Budget estimated to be around Rs3.67tr

KARACHI - Total development spending for the upcoming fiscal year 2011-12 is expected to be fixed at Rs650 billion against an official indicative budget estimate of Rs710 billion and the revised target of Rs485 billion set for the outgoing financial year, according to the latest report of JS Research. The government may allocate an amount of Rs280 billion in the Public Sector Development Programme 2011-12, substantially higher than FY11s revised target of Rs180 billion. Out of a total Rs710 billion PSDP allocations, the provinces expenditure are estimated at Rs430 billion. The provinces had allocated Rs383 billion for development spending for the current fiscal year. According to a report titled Pre-Budget 2011-12: Self reliance and austerity should be the moto, the share of the federal government, with the approval of the 7th NFC award, the divisible pool is foreseen to slide down to 43.5 per cent in FY11, increasing its reliance on provinces for PSDP. It might be mentioned here that the government had reduced the size of the Public Sector Development Programme (PSDP) from Rs242 billion to Rs180 billion for the ongoing financial year with an aim to counterbalance the destruction and losses caused by the heavy floods to countrys economy during the first three months of the current fiscal year. The economic cost of this ongoing havoc had paid by the government in form of cut in development expenditures and an infrastructure spending allocated for all provinces under PSDP. Initially, the government had set total PSDP target of Rs663 billion (3.9pc of GDP) in the budget 2010-11 versus Rs510 billion (3.4pc of GDP) in FY10. The report stated that despite the government introducing a variety of measures (flood tax, hike in S.E.D, withdrawal of GST exemptions and expenditure cuts) to curtail the rising deficit, the fiscal deficit would continue to cross the 5.3 per cent of GDP target agreed with the IMF and close in at the 6 per cent mark. The federal budget for FY12 is estimated to be around Rs3.67 trillion, up 11 per cent from the original budget estimates of last year. Current expenditure for the coming fiscal year is forecasted to be around Rs3.0trn, compared to Rs2.69 trillion for FY11, the report predicted, according to the report revelations. This view is supported by the recent tax collection numbers (April revenue at Rs127bn) which has left the government with an ambitious target of Rs437bn for the remaining two months of the fiscal year. The total development expenditure and net lending stood at Rs353 billion during the first nine months of FY11 while development expenditure amounted to Rs283 billion and the PSDP spending recorded at Rs247 billion during the period under review, it said. The government is likely to set the revenue target for FY12 at Rs1.78 trillion, up 16.3 per cent from FY11s revised target of Rs1.53 trillion. The dismal tax collection is primarily attributed to the summer floods and increased power outages, the report stated. The formal sectors income (mainly manufacturing sector) has severely been hurt, while the lightly taxed sectors (likes of agriculture) have witnessed huge windfalls gains. This is also reflected from contribution of 37 per cent by direct taxes to the total tax collection, compared to last years 38 per cent, it mentioned. The share of direct taxes to augment in FY12, as FBR is launching a campaign to document the economy and bring rich elites into the tax net. Additionally, with the imposition of GAT and agriculture tax, and improved GDP outlook, the overall tax collection is also expected to grow YoY, it added. Total outlay for this years budget is expected to come around at Rs3.66 trillion, up 11 per cent from last year. The government may cut spending on the subsidies and compensate the needy segments through targeted subsidies, the report said, adding that non-development spending of the respective ministries and salaries of the government employees are likely to be frozen at last years level. The expenditure on debt servicing and defense is anticipated to jump further in the vicinity of 10-15 per cent.