ISLAMABAD - The PML-N government would present its third budget today in the National Assembly with total outlay of around Rs4.2 trillion and a deficit of 4.3 percent of the GDP (around Rs1.44 trillion) for the next fiscal year 2015-2016.

Finance Minister Ishaq Dar would present the budget proposals in the cabinet meeting, to be held few hours before the start of National Assembly session. After cabinet approval, he would lay budget in the house – for the third time as finance minister.

The main theme of the budget would be enabling growth to accelerate economy, job creation and poverty reduction. The government has set Gross Domestic Product (GDP) growth target at 5.5 percent for the financial year 2015-16.

The federal cabinet would consider the proposals of the special committee formed by finance minister to peruse the current pay scales with a view to provide relief to the government employees. The government could revise the pay scales of the employees by merging the ad-hoc relief allowances into basic salaries and then give 7 to 10 percent increase on it. Similarly, the government could raise the pensions by 10 percent.

Next year’s budget has been estimated at around Rs4.2 trillion - as opposed to the original Rs3.936 trillion for the outgoing fiscal year. The government had kept the budget deficit target at 4.3 percent of the GDP for upcoming financial year as against 4.9 percent of the GDP of the outgoing year. The FBR’s revenue target for next year has been put at a little over Rs3.1 trillion, against revised estimates of Rs2.605trn for the current year - suggesting a 19 percent increase.

The size of the development budget for next year would be Rs1.514 trillion, including Rs 700 billion as federal Public Sector Development Programme (PSDP) and Rs814 billion as provincial Annual Development Programme (ADP).

The break-up of federal PSDP shows that government kept Rs100 billion for special development programmes for temporarily displaced persons (TDPs) and security enhancement, Rs20 billion for the Prime Minister’s Youth Programme, including laptop programme and fee reimbursement initiatives for students. The volume of Benazir Income Support Programme would be Rs107 billion.

The government has earmarked Rs266 billion for ministries/divisions, Rs256.3 billion for corporations (NHA and Wapda), Rs30 billion for federal development programmes, Rs20 billion for MDGs community development and Rs7 billion for the Erra. It has allocated Rs200 billion for the national highways, Rs21 billion for the Higher Education Commission and Rs40 billion for Railways. The government has also allocated Rs171 billion for executing different schemes under China-Pakistan Economic Corridor (CPEC) during the budget year 2015-16.

For the new fiscal year, the government has estimated a regular defence budget of Rs772 billion. In addition to the regular budget, the military has demanded roughly Rs45 billion for spending on Operation Zarb-e-Azb and provision of security to China-Pakistan Economic Corridor projects, bringing total military spending to Rs817 billion.

The government has kept around Rs1.4trillion for debt servicing for the next year. It has decided to cut power sector subsidies by around 50 per cent to Rs118 billion. Around Rs 1.7 trillion would be transferred to the four provinces under National Finance Commission (NFC) award.

The government is also aiming to generate around Rs270 billion additional revenue from improved efforts of the tax machinery, withdrawal of tax exemptions under discretionary SROs, and fresh taxation measures. The FBR has estimated to withdraw the tax exemptions worth of Rs100-110 billion in the upcoming budget as it did in previous budget.

The government could increase taxes/duties on several commodities like ghee, cooking oil, sugar, beverages, cigarettes, cement and iron steel. The government is also mulling to enhance federal excise duty on air-tickets for first class and business class. Similarly, it is considering increasing duties/taxes on imported machinery, air conditioners, freezers, refrigerators and others.

The government is also contemplating to raise the advance tax on residential electricity consumption by reducing the threshold, as there is current 7.5 percent tax on monthly bills of over Rs100,000 which would now become applicable on monthly bills of Rs50,000. The capital gains tax on sale of securities is also expected to be increased.

The customs slabs would come down from six to five, and the maximum tariff would fall from 25pc to 20pc in the coming budget. The government may lower withholding tax rates on the transfer in ownership of vehicles. In the last budget, the government had introduced withholding taxes in the range of Rs10,000 to Rs450,000, depending on the engine capacity and whether the buyer is a income tax filer or not.

The growth of GDP for 2015-16 is targeted at 5.5pc with contributions from agriculture (3.9pc), industry (6.4pc) and services (5.7pc). Nominal GDP is targeted to grow by 11.8pc and GNP per capita is projected at Rs167,915.