Great boast, little roast
June 08, 2012
For the first time in the country’s history, the PPP-led government presented its last budget at the conclusion of its five-year constitutional term. Prior to this no other elected government ever had a chance to complete its five-year term.
On June 1, 2012, Finance Minister Abdul Hafeez Sheikh presented Rs2960 billion federal budget for the fiscal year 2012-13. The budgetary proposals include creation of 100,000 jobs, special measures to address the ongoing energy crisis and construction of water reservoirs and infrastructure across the country.
Moreover, the government claims no new tax will be imposed in the budget and relief would be given to the masses. The salaries of government employees have also been increased by 20%. The Prime Minister’s House will be converted into an institute for advanced studies and the premier will live in a small house.
The budget brings a Rs20 billion increase for the defence sector, with an allocation of Rs264 billion for the army, Rs52.7 billion for the navy (around Rs230 million less than the previous budget), and Rs114 billion for the Air Force. According to the budget, the government will create 2,000 new utility stores to provide relief to around 300,000 families. The government has set aside Rs10 billion for the Export Development Fund. Efforts are being made to bring the tax of all those items down to 16 per cent which carry a GST tax of 0ver 16 percent.
“We have decided to lessen the customs duty… all customs items which were in the maximum range of 35% will be brought down to 30%,” said Shaikh. He said Rs183 billion had been allocated to deal with the energy crisis. The total federal receipts are estimated at Rs3234 billion which is 18.3 per cent higher than Rs2732 billion of the outgoing year. Out of the Rs3234 billion the tax revenue is targeted at Rs2504. The Federal Board of Revenue is given a target of Rs2381 billion while the provinces share in the overall revenue receipts would be Rs1459 billion leaving Rs1775 billion to the federation.
The FBR target envisages tax to GDP ratio to grow up to 10.1 percent from the budgeted ratio of 9.3 per cent and the revised figure of 9.5 per cent of the GDP. The provinces would get Rs1459 billion from the Federal Divisible Pool under the 7th NFC Award as against Rs1203 billion during the current financial year. Provincial surpluses during the next financial year are expected to be in the range of Rs80 billion. The overall fiscal deficit is estimated at Rs 1105 billion which would be 4.7 per cent of the GDP as against 5.5 per cent during the outgoing year.
Allocations for Benazir Income Support Programme have been increased from the last year's Rs50 billion to Rs70 billion for the next financial year. The government has also allocated Rs10 billion for Export Development Fund in the new budget.
The finance minister announced that the government would provide targeted subsidy to low income groups on food items through utility stores. Under the scheme, the card-holders of BISP would get 10 per cent discount on purchase of essential items like sugar, ghee, rice, gram and moong pulses and wheat flour from the utility stores. This means the poor would get these items 17 per cent less than the market’s. He said the government plans to open 2,000 utility stores to provide immediate relief to 3.5 million families.
Dr. Abdul Hafeez Sheikh said 100,000 unemployed educated youth would be afforded job opportunities through internships and technical trainings. Under the internship programme, bachelor and masters degree holders would be provided 40, 000 internships each by the public and private sector. In addition 20, 000 graduates would be imparted skills that are in demand in the domestic and foreign markets. The government would be spending Rs 9.5 billion on these measures. The finance minister also announced measures to further improve socio-economic uplift in Balochistan, FATA and Gilgit-Baltistan as part of the strategy to bring them on a par with other parts of the country. He said the federal government had decided to promote higher education in Balochistan, FATA and Gilgit Baltistan and for this purpose it would bear tuition fee for all students belonging to these areas for masters and PhD programmes in renowned universities of the country. Rs500 million annually will be spent for this purpose.
He pointed out that this was the fifth consecutive increase in salaries and pensions during the tenure of the present government. The finance minister said the present government took difficult decisions to expand tax net by abolishing exemptions and bringing new tax payers in the net. This has led to twenty-five percent increase in revenues this year.
The new budget envisages Annual Development Plan worth Rs873 billion which is 25per cent more than the outgoing year. Of this, the share of Federal Public Sector Plan will be Rs360 billion which is 20per cent higher than the current year. The priority of the new PSDP would be on the completion of ongoing projects; focus on backward areas; projects for welfare of women and children; infrastructure development especially energy and water; and projects in the sector of Higher Education.
Power sector would get Rs69 billion besides Rs115 billion to be spent on WAPDA and electric companies. Water sector would get Rs 48 billion; social sector Rs 44 billion and FATA, Gilgit Baltistan and Azad Jammu and Kashmir would get Rs37 billion from the development budget. The PSDP includes Rs 16 billion for Higher Education and Rs 84 billion for transport and communication.
The minister said that the financial allocation had been increased for Gilgit-Baltistan the government has increased Block Development Allocation for the area to Rs 16 billion. Other steps taken for the purpose include appointment of 5,000 police personnel, 100 per cent increase in salary of police officials, provision of monthly economic support to 50,000 households under Benazir Income Support programme, launching of mega development projects in the area at a cost of Rs 10 billion, besides expansion of Gilgit and Skardu airports and up-gradation of dry port for increasing trade links with China.
People belonging to different walks of life have rejected the Federal Budget 2012-13. They said once again their food basket would remain empty. Government employees said that the government had increased inflation by more than 200% during four years and raised their salaries by only 20 to 25% in the budget. They said the government had totally failed in providing any relief to the public in its four-year rule in the country. “The PPP will have to pay in the forthcoming general elections for its wrong policies,” they warned.
Economists have rejected the Federal Budget 2012-13, saying that the unbridled inflation during the fiscal year 2011-12 had put an extra burden on people, as several ‘mini-budgets’ affected their routine expenses. “There is nothing for us in the budget,” he said. They said high prices during the fiscal year 2011-12 were mainly because of high fuel prices, ever-rising electricity and gas tariffs, GST on different commodities, floods and had little to do with depreciation of rupee against dollar.
If one compares the prices in 2012 with those in 2011 there has been around 60 to 80% price hike since the last budget in June 2011. The prices of kitchen items, including sugar, ‘ghee,’ meat, milk, pulses, vegetables and fruit, have witnessed more increase till June 2012 as compared to the corresponding period of last year.
The budget shows it has been formulated without consultation of the public and business community. If the government could not make tax recoveries of Rs1952 billion then how could it recover Rs2400 billion. No serious announcements were made to mitigate the suffering of the common man.