GDP on account of electricity and commodities operation. An amount of Rs 70 billion has been estimated for Benazir Income Support Program in the next fiscal year against Rs.50 billion for the current fiscal year. And t Rs.10 billion has been allocated for Export Development Fund in the budget for 2012-13.

The Minister announced that a targeted subsidy on food items would be provided to help low income consumers through the Utility Stores Corporation (USC) and BISP cardholders would be given a special additional discount of 10 percent on essential food items, including sugar, ghee, rice, daal channa, daal moong, and wheat flour.

Hafeez Shaikh said the government would initiate a programme to provide skilled training to more than one hundred thousands unemployed youth at an estimated cost of Rs. 9.5 billion in 2012-13. The minister said the federal government has decided to promote higher education in Balochistan, Fata and Gilgit-Baltistan by paying tuition fees of all students studying for masters and PhD in reputable universities of Pakistan with an allocation of Rs.500 million annually. Finance Minister said that the government has decided to give subsidy for sale of solar tube wells and allocated an amount of Rs 183 billion on account of subsidy to deal with energy crisis. He said that the federal cabinet has also empowered him to give as much money as is required to deal with the energy crisis.

Finance Minister said that the government has decided to convert the Prime Minister House into an advanced studies institution and the Prime Minister would move into smaller accommodation.

Announcing tax relief, he said that honest tax payers have not been burdened instead, the budget for next fiscal year would provide relief.  The Finance Minister said that higher rates of 19.5 to 22 percent sales tax have been slashed to 16 percent across the board, federal excise duty (FED) eliminated on 10 items and custom duty has been reduced from 35 to 30 percent on 293 items. The basic exemption limit has been raised for salaried and business individuals to Rs.400,000 and reduced the existing slabs from 17 to 5.

The maximum general tariff slab has been reduced from 35 percent to 30 percent, the custom duty on raw materials and components for printing and stationery sector has been slashed on 88 pharmaceutical raw materials and other input goods has been further reduced from 10 percent to 5 percent. The minister said that value of vehicles has enhanced from Rs 1.5 million to Rs 2.5 million. The minister said that to provide relief to the employees availing small amounts of loans from their employer, the loan up to Rs. 500,000/- is proposed to be exempt from income tax whereas the benchmark interest rate for loans above this limit shall be fixed at 10 percent instead of the progressively increasing rate which has reached 13 percent.