WEDNESDAY APRIL 27: Budget 2011-12: government targets 4.2 percent growth

ISLAMAABAD: The government has projected a 4.2 percent growth and a 4.5 percent consolidated fiscal deficit for budget 2011-12. It has also set a revenue collection target of Rs 1.952 trillion. Sources said the Ministry of Finance has finalised the budget strategy paper, which and would be presented to the National Assembly Standing Committee on Finance today (Wednesday) for approval.
According to the projections, the Federal Board of Revenue (FBR) revenue collection target for 2011-12 is 9.7 percent of the GDP - 0.6 percent up from previous year downward revised target of 9.1 percent. The fiscal deficit surplus of the provinces has been estimated at 0.6 percent for the next fiscal year while total expenditures have been estimated around Rs 3.4 to 3.5 trillion.
Inflation has been projected at 12 percent while current account deficit has been shown in negative 3.7 percent of the Gross Domestic Products (GDP). The total projection of public debt-to-GDP ratio is estimated to reduce to 50% over the medium-term (this includes repayment of IMF Stand-By Arrangement (SBA) loan.
Exports for the next fiscal year have been estimated at US $25.9 billion against imports of US $39.1 billion. Remittances and gross official reserves for the next fiscal year have been projected at US $11.6 billion and US $17.7 billion, respectively. Sources said the GDP growth for the current fiscal year has been revised downward to 2.8 per cent from original estimates of 4.5 percent and inflation has been increased to 15.5 per cent from original estimate of 9.5 percent.
An official said the FBR tax collection target for the current fiscal year has been revised downward to 1.688 trillion (9.1 percent of GDP) from original target of 1.667 trillion, (9.8 percent of GDP). The budget strategy paper, according to an official, provides guidance towards the finalisation of the annual budget for 2011-12 and the medium-term forward budget estimates for 2012-13 and 2013-14 strictly in accordance with Fiscal Responsibility and Debt Limitation Law (FRDLL).
The aims are to ensure fiscal prudence and consolidation to lay the basis for future sustainable economic growth, employment creation and poverty alleviation. The Standing committee would be informed that the causes that led to a downward revision of GDP from 4.5 per cent to 2.5 percent were largely due to loss of production. The other contributing factors to the economy were the security situation, surging world oil and commodity prices.
The energy shortages perpetuated, inflationary pressures intensified and interest rates were inevitably on the rise. The economy is bouncing back and there are some very encouraging developments that augur well for its future performance. For example, exports of goods have increased by 25% in the last 9 months, and at this pace are likely to cross US $24 billion mark. Remittances are also showing historic performance as these are likely to cross US $11 billion mark.
Reserves at US $17.5 billion are also all time high. These developments have contributed to the stability of the Pakistani Rupee which is maintaining its value at Rs 85-86/one US dollar. According to Finance Ministry, main factors contributing to increased deficit are slow economic growth, non-implementation of Reformed GST, high electricity subsidies, increased interest liability due to higher interest rates, lower dividends, and non realisation of proceeds from the sale of 3G Telecom licence.