What budget 2012-2013 holds in store?
June 01, 2012
The budget deficit for the fiscal year 2011-12 in 10 months has surpassed the already revised deficit of 4.7 percent to 5 percent, the outlay of which is nearly Rs10 trillion. The budget deficit for the current year was targeted at 4.2 percent of the GDP which was later revised to 4.7 due to floods in August and the power crisis. The federal budget for the past three years has been in deficit.
According to the fiscal operation data, the total revenue increased by 26 percent to Rs1,135 billion during the first half of FY12 against Rs989 billion in the corresponding half last fiscal year.Tax collection increased by 25.36 percent to Rs904.62 billion against Rs721.57 billion. The total expenditure during the first half of FY12 stood at Rs1,667.79 billion, a growth of 12.68 percent against Rs1,480 billion in the corresponding half last year.
The current expenditure, including interest and defence, went up to Rs1,399.21 billion from Rs1,226.78 billion. The total expenditure on the public sector development programme (PSDP) increased significantly to Rs206.7 billion as it was Rs124.85 billion.The government has miserably failed to control its expenditures as well as to increase financial resources. In the next three months, no large considerable amount is expected from abroad. The internal and external debts have reached Rs1.243 trillion.In the past nine months several indications were given to reduce the cabinet size but instead the already large cabinet was further expanded by 11 ministers and advisors while the expenditures of 41 standing committee chairman remain outlandish.
For the current fiscal, authorities had budgeted $1.34 billion or Rs118.7 billion on account of CSF reimbursement but the US has not released the amount yet, linking it with the reopening of Nato supply lines. The outstanding CSF dues at present amount to $2.5 billion.Some sources, however, say the finance ministry’s budgeting of the CSF indicates that both the sides have arrived at an agreement. So far, we are calculating $400 million in our non-tax revenues for this fiscal,” said Rana Assad Amin, spokesperson for the Finance Ministry. The amount is only 30% of the original budget estimates.The ministry has finally excluded Rs75 billion, estimated to be received through the auction of 3G licenses, from its non-tax revenue receipts, he said.This will widen the deficit to 5% of GDP, Rana added. Independent experts, however, have projected over 6% budget deficit excluding an additional 1.9% on account of debt payments.
Meanwhile, Federal Minister for Finance DrHafeezShaikhhas announced that there would be no unpleasant surprise for the taxpayers paying their taxes honestly. The provinces can sit together for chalking out a uniform agriculture income tax mechanism and the federal government would not interfere in their tax jurisdictions in the budget for 2012-13.
Addressing a seminar, the minister said there should be coordination among the federal and provincial governments to achieve self-sufficiency in resource mobilisation. The Constitution has categorically separated tax jurisdictions of federal and provincial governments. The federal government is empowered to levy and collect income tax and sales tax on goods, customs duty and federal excise duty. On the other hand, the provinces have the right to collect general sales tax (GST) on services, agriculture income tax and property as well as other local government taxes.
News reports quoted official sources as having said that the government is not ready to take any risk of announcing new taxation measures through the Finance Bill 2012-13 to give a clear message to the masses that “the upcoming budget will be investment, employment and growth-oriented”.On the other hand, law makers are reported to be considering some further relief in the upcoming budget. Prior to his departure for an official visit to London, PM Gilani announced that 100,000 new jobs will be created in the next fiscal year. Measures such as reduction of sales tax on certain raw materials, raising salaries and pensions of government employees and the expansion of social safety programmes, all seem to suggest that government expenditures are likely to rise.
Add to this growing list of expenses the amount of funds that will be required if the circular debt in the energy sector is to be cleared, and the government arrives in a precarious situation where avenues of revenue generation are few, while expenses continue to rise. In effect, it may be argued that a pro-growth stance by the government mandates more efforts towards mobilising infrastructure development and projects that can create both jobs and stir growth; hence a higher expected allocation for developmental projects.
While much has been said about the rising fiscal deficit, it is well known that there is little room on the expenditure side for further contraction since the government is already making do with threadbare allocations for development. Budget proposals from various private sector associations have in unison, called for broadening of the tax base. Among these proposals, one that appears to have stuck in the minds at FBR was imposition of GST on school fees and wedding hall rentals.
Pakistan’s population increased by 47 percent after 1998 out of which Balochistan has 139.3 percent, Sindh 81.5 percent, Fata 62.1 percent, KP 51.6 percent, Gilgit-Baltistan 63.1 percent, Punjab 24.1 percent and Islamabad 4.1 percent. With the rise in population the poverty level has also increased coupled with inflation. According to a report, in the four-year period the rate of flour has risen from Rs13 to Rs 38 per kg, sugar to Rs 70, cooking oil from Rs90 to Rs190 per kg, diesel from Rs39 to Rs105, petrol from Rs56 till 103, US dollar from 60 to 90/92, GST from 15 to 25 percent, load shedding from 30 percent to 150 percent, electricity by Rs3.50 per unit to 25/9 and gold from 17000 per tolaa to 57/56000 per tola. These statistics reveal that rising inflation has broken the back of the common man. The budget has been affected by the rise in oil prices on the international market.
The rise in electricity tariff by 16.5 percent and rate of flour by 4.50 per kilo prior to the national budget announcement speaks volumesfor the government’s insensitivity towards the public. Both these decisions indicate that the basis of govt decision making is not public interest but their own interest.
By increasing electricity tariff the poor public has been burdened with an additional Rs92 billion annual mainly due to corruption in electricity production and supply, which was exposed by the Supreme Court in the rental power case. In the next budget, the end to energy crisis must be their priority. In this regard, the competition of public and private sector must be bought forward. Non-development expenditures must be curtailed and a large amount of money must be earmarked for education and health. The tendency on tax subsidy must be ended and relief should be provided to the public in the next budget and such measures should be announced so that the prices of everyday commodities are reduced. If an announcement is made to cut the expenses of federal and provincial secretariat than that would definitely be good news for the public. In order to overcome the energy crisis the gas and electricity supply to official residences, colonies and offices must be controlled through a quota and load shedding must be conducted in areas utilizing energy more than the required unit. Continuous power supply must be ensured to public residential areas and industrial units. The burden of sales tax should be shifted to the privileged class rather than the common man. Special public works should be announced so that true employment opportunities are provided. Saving schemes should be encouraged and profit rate must be increased.
Real State mafia should be abolished. The State Bank should take measures to control inflation. Industrialists and traders of Pakistan Federation of Chambers of Commerce and Industry say the new budget should not be political but economic. In order to correct economy,the foreign policy must be corrected. Industry and investment must be priority of the budget. The tax net must be expanded.It is to be seen how the government provides relief to the masses in the new budget and how much it succeeds to solve the economic problems of the country.