Govt to keep inflation under 6pc, budget deficit at 4.1pc

KARACHI: Announcing details of the budget strategy, the finance minister said the government was aiming to keep inflations rate under six percent, and budget deficit at four percent.

"The government followed a policy of fiscal consolidation because of which fiscal deficit reduced from 8.2 percent to the current year's 4.2 percent.

This was achieved through higher revenue collection through improved administration and broadening of the tax base, undoing decades-old concessionary SRO and curtailing non-development expenditure of the government," said Dar.

"In fiscal year 2012-13, FBR collection was Rs1,946 billion. For the current year the target is Rs3,521 billion.

This represents a historic increase of 81 perecent in the last 4 years with average annual growth of 20 percent.

"Tax to GDP ratio, which was 10.1 percent in fiscal year 2012-13, is likely to increase to 13.2 percent this year," said Dar, adding the government was targeting tax to GDP ratio of 13.7 percent in the year 2017-18.

He said the PML-N administration was targeting increase in real GDP growth to 6 percent, taking investment to GDP ratio to 17 percent, net public debt to GDP ratio below 60 percent of GDP, and keeping foreign exchange reserve levels adequate enough to cover a minimum of 4 months of imports.

The foreign exchange reserves stand today at $16 billion, which come up to $21 billion after adding the bank reserves, he stated.

Tax collection target for the upcoming fiscal year has been set at Rs3,521 billion, he added. Announcing further measures in the budget, the finance minister said the minimum wage for unskilled workers would be raised from Rs14,000 to Rs15,000.

The minister said an investment of Rs97 billion is being undertaken in the Pakistan Stock Exchange.

He also said that women will be given representation in listed companies as well as representation in boards of governors. The government is aiming to achieve a tax revenue target of Rs4,330 billion, with Rs4,013 billion in taxes collected by the Federal Bureau of Revenue (FBR), and Rs317 billion in other taxes. The non-tax revenue is targeted at Rs979.9 billion.

On the expenses side, the government allocated Rs3,477 billion for ‘current expenditure’, and Rs1,275 billion for development expenditure.

The budgeted current expenditure includes Rs1,363 billion in interest payments, Rs248 billion in pensions, Rs920 billion for defence affairs and services, Rs430 billion for grants and transfers, Rs138 billion in subsidies, and Rs378.8 billion for the running of the government.

Talking about the exports sector, which has showed a negative growth, the minister revealed that the customs duty on the export of raw hides has been suspended. He announced similar measures for stamping foil.

The minister also informed the House that the present housing shortage in the country is one million, and increasing annually by 0.3 million units.

He thus announced a 40% government guarantee on loans up to Rs10,000 from banks and other financial institutions for housing purposes.

The sales tax on the commercial import of fabric will be set at 6%.

The minister also announced the setting up of an Information Technology Park in Islamabad in collaboration with South Korea. Majority of population is under 20 years of age, thus our focus is on them, said the minister. An allocation of Rs49 billion has been made for the health sector.