4
KARACHI: Pakistan is due to announce its budget for the 2011/12 (July-June) fiscal year on May 28. The International Monetary Fund and Pakistan began talks on Wednesday in Dubai to discuss budget targets.
Following are some targets that could be announced:
ECONOMIC GROWTH
Pakistan's economy is expected to grow 4.2 per cent in the coming financial year, which starts on July 1, after what is expected to be growth of 2.4 per cent this fiscal year.
The Asian Development Bank has forecast growth next year will be 3.7 per cent. It expects persistent energy problems and security issues will continue to check Pakistan's growth in 2011/12, with surging inflation posing a major risk.
REVENUE TARGET
According to reports, the government is targeting tax revenue at 1.95 trillion rupees ($23 billion) in the next fiscal year, compared with the Federal Board of Revenue's estimate of revenues of 1.59 trillion rupees ($18.7 billion) this fiscal year.
Analysts expect the revenue board to collect 1.5 trillion rupees this year and some say its target for next year's tax revenue could be unrealistic.
EXPENDITURE
Analysts said there is hardly any room to cut on the expenditure side as 75 per cent of the Federal Board of Revenue's tax revenue goes on debt servicing or interest repayments and security related expenditure.
However, the government could eliminate untargeted subsidies such as electricity subsidies. Another option would be to sell off loss-making public sector enterprises which according to analysts would cost about 300 billion rupees ($3.5 billion) this year just to run.
DEFENSE
According to finance officials, Pakistan is budgeting 495 billion rupees ($5.8 billion) for defense, an 11.7 per cent increase from last year. Analysts said that was a realistic increase and was less than the annual rate of inflation which is at 13.04 per cent.
INFLATION and FISCAL DEFICIT
Inflation is being projected to come in at 12 per cent next year while the fiscal deficit is expected to be contained to 4.5 per cent of GDP.
POSSIBLE REVENUE MEASURES
- Imposition of a gross asset tax or a wealth tax.
- Imposition of a reformed general sales tax or a “plan B” which would include removal of exemptions.
- Imposition of tax on agricultural income but that would be announced in provincial budgets.
