ISLAMABAD - The new government Wednesday unveiled what it termed ‘an investment and business friendly’ budget with a total outlay of Rs3.591 trillion for the financial year 2013-14, 21% up from the revised figures for 2012-2013 budget.

The budget is expected to be funded partially by tax revenues of around Rs 2.75 trillion rupees.

Finance Minister Senator Ishaq Dar, who presented the deficit budget in the National Assembly without any usual voices and shouting by the opposition, said that the government’s objective was to make tax-evaders pay taxes, and widen the tax net.

As the burden of circular debt has witnessed a whopping increase of 250% to reach Rs14,284 billion, the focus of the budget is spurring growth by stabilisation of the economy, cutting down on non-development expenditures, enhancing productivity and overcoming the energy crisis, which has been costing the country 2% of GDP annually, by bringing down subsidies and gradually increasing electricity tariff for all consumers.

The budget projects fiscal deficit at 6.3% (Rs1,651), GDP (gross domestic product) growth rate at 4.4%, inflation 9.5% while revenue target has been set at Rs2.475trillion. Rs1.155 trillion have been allocated for national development, Rs926 billion for debt servicing, Rs225 billion for energy sector development and Rs75 billion each for Income Support Fund and human resource development.

The General Sales Tax (GST) has been proposed to increase from 16 per cent to 17, a decision which is going to further raise the prices of commodities for the people already battered by the worst price hike. There is no increase in government employee salaries. However, pension of federal government employees has been increased by 10%, while the minimum pension has also been raised from Rs3,000 to 6,000.

A new 0.5% levy has been imposed on movable assets, while ‘adjustable’ withholding tax has been imposed on wedding ceremonies, and foreign films and dramas. Tax rate on cigarettes and cold drinks has also been increased. Every intending Haji will also have to pay Rs5,000 tax. An additional 5% sales tax has been imposed on commercial and industrial electricity account holders who are not registered as tax payers. Tax on cash withdrawals from banks has been raised to 0.3%.

Tax on vehicles has also been increased, however, a 100% exemption from all duties and taxes has been granted on import of eco-friendly hybrid cars of up to 1200cc. Despite the weak economic growth, high inflation, dwindling foreign exchange reserves and unprecedented power cuts, the new budget earmarked 627 billion rupees ($6.3 billion) for defence, a 10% increase compared to 570 billion rupees in the outgoing year.

Dar said in his budget speech that the government inherited a battered economy and the average rate of inflation stood at 13% in last five years.

He promised that the government would focus on economic growth, resolve energy crisis, reduce fiscal deficit and tackle public debt for putting economy back on track. Drawing a grim picture of the economy suffering from subsidies, foreign debts, energy crisis and bad governance, he underlined the need to put an end to subsidies and reliance on others, adding that self-reliance could not be achieved without ending subsidies.

The minister said that GDP growth remained below 3% and if compared with the population growth of about 2%, the real growth would stand at just 1%. He said that inflation has remained at 13% which is highest during the past 4 decades while the foreign exchange reserves have fallen from $11.1 billion to $6.3 billion. The minister said that it seemed the country was being run on autopilot over the last five years.

He, however, expressed the hope that Pakistan would regain its lost glory, vowing that the government would ‘turn the tide’. “We are starting our journey from very precarious situation, however, the bad condition of economy has boosted our courage to lead it towards its desired heights of sustainability,” he said. The previous government, he said, had not looked after the economy in accordance with the national interests. The minister said that the nation has made better accountability by rejecting those who did not deliver in past five years. “We need self-reliant economy to run the affairs of the country,” he said, adding that the government would not involve in over-spending like the previous government.

Dar said that the government was hoping to save Rs 40 billion through an austerity drive that entails freezing of secrets funds for all ministries and departments as well as by discouraging the VVIP Culture. “The Prime Minister’s discretionary fund and secret funds of all government departments, except for national security agencies, have been frozen and scrapped,” Dar announced. The minister added that all ministers’ discretionary funds had also been scrapped, and that the expenses of the PM House will be brought down by over 40%. He also proposed ban on purchase of new vehicles for Prime Minister Office.

He was of the view that doing business was not the job of the government so it would make the private sector centre of economic activities and introduce reforms in the market system. He said the government however would do intervene in those sectors where private sector has limitation particularly in education, health, population and huge infrastructure development sectors.

The finance minister said the government is introducing the concept of a medium term plan for improvement of economy. According to Medium Term Macroeconomic Framework (MTMF), Gross Domestic Product (GDP) rate would be increased to 7% in next three fiscal years (2013-14 and 2015-16), inflation will be brought down to single digit, investment to GDP will be increased to 20% and fiscal deficit will be reduced to 4%.

