ISLAMABAD - Advisor to Prime Minister on Finance Shaukat Tarin Sunday said that the economy had stepped on revival track and measures taken in the budget 2009-10 would contain inflation to 9 per cent in the next fiscal year. Addressing a post-budget press conference the Advisor skilfully defended that the new taxation of Rs 69 billion in addition to carbon tax and Rs 120 billion subsidies withdrawal would not put inflationary pressures on prices. Even the missing of fiscal deficit target from 4.6 per cent to 4.9 per cent of the GDP would not increase inflation due to tight monetary and fiscal policies, he added. He described the fiscal year 2008-09 as the year of economic stability, adding the government would focus on revival through development in the new financial year. He claimed that special measures would be taken for the development of agriculture sector. Elaborating situation of resources, he said Pakistan would be getting Rs 80 billion from Friends of Pakistan. He claimed that the government had not counted these funds in the budget 2009-10, and those would go to the war on terror expense. To a question on Balochistans deprivation, he said five new dams would be built in the province, while Rs 8 billion were allocated for highways. He added that the government had increased Balochistans development budget from Rs 42 billion to Rs 50 billion. To a question about the government servants salaries, he said the Pay and Pension Commission would report in December and that would allow him to revise the salary scales accordingly which would be effective, hopefully, from January 1, 2010. He made it clear that the ad-hoc relief would be withdrawn before the pay scales revision according to Commissions report in December. Answering a question on hepatitis, he said the government had specifically allocated Rs 450 million to combat the menace across the country. Talking about two proposed mega projects in Sindh namely Thar Coal and Ketti Bandar, he said the federal government had already taken Sindh government into confidence over these projects. Concealing detailed information, he said two projects in that regard were already underway and two more would be started soon. Regarding the Federal Board of Revenue (FBR), he said this year the tax to GDP ratio stood at 9 per cent while next year it ought to be 9.3 per cent. Tarin said he believed that the administrative measures in the FBR could improve tax collection more than the imposition of new taxes. To another question, he said the government would get an aggregate of $4 billion from multilateral sources including the International Monetary Fund, while last year Pakistan received $4.8 billion. These multilateral loans will support the reserve position even if the money from Friends of Pakistan delays, he added. To a question on the carbon tax, he said it was just change of nomenclature and issue of transparency. Last year, he said, the government collected Rs 129 billion from the head of Petroleum Development Levy while target for the carbon tax during the next year was Rs 134 billion. Subsidy allowed on electricity had been curtailed from Rs 85 billion to Rs 66 billion, he said and expressed concerns over line losses, which the power distribution companies could not contain so far. Therefore he announced that two power distribution companies would be privatised every year. The resolution of administrative matters would be assigned to competent persons keeping in view experience in Karachi Electricity Company, he added. According to Tarin, price increase in power tariff was not part of budget 2009-10, but he asserted that the tariff would be increased gradually. To a question, he clarified that no tax exemption was given to large vehicles and luxury cars. Only 5 per cent federal excise duty had been abolished on the vehicles being manufactured at local level, he explained. Observing that the general sales tax at 15 per cent and above was not okay, he indicated its rate would be slashed in the budget for the financial year 2010-11. I believe that the sales tax should be gradually brought down to the level of a single digit, he added. He said that grant for provinces had been increased from Rs 560 billion to Rs 655 billion in the next financial year. The package for NWFP and Balochistan had been raised in consultation with the provincial governments, he added. In order to highlight humanitarian aspects of budget for the financial year 2009-10, budget for education sector had been scaled up from Rs 21 billion to Rs 31 billion, for health sector from Rs 14 billion to Rs 23.2 billion, for population welfare from Rs 3 billion to Rs 3.5 billion, he told. Imran Ali Kundi adds: The Advisor on Finance said that government would announce new National Finance Commission (NFC) Award within the next three months. He informed the media persons that NFC would be convened within two to three months, which would decide the allocation of resources to the provinces. He said that the issue of new NFC award was discussed in the cabinet meeting on Saturday last. He said he had already asked Prime Minister Syed Yousuf Raza Gilani to constitute the commission under his own chair to make new NFC award. Tarin further explained that the Constitution didnt allow him to head such a commission, as he was not an elected member of the Parliament. He said that after the announcement of NFC award, all the four provinces would get enhanced share from the divisible pool of resources accordingly. It was not possible for us to announce the new NFC award before the federal budget 2009-10, as the time was not enough, he said. He further said that after the announcement of new NFC award, all the concerns of the provinces would be addressed. It is pertinent to mention here that the government announced in May last that the provinces would get their share according to the existing formula in the upcoming budget 2009-10 and the new NFC award would be announced soon after the budget. Federal Minister for Overseas Pakistanis Dr Farooq Sattar told TheNation the other day that new NFC would be announced in the next three months, as he had taken the matter of NFC award with the Prime Minister and the Premier had assured him that the committee in that regard would be constituted in the next few days after consultation with the provinces. To a question about the basis for the new NFC award, he said the commission would decide whether or not royalty and other issues should be considered in addition to population. Agencies add: Pakistan has asked the International Monetary Fund for a $4 