Just six days after assuming the power in the Centre, the PML-N Finance Minister Ishaq Dar presents the annual national budget, having a total outlay of Rs 3.591 trillion for the year 2013-14 in the National Assembly on Wednesday. Earlier in a special meeting, the Federal Cabinet, with the Prime Minister Nawaz Sharif in the chair, formally approved the budget after reviewing the budgetary proposals. The Finance Minister gave a detailed briefing of the current financial year, which he called a bad one, having widespread slippages on economic targets and remedies offered in the budget for revival of the Country’s ailing economy.
During the current year, the GDP growth rate was targeted at 4.3pc, but estimates put it at 3.6pc. The revenue target was Rs2.381 trillion, but it faces a massive Rs350billion shortfall. Total investment was 14.9pc, but only 14.2pc is achieved. The investment-to-GDP ratio was targeted at 13.3pc, but it stood around 12.6pc-- far too short to run the industry and economy. The agriculture sector grew at the rate of 3.3 per cent against the target of 4.1%. The services sector just achieved a growth rate of 3.7 % against set target of 4.3pc. Industrial performance grew at 2.8pc against a target of 2pc—marginally above the estimates. Indeed, the overall economic growth rate has been pathetic. The fiscal management also does not paint a rosy picture. The current account deficit was expected to $2 billion that actually turned out be $2.9 billion and the Foreign Exchange Reserves held by the SBP stand at a dismal $6.2bn. The public debt, which was staggering at Rs3 trillion in June 1999, had jumped to Rs13.25 trillion in March this year and is likely to reach Rs14 trillion by the end of the financial year—of course it is not sustainable at all. In such pathetic economic conditions, overcoming the energy crisis, stabling the economy, cutting down on non-development expenditures and enhancing productivity are the prime goals, the government had to focus on, thus in the first national budget for the PML-N government has unveiled new growth strategies. To redress the immediate concern of the nation, Rs 225 billion has been earmarked for the energy sector and Rs 59 billion for the construction of new dams--apart from promising to restrict the exaggeratedly high line losses in the power sector. If the government manages to bring down half of its power losses, it can save around Rs 100 billion. Yet it will bring no respite for the general consumers, as the government intends to bring down subsidies and gradually increase electricity tariff for all. Minutes before the budget announcement, the Nepra notified another increase in the power tariff which must have rocked the masses, hoping for any sort of relief. In an attempt to boost Pakistan’s tax-to-GDP ratio from existing 8.9% to 15 per cent to meet the revenue target of Rs 2.75 trillion rupees, the government had proposed to bring General Sales Tax up from 16 per cent to 17 per cent meaning thereby that the price of every essential house-hold item will go up unless accorded special exemption. Middle class and the poor people, already battered by the worst price hike, might rue the impact once the GST increase is implemented. But to the immediate delight of the House that mostly comprises filthy rich members; the Finance Minister extended 100 per cent exemption of all duties and taxes to the imported eco-friendly hybrid cars up to 1200cc. A concession of 25 percent has also been proposed for 1800-2500 cc cars and 50% duty reduction on 1200-1800 cc cars. Great! All rich bureaucrats, politicians, army men, business men can buy fuel-efficient new cars that too at subsidized rate of levies.
Offering some consolation to the under-privileged class, the government has decided to offer interest-free loans at the provincial level, and at least 50 per cent of those benefiting from these cheap loans will be women—the decision will give some relief to those who had no one seek financial help from provided the scheme is judiciously executed, ensuring a highest degree of transparency. Denying raise to the salaried class, pensioners get 10 per cent increase and minimum pension goes up Rs 3000 to Rs 5000 a month.
The taxation proposals don’t carry any new tax on those who are already paying taxes; however, the rate of taxation will go up. Once again the government reiterated to expand tax base. On the other hand, the finance Minister promised to decrease corporate tax by one per cent each year—yet another move that will serve the rich corporate sector. Contrary to this, two percent adjustable withholding tax had been proposed on the functions held in hotels‚ clubs‚ marriage halls and restaurants. The minimum tax rate has enhanced from 0.5 per cent to one percent of the annual income. Unregistered industrial and commercial electricity connections are also now liable to five percent additional sales tax. Putting slabs on salaries, the tax on salaried persons will be rationalized according to their salaries. Similarly, to rationalize tax on the business men, two slabs had been created under which tax rate from 25 per cent goes up to 35 per cent on the income of Rs six million. Small farmer, who hardly earn taxable income, is no more entitled to the agriculture credit.
A new adjustable withholding tax had been clamped on foreign films and dramas that will make the entertainment for the general public more expensive. The Prime Minister’s discretionary fund and secret funds of all government departments had been frozen and scrapped; the same should be applied on the security agencies. Pakistan’s economy is battered thus the harsh measures are no surprise. Yet the measures announced in the PML-N debut budget are too harsh and contrary to the expectations of the masses who voted the PML-N to power. Soon the brunt of the initiatives will fall on them like a sword. The gimmick of words used in the speech will falsify the public oratory used by the PML-N in the run-up of May 11 elections. Though the Finance Minister claims the budget has been chalked out, in line with the vision of the populist Prime Minister to ensure revival of the Pakistan’s economy; but the remedies offered in the federal budget give the feelings that the federal budget 2013-14 complies with the reflections of the International Monetary Fund. By all means, the federal budget 2013-14 is hardly a people-friendly budget rather a tough call in tough economic conditions.
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