Dar said the circular debt will be resolved in 60 days, as he requested to all consumers to pay their bills on time. “We will evaluate the allotment of subsides, 3G licenses will be sold in a transparent within the current fiscal year” and foreign exchange reserves will be raised to $20 billion in three years. He also announced that employment opportunities will be created in the private sector. There will reforms in state owned enterprises. The first step is to appoint professional managers who will be appointed on the basis of merit.

Dar announced that steps should be taken to set up a system which collects taxes from those who do not pay them.

In an announcement welcomed by the house, the finance minister said that the government had planned to grant 100 per cent exemption all duties and taxes to imported eco-friendly hybrid cars up to 1200cc.

He said that adjustable withholding tax is being introduced on wedding ceremonies, and foreign films and dramas while income tax laws will be reformed. A new 0.5% levy to be imposed on movable assets, will be channelled to Income Support Programme, he said, adding that he would introduce the levy by volunteering himself. He further announced that commercial and industrial electricity account holders will be charged an additional 5% sales tax if they are not registered tax payers. When they are registered this increase will be withdrawn, he added.

According to finance minister, “Budget is a part of medium-term economic framework.” An amount of Rs21 billion allocated to the health sector for programmes of immunisation, mother child care, family planning, reduction of blindness, and other national programmes, while Rs8 billion have been allocated for social welfare. The federal government, he said, would also assist the provinces in population welfare projects.

Calling human resource development vital for the national economy, he said total allocations for development of human capital would be Rs57 billion and Rs18 billion is allocated for higher education. According to a study, number of students in higher education will increase from one million to 1.2 million and 6,200 scholarships would be provided to bright students.

The government has earmarked Rs78 million for the Human Rights Division in Public Sector Development Program (PSDP) for the year 2013-14. Rs5 billion have been allocated for Tameer-e-Pakistan Program. The minister said that Income Support Fund will continue and the amount, with an increase of 80%, will be increased to Rs75 billion. He however said they would make some changes to the programme so people do not become dependent on it.

The finance minister also announced a programme for youth and other initiatives of Rs115 billion that includes Prime Minister’s Youth training programme, prime Minister’s Youth Skill Development programme, Small business Loans Scheme, Prime Minister’s Scheme for Provision of Laptop, Fee Reimbursement Scheme for less developed areas, Prime Minister’s Micro Finance Scheme, Prime Minister’s Housing Scheme and Public Works Programme for parliamentarians.

While describing the salient features of Public Sector Development Programme (PSDP), he said Pakistan has abundant water resources and it inherited a countrywide system of irrigation and dams at the time of partition, followed by building of Mangla and Tarbela dams which are lifeline of economy. The government has allocated Rs59 billion for water projects including expansion of Mangla and Tarbela dams, Diamer-Bhasha Dam, Gomal Zam Dam and various other dams and irrigation projects, he added.

The minister informed the House that Rs225 billion have been allocated for energy sector in which Rs160 billion was allocated in the PSDP and Rs65 billion revenue would be generated by Gencos and Discos. Funds have been allocated for Neelum Jhelum Dam, Thar coal, Chashma nuclear power plant, modernisation of power stations and building of grid stations, he added.

Ishaq Dar expressed disappointment that during the last five years, investment in industrial sector decreased and the sector grew on average only 1.8%. The industrial sector is the mainstay of the economy and engine of economic growth and job creation, he said adding, laws would be improved to make the export processing zones more attractive for investors and Special Industrial Zone in Gwadar would be given more incentives. For the Textile Industry Division projects, he said, Rs315 million have been allocated.

Referring to the building of unprecedented Islamabad-Lahore Motorway by the PML-N government in 1997-99, the finance minister said Rs63 billion have been allocated for building of highways and roads. He said roads in far flung areas, link roads and farms to market roads are essential to create economic opportunities and alleviate poverty. One of the government’s main strategic project would be to link Gwadar Port to the Northern Areas making Gwadar a gateway to Central Asia and access point for markets of Europe, the Minister said.

He said Rs31 billion was allocated for railway to improve a mode of transportation, which was remarkable at the time of partition, but now it is in shambles. He earmarked Rs31 billion for Pakistani Railways. He added that work on Karachi Circular Railway is underway with the assistance of Japan and it will be completed soon.

The newly-elected government of Prime Minister Nawaz Sharif has presented its first budget in record time of less than a week. Government sources claimed no additional taxes have been levied on the masses.