ISLAMABAD: As expec­ted, the government unveiled an election year budget that has a steep hike in development spending, while avoiding any painful revenue measures.

Finance Minister Ishaq Dar promised relief measures for civil and military personnel and schemes for agriculture, exports and textile to name a few and a jacked up development programme by 40 per cent to spur economic growth, that the government is hoping to take to 6pc by the end of the next fiscal year when it will be preparing to hand over the reins of government to an interim government in preparation for a general election.

The bulk of the new revenues to pay for this ambitious programme will come from FBR tax revenues, which have a poor track record of meeting even more modest targets.

Budget eyes elections, Development spending hiked, Super tax to continue

A 12pc hike in FBR revenues has been assumed to come automatically from inflation and the rate of economic growth, said Finance Secretary Tariq Bajwa, speaking on phone with Dawn. Of the remaining amount, he said non-filers of tax returns would face a significant burden, but did not explain further. The budget documents also cast scant light on the matter. After this, an increased tax burden on business and industry is envisioned to fill the rest. A fixed tax regime for real estate builders and developers introduced last year has been withdrawn.

The minister dwelt at length on the journey his government has travelled, reminding the assembly that the country stood “on the brink of default” when he assumed charge of its financial health in 2013. Throughout his appearances for the economic survey and the budget speech, he has sought to cast his track record as having turned the economy around.

“Today Pakistan is on the cusp of a high growth trajectory” he declared triumphantly, pointing to foreign exchange reserves sufficient to cover four months of imports, tax revenues that have increased by 81pc and a fiscal deficit at 4.2pc as a revival in growth gets underway. At times, it sounded less like a budget speech and more like a curtain raiser for his party’s forthcoming election campaign. “By 2030, Pakistan will join the G20,” he repeated several times. The budget itself cut a contrast with the rhetoric. It avoids any innovative new measures, any robust revenue lines, or any hikes in current spending, preferring to focus all its resources on brick and mortar style development.

Subsidies for the power sector have generally been kept unchanged at the level of current year. Last year the government overshot its subsidy allocation by almost 50pc, so it is not clear how they intend to remain within the allocation this year without raising power tariffs. A super tax imposed on the rich and companies for one year in 2014-5 has been extended for another year. Income taxes for salaried individuals have not seen any significant changes.

A key point of Mr Dar’s speech was Rs125 billion additional financial impact on increase in salaries, allowances and pensions of civil and military officials that was not fully represented in the budget books that showed just Rs6-7 billion of increased allocations.

The finance secretary told Dawn that the government would seek to shift money from various existing heads to arrange these funds into the fiscal year, as well as seek supplementary grants down the road. He explained that a last-minute approval given to the salary hikes made it difficult to programme the funds into the allocations.

He said the additional impact of increase in salaries and pensions would be partly adjusted within various existing heads and remaining would be covered through supplementary grants down the road because this was an area approved at the last moment by the federal cabinet.

The total size of the federal budget (expenditure) has been estimated at Rs4.753 trillion for next fiscal year, about 8pc higher than Rs4.395trn budget estimates for the current year. This would include a public sector development programme of Rs1.001 trillion, almost 40pc higher than current year’s revised estimate of Rs715bn. This meant the PSDP was cut this year by Rs85bn or almost 11pc to adjust for slippages on tax front whose target was also brought down by Rs100bn to Rs3.521trn.

For next year, the FBR taxes have been estimated at Rs4.013trn or Rs492bn higher than revised estimates for the current year. Non-tax revenue is estimated to increase by a nominal 2pc next year to Rs980bn from current year’s budget estimates of Rs959.5bn –a target missed by about Rs48bn.

Tax revenue for the next year has been pitched at Rs4.33trn, up 9.5pc over current year’s Rs3.956trn target missed by a substantial Rs131bn.

The budget deficit for the next year has been estimated at 4.1pc of GDP (Rs1.480trn) to be achieved through Rs347bn cash contribution by the provinces when compared to 4.2pc of GDP deficit during current year.

Published in Dawn, May 27th, 2017