ISLAMABAD: The Ministry of Finance has prepared broad contours of the federal budget 2013-14, envisaging an overall outlay of about Rs3.43 trillion and a deficit of about 4.3 per cent of GDP.

The budget strategy paper (BSP) is expected to be presented to the federal cabinet on March 6 for clearance after which the Ministry of Finance will firm up budgetary estimates for next year.

A senior government official told Dawn that on the basis of the latest fiscal figures the current year’s fiscal deficit was estimated at six per cent of GDP because of over Rs300 billion slippages on three main heads -- shortfall in Federal Board of Revenue’s tax collection, much higher power subsidies than the budgetary target and failure to hold the auction of third generation telecom licences.

The budget deficit was originally set at 4.7 per cent.

He said the government had estimated power sector subsidies at Rs120 billion, but actual disbursements under the head exceeded Rs235 billion during the first eight months of the current fiscal year. With the government now focussing on providing maximum funds for procurement of fuel oil for power generation to contain the increasing power shortage, the power sector may end up spending over Rs350 billion by the end of the current fiscal year.

Likewise, the FBR appears to be facing difficulty in putting together Rs2.190 trillion revised target for tax collection, down from the budgetary target of Rs2.381 trillion. The next year’s tax target will be slightly higher than the current year’s budgetary target. Roughly, the target would be less than Rs2.5 trillion for the next year, the official said.

The overall size of next year’s budget at Rs3.43 trillion is initially estimated to be seven per cent higher than the current year’s outlay of about Rs3.203 trillion. The allocation for the public sector development programme will be about Rs450 billion, compared to current year’s Rs360 billion, an increase of about 25 per cent.

The BSP suggests a nominal increase of five per cent in basic salary of government employees. The official said the next government would have the option of making adjustments in allocations for development programme, defence and salaries according to its economic priorities.

The BSP has been finalised without any tax amnesty scheme as previously proposed by the FBR.

The official said the caretaker government would have to immediately start negotiations with the International Monetary Fund for a bailout package of about $4-5 billion to strengthen foreign exchange reserves and improve the balance of payment position.

He ruled out the possibility of convening a meeting of the Council of Common Interests (CCI) to share the budget outline with the chief ministers before March 16 when the government would complete its five-year term and the formality might be completed by the caretaker set-up.

The focus of the fiscal management next year will be on strengthening provincial budgets because the provincial governments have attained greater importance following a squeeze on federal resources because of the 7th National Finance Commission award entailing higher transfers to the provinces.

The official said the finance ministry’s consultations with other ministries and divisions were continuing in line with budget calendar already disseminated to them with the aim of completing all formalities for presentation of the budget by May 31. “Our target is toannounce the budget on May 31 which can be delayed for a week or so depending on political transition,” he said.

The ‘priorities committee’ will hold meetings with all ministries, divisions, institutions and corporations between April 1 and 12 to finalise the budget, including development and current expenditures, along with expected revenues and receipts.

Principal accounting officers will brief the committee comprising the Ministry of Finance, Planning Commission and Economic Affairs Division on their plans, strategies and financing requirements and sources on current and development sides of the budget.

A meeting of the Annual Planning and Coordination Committee will be held in the last week of April to recommend the public sector development programme and finalise macroeconomic framework for approval by the National Economic Council which is tentatively scheduled for the first week of May.

The budget documents, including financial management application software and green book, will be finalised by May 14 so that its printing could be completed at least 10 days before the budget speech.