Internews/Islamabad

The government of Pakistan unveiled yesterday the outline of next year’s federal budget, envisaging tax target of Rs3.1tn, development programme of Rs580bn and fiscal deficit of about Rs1.433tn.
Briefing a panel of parliamentarians, the government’s economic team said the next year’s target for economic growth was proposed to be set at 5.5% against this year’s revised estimate of 4.2%.
Federal Board of Revenue Chairman Tariq Bajwa said that the burden of taxes would not be increased on tax compliant people.
The next year’s tax strategy, he said, would be focused on reducing one-third of tax exemptions (around Rs120bn), increased tax rates on non-tax filers to make their transaction costs expensive and taxing hitherto untaxed areas.
He said the FBR’s effort would contribute about 0.6% of addition to tax-to-GDP ratio next year and the overall tax revenue would be targeted to grow by 19% to Rs3.1tn against current year’s twice revised target of Rs2.605tn.
He said the current year’s target of Rs2.810tn would face Rs205bn shortfalls mainly because of slower than targeted economic growth rate, lower inflation and decline in international oil prices.
An extraordinary expenditure of Rs100bn was also being proposed for resettlement of displaced people and on security-related matters, said Finance Secretary Dr Waqar Masood Khan while presenting key indicators of next year’s budget and three-year medium-term macroeconomic framework before National Assembly’s Standing Committee on Finance and Revenue.
 Moreover, he said, inflation was proposed to be about 6% for the next three years, against 4.8pc this year. Except for defence, all other government expenditures would see a nominal increase, Waqar Masood said. The meeting was presided over by Omar Ayub Khan.
Dr Masood said a special meeting of the federal cabinet had been convened on May 26 to seek formal approval of the budget strategy paper and the federal budget would be presented in the National Assembly on June 5.
He further stated that next year’s fiscal deficit limit would be set at 4.3% of the GDP, including 0.3% or Rs100bn for one-off extraordinary expenditures on settlement of displaced persons and security.
About 28 wings of civil law enforcement agencies would be created next year besides nine battalions of armed forces having combined expenditure of Rs40-45bn, he said. He said the pure military cost of the operation was estimated at about Rs20bn.
 He said the government had already spent Rs6bn on settlement of people displaced by floods and operation Zarb-e-Azb this year while another Rs25-30bn were allocated for next year although overall requirement was quite higher.
He said these expenditures were made through the armed forces because of their presence in those areas while resettlement expenses were worked out on the basis of Rs35,000 per person (Rs10,000 transportation and Rs25,000 relocation).
He said another Rs3bn project for reconstruction of schools, colleges and health centres was also being envisaged for the areas affected by military operation.
“The fiscal year 2015 will consolidate the gains made by the government in stabilising economy, yet enabling the growth to accelerate for providing jobs and reducing poverty,” he said elaborating government’s next year budget strategy.
The path of austerity will be followed, as in the past two years, with current expenditures being targeted to increase less than inflation rate.
 He said the fiscal deficit would be reduced to 3.5% after next year and then maintained there until 2017-18. He said the tax to GDP ratio at 11.5% this year would be gradually increased to 13pc to 2017-18 with annual increase of 0.7% of GDP per year.
 The debt to GDP ratio that stood at 63% now would be brought down to 61.5% of GDP next fiscal year and subsequently to 55% by 2017-18. Waqar Masood said foreign exchange reserves would be jacked up to $19bn by end-June this year and further to $25bn by 2017-18.
The provinces, he said, would be required to provide around 0.8-1% of GDP (around Rs333bn) and the budget strategy would be focused on continuous reduction in debt-to-GDP ratio and retirement of government borrowing from the Central Bank.