ISLAMABAD: Prime Minister Nawaz Sharif cautioned his economic team on Tuesday against setting unrealistic targets for the next financial year, 2015-16. He was chairing a budget strategy meeting for the upcoming financial year.

A participant quoted the PM as saying, “It is advisable to only talk about those things which the government can achieve at the end of the day.”

He was perhaps referring to lessons learnt from past experiences of unsuccessfully following up on government claims to end loadshedding within six months of taking over. Throughout the meeting, sources said, the PM kept warning his ministers “if you fail to achieve your targets it will only bring embarrassment to the government, so be careful”.

Also read: Budget 2015-16: hunger for growth

For example, Finance Minister Ishaq Dar projected that the Gross Domestic Product (GDP) growth rate for the next financial year would be 6 per cent. At this, the PM said that 5pc or, at most, 5.5pc was enough because “if we fail to show 6pc growth, the people will criticise us”.

The government has set an export target of around $25 billion for the next financial year. Commerce Minister Khurram Dastgir, who will be the one looking to achieve this target, was asked by the PM, more than once if he was comfortable with the figure.

“This target is meant to be practically achieved, not just presented to the general public,” the prime minister was quoted as saying to Mr Dastgir.

The PM also advised his economic managers to increase the tax base instead of taxing the already taxed. There were suggestions, according to a source, to impose extra taxes on the effluent class, which is already part of the tax net.

During the meeting, Petroleum Minister Shahid Khaqan Abbasi pleaded for an increase in gas tariff, arguing that the sector was suffering due to the low rates that the government charged domestic consumers.

Though the PM agreed with Mr Abbasi’s argument, he refused to include his suggestion in the federal budget. “If we increase the prices of gas in the budget, the opposition will not spare us,” he said.

Failure to achieve targets will bring embarrassment to the government, ministers warned

After the meeting, the PM Office’s Media Wing issued a statement quoting the PM as saying: “The next budget should focus on the welfare of the common people so that the process of transferring the fruits of growing economic stability of the country was further strengthened. Out of the box solutions must be explored in designing tax proposals for broadening the base to increase revenues. A system should be devised which results in reduction of corruption and encourage voluntary compliance from taxpayers.”

The cabinet meeting noted that while benefits of mega projects that were in the pipeline would start unfolding in the next five to ten years, immediate measures were needed to encourage investment in the private sector.

The PM directed that the overall prosperity of the masses should be the top priority in the next budget and said that the current trend of GDP growth should continue to increase employment opportunities for the youth. 

“We must address issues [in the] agriculture and manufacturing sectors to boost growth and work day in and day out to further strengthen the country’s economy,” he said.

The cabinet, after detailed discussions, approved the Budget Strategy Paper 2015-16.

In his briefing to the meeting, the finance minister said, in its medium-term plans, the government intended to raise the GDP to around 7pc and contain inflation to single digit i.e. less than 6pc. “We intend to bring down the fiscal deficit to 4pc and increase foreign exchange reserves to $20bn. We have also set the target of increasing the tax-GDP ratio to 13pc.

Revenue collection

The finance minister briefed the cabinet that the FBR tax collection was increased from Rs1,946bn in 2012-13 to Rs2,266bn in 2013-14 and during the last 10 months the tax collection has reached to Rs1,968bn with an increase of 12.8pc from the corresponding period of the last financial year. There has been an increase of 200,000 taxpayers in the last two years, he said.

Economic indicators

The finance minister said that in its first year, the government achieved a GDP growth rate of 4.02pc and in the current year, it will achieve 4.24pc, which would be the highest in the last seven years. He said that the government had also brought down the budget deficit from 8.2pc in 2012-13 to 5.0pc in the current year. Overseas remittances also reached $14.8bn in the July-April period of the current fiscal year, showing a growth of 16.06pc. He said that the country’s foreign exchange reserves had also reached $17.5bn on May 25, 2015.

Inherited weak economy

The finance minister didn’t forget to recall the sorry state of economy when the PML-N took over. “When we took charge, the economy was weak and fragile and the growth rate averaged less than 3pc and inflation averaged around 12pc. The circular debt of Rs503bn was crippling the power sector and economy.” The fiscal deficit was hovering around 8.8pc and there were predictions of default. However, due to the economic policies of the government, the economy is now performing well, he said.

Published in Dawn, May 27th, 2015

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