ISLAMABAD Defending a percentiles increase in the GST, Finance Minister Dr Abdul Hafeez Sheikh on Sunday said it was only for interim period until October 1, when it would be replaced by 15 percent Value Added Tax. Addressing a post-budget press conference along his entire team of the economic management, the Minister turned down the impression that one-percent increase in 16 to 25 percent rate of General Sales Tax would enhance inflation. He also clarified that the Government had not withdrawn subsidy on pulses and other daily-use items at the Utility Stores Corporation and it was mistakenly mentioned in the budget. He listed down measures including freezing of non-salary current expenditures of the Government at the level 2009-2010, containing of fiscal deficit at 4 percent, and limiting of bank borrowing were to check inflation and protect the economic recovery. Refraining from increasing any customs duty and instead reduction in duty on 29 items was also aimed at containing inflation by keeping the cost of business low, he said. Answering questions about the International Monetary Fund with regard to the implementation of the VAT that the Government has now started calling as GST reform, he said, We have a continuing dialogue with IMF and need to adhere to the commitments made with them. Dr Nadeem-ul-Haq, Deputy Chairman Planning Commission added, The entire reform process including the GST reform would be implemented as agreed upon with the IMF. Though he claimed modernising the budget making but he failed to answer the question that priorities that figured in the budget portrayed the same, as they were a couple of decades ago. His answer in so many words that the social sector had been given as much as it was never given before, was basically an expression of his inability like his predecessors to re-prioritise expenditures. As it has been for so many years that the debt servicing tops the current expenditures followed by defence and then pubic order maintenance leaving a meagre amount for the social sector. He wanted enhanced income tax exemption limit for the salaried taxpayers from Rs 200,000 to Rs 300,000, should be highlighted as a relief provided by the Government. In addition, he also drew credit for increasing exemption limit for non-salaried income from Rs 100,000 to Rs 300,000. Replying to a question, the Finance Minister said 50 percent ad hoc relief announced for the Government servants would not be applicable to the Cabinet members rather their existing wages would be cut by 10 percent as an austerity measure. Secretary Finance, Salman Siddique while answering a question said the current 50 percent ad hoc relief would not be applicable to the police, armed forces and judiciary, as their salaries had already been increased by 100 percent. He also clarified that 50 percent ad hoc increase for the Government employees would be calculated on the running basic salaries. Dr Sheikh said that all the corporations following the Governments pay structure would also be provided resources to transfer the ad hoc relief to their employees. He reiterated that the Government was trying its best to implement recommendations of the Pay and Pension Commission that had already submitted its report on the salaries and wages of the Government employees. He gave no deadline or timeframe for implementation of the Committees recommendations that also pointed out doing away with disparities by monetising all perks. Dr Sheikh said that in the current budget provinces were provided more shares, up to 57 percent from the federal divisible pool for social safety net. Now, he said, it is the responsibility of the provinces to bring the vulnerable segments of the society under social safety net more efficiently and honestly. According to the Minister, 52 percent increase in the Public Service Development Projects (PSDP) of all provinces was a historic achievement of the Government. According to the Minister, the GDP growth, in the year 2007-08, was 1.2 percent that bettered a bit in 2009-10 and reached 4.1 percent, while in the upcoming fiscal year the target had been set to achieve 4.5 percent growth target. He attributed substantial decrease in inflation from 20.8 percent in 2008-09 to the effective monetary policies. And now the Government was quite confident of bringing it further down to 9.5 percent in 2010-2011, he maintained. The Minister said the fiscal deficit has been reduced from 7.6 percent in 2007-08 to 5.2 percent in 2008-09, while it would be further brought down to 4 percent of the GDP in 2010-11. He hoped the current account deficit was expected to decline under 3 percent during the current financial year from 8.3 percent of the GDP in 2007-08. Dr Hafeez Sheikh said Pakistans economic policies were being highly appreciated by international economic organisations, saying, Pakistans international credit rating has been upgraded from CCC to B(-). Agencies add: Hafeez Sheikh said that the budget for fiscal year 2010-11 aims at providing maximum relief to the low-income people, adding that it did not contain any mystery or jugglery of words. Sheikh said the govt had adopted prudent economic policies during last three years and as a result the economy had started showing resilience despite severe challenges. The economy has shown resilience despite severe challenges. He said the Pay and Pension Committee had submitted its report and the Government was committed to implement it in next three years. The committee, he said, had pointed out some inequities in different rental ceilings and allowances of the government employees like housing, medical and others. The government would rationalise them offering relief to the all employees across the board, he added. He said the federal budget had become less important after transferring of resources to the provinces. Provinces development programmes are our programmes, he said. The minister said in the past there was confusion over spending but now there was administrative arrangement between the federal government and the provinces. He also said the health sector was no more the domain of the federal government after new administrative arrangements. Now the provinces have bigger place in economy in terms of health, education and infrastructure sectors, he added. He said Sheikh said the budget had been prepared in accordance with actual facts of Pakistans economy and the government had do its best to lessen the prices of commodities, adding that 29 items were exempted from tax. The govt has formulated the budget 2010-11 to initiate self-dependence policy in the country, he remarked. He informed the journalists that tax ratio would be further decreased in the next three months while the govt had also decided not to increase custom duty. Budget 2010-11 has not been a complete economic system but a sub part of economic system of the country, he remarked and urged everyone to play their relevant role for economic stability. Sheikh pointed to the fact that the health and education sectors had been handing over to the provinces. Responding to a query, the minister said Pakistan was a sovereign country, making economic decisions itself and without any foreign dictation, adding that the elements criticising the budget should come forward with alternatives. He said according to the agreement with IMF, the imposition of Value Added Taxes (VAT) had to be made from 1st of July. Referring to previous practice of announcing the prices of essential items in the annual budget, he said it was desirable nowadays to fix the prices through regulations like PTA and Ogra. Talking about the power sector, he said the line losses in the capital were the lowest in comparison with other parts of the country. He rejected the impression that the Chashma Right Bank Canal project had been shelved, saying it was on the map, which was being designed by the Khyber Pakhtunkhwa govt. The importance of Federal Budget has decreased as compared to the past, while that of provincial budgets has increased, Sheikh said. In the current budget, the portfolios like law and order, health, education and provision of drinking water have been handed over to the provinces, which is a big development as its benefits will directly trickle down to the common man, he added. He said transferring of these responsibilities to provinces was an administrative arrangement, already projected in the Constitution. It is also in accordance with countrys Constitution and hence should be reflected in the budget, he added.