SUNDAY MAY 22: Hafeez promises business-friendly budget

KARACHI: All major economic issues afflicting the economy will be addressed within the budgetary framework to reduce inflation and enhance growth, said Dr Abdul Hafeez Shaikh, Minister for Finance. Hafeez Shaikh, while addressing a press conference here on Saturday, said that Sales Tax was being further reformed and would be implemented from next fiscal year.
However, he claimed that, next budget, would be business friendly and focused on revenue collection, private sector credit, fiscal deficit and energy crisis, besides tightened expenditure of government. "We will endeavour to enhance credit to private sector to create new job opportunities, while government expenditures will be further curtailed to reduce its dependence on the banking system", he added.
He said that budget framework was being prepared through a consultation process with parliamentary groups, businessmen, trade bodies, academia, economic and taxation experts. For this purpose, government has constituted a Revenue Advisory Council, Economic Advisory Council and several sub-committees to gather input on economic issues and enhance revenue collection, the minister added.
"Stabilising the economy, reducing government borrowing, creating new job opportunities, increasing exports, tackling energy crisis by sorting out the circular debt issue and tightening funding to public sector enterprises will be focused in the next budget," Hafeez said.
Hafeez said the vision of the government is to get back to a higher growth path and reduce inflation along with protections of vulnerable sectors. "It is also our basic aim to tax the un-taxed sectors, broaden tax revenues and eliminate exemptions," he mentioned. Responding to a question about cut in defence budget, he said that in the current situation in the region as well as in the country, there was a need to further strengthen defence of the country. However, he said that, all decision in the budget would be balanced.
He said that present government inherited economic problems, however, things were now being brought under control and economic indicators of past one year were better than previous years. "We can not say that economic situation is satisfactory but economy has shown resilience and is beginning to stabilise," he added. Minister said that in recent years the economy has faced severe turbulence like unprecedented floods and estimated damage is $10 million. Two million families were affected. Giving one lakh rupees to each family means Rs 200 billion. So far an amount of over Rs 40 billion has been distributed through Watan Cards.
Briefing about the economic achievements in the fiscal year 2011, he said that the government has taken several steps to reduce fiscal deficit and it would be 5.5 percent of GDP for the current fiscal year as against the economists' estimates of 8 percent. He said that external sector did well and GDP growth remained between 2.5 to 3 percent end of June this year. Exports will be all time high level of $24 billion with a historical growth of 28 percent. In addition, home remittances will cross $11 billion mark this year as foreign exchange reserves crossed $17 billion, he added.
Minister said that the raise in revenue collection was big challenge for the government and recently Federal Board of Revenue (FBR) had identified 700,000 wealthy people, enjoying a luxurious life but not paying tax, out of these some 55,000 had been issued notices to pay taxes as they had cars, big houses and were enjoying foreign tours without paying a single penny tax.
He said national growth policy has almost finalised and soon would be presented to President and Prime Minister for formal approval. "The economy has many challenges including energy and massive growth in population, government is struggling to overcome these challenges," he said.
Under the new NFC award provinces share has been raised to 57 percent from 50 percent. As per new sharing formula, provinces have been provided an additional Rs 300 to Rs 330 billions this year to build roads, undertake new water supply schemes, improve policing and to improve social indicators. This has created some financial problems for the federal government, the minister said. Talking about the SBP's tight monetary policy, he said that State Bank is autonomous and government does not influence SBP's monetary policy decisions.
Due to the flood, government's revenue and GDP growth target was disturbed and only 2.5 percent of GDP growth was achieved as against the target of 4.5 percent. Similarly, rising petroleum prices have also hurt the economic targets. Crude oil prices crossed $100 mark in the world market, which was unexpected, he added.
"We have taken several tough decisions to provide maximum relief to the general masses," the minister said. The minister said government has also decided to enhance allocation under the relief schemes like Benazir Income Support Fund (BISF) to reduce poverty in the country. On the occasion Governor State Bank Dr Shahid Kardar, Chairman FBR Salman Siddique and Secretary General Finance Dr Waqar Masood were also present.