billion standby loan to be used if foreign donors fail to deliver aid needed to fund a widening budget deficit. The IMF facility is 'insurance if pledged assistance is delayed or does not arrive, Shaukat Tarin, Adviser to Prime Minister on Finance, told reporters while addressing the post-budget Press conference in Islamabad on Sunday. The budget gap for the year starting July 1 is estimated at 4.9 per cent of gross domestic product, higher than the 4.6 per cent goal set by the Washington-based lender as part of its $7.6 billion bailout of South Asias second-biggest economy. International donors meeting in Tokyo in April pledged to provide Pakistan with $5 billion to shore up the countrys ailing finances and fight terrorism. The governments seven-week campaign against Taliban insurgents in the northwest Swat Valley has had an 'extremely high cost on the economy, Tarin said. With economy stabilising and inflation settling at the single digit, important measures will be in place under innovative roadmap to revive the economy on sustainable grounds but with human face by hiking allocations in health and education sectors and alleviating poverty in transparent manner. Tarin along with Minister of State for Finance and Economic Affairs Hina Rabbani Khar said the human face was being accorded top priority while resuscitating the economy with the help of nine-point strategy in sustainable fashion. Human face will rule the roost in the revival of the economy with enhanced allocation from Rs 14 billion to over Rs 23 billion in health sector and from Rs 21 billion to Rs 31 billion in education sector besides three times surge in allocation under Benazir Income Support Programme (BISP) from disbursed Rs 22 billion to Rs 70 billion. Secretary Finance Salman Siddique, Chairman Federal Board of Revenue Sohail Ahmed and Additional Secretary Finance Ayub Tareen were also present at the press conference. The government hammered out bitter but important decisions in a difficult situation facing the country, which, he elaborated, were aimed at yielding far-reaching positive and healthy impact on the countrys economy. With innovative approach and measures for the stabilisation of the economy, Tarin said, We are trying to reduce inflationary impact. Important steps are underway to check the menace of poverty, he stated adding, pragmatic strategy carved out by the government will gradually reduce poverty. Friends of Pakistan forum has been requested to give money for social sectors so that growth-oriented policy could be pursued and implemented in true spirit through financial resources, available with the country. Tarin further said expenditure was sliced down by Rs 120 billion to slash budgetary deficit adding the government acted in responsible and transparent manner to underpin the economy against slew of predicaments. Owing to inhospitable situation and difficult environment looming over the country in the wake of fight against terror, economic growth got exacerbated in an adverse manner, posing problems to the people on the economic front. Tarin told a questioner that budgetary deficit would be around 3.4 percent during next fiscal year. The services sector will grow by 3.9 per cent. National Internship Programme will receive an allocation of Rs 3.7 billion. World Bank, Asian Development Bank and Islamic Development Bank will dish out $4.80 billion while Pakistan will receive $5.80 billion from Friends of Pakistan forum in two years. Non-productive subsidies are being done away with this year, he said adding, foreign exchange reserves stood at $11.30 billion while Gross Domestic Product valued Rs 14.82 trillion. Responding to a query about entitlement of 15 per cent adhoc relief with regard to regular, contract and daily wage employees of the government and semi-government corporations, the Advisor said all those who were getting their salaries from the national exchequer will be entitled to the adhoc relief. Tarin said the key objectives set for the Budget 2009-2010 after achieving successful completion of stabilisation agenda by reducing current and fiscal account deficits by 3.3 percentage points and 3.2 percentage points of GDP in one year. He said the economy needed to transit from stabilisation to a sustainable, equitable and job-creating growth with human face, which will entail: Focus on productive sectors of the economy, agriculture and manufacturing, enhancing productivity level through improvements to human capital base and physical infrastructure and ensuring availability of cost-effective energy. The budget, he said will focus on reinvigorating economic growth. Our tax and duty measures in budget for fiscal year 2009-10 would revolve around the following concepts: 1. Provide protection to the poor and vulnerable against the current economic downturn by providing cash transfers and skill development. 2. Revive manufacturing and industry, especially export-oriented industry to raise their productive levels. 3. Broaden the tax base instead of overburdening the existing taxpayers; and restrain unnecessary imports to improve the balance of payment position. Responding to a question, Tarin said the budget will focus on reinvigorating economic growth by providing protection to the poor and vulnerable against the current economic downturn. He said We are emphasising on revival of manufacturing and industry, especially export-oriented industry to raise their productivity level and broaden the tax base instead of overburdening the existing taxpayers and restraining unnecessary imports to improve the balance of payment position. Tarin said the government was phasing out the subsidies to enhance budgetary resources during 2008-9 and now expenditures were rationalised through a process of prioritisation of government development schemes to reduce the budget deficit. He said import of non-essential items was curtailed by tariff adjustments to reduce the trade and current account deficits. In the financial budget 2009-10 we have included two new sectors, real estate and services sectors in the tax net, while within a couple of years two more sectors would be included in it, he said while replying to a question. He said the countrywide blind survey had been initiated to assess the households living below poverty line to provide them special cards under Benazir Income Support Programme, making the process simple and more transparent. BISP has some complications and may have some issues regarding its transparency. We would bring reforms in the system and make it transparent and simple, said Tarin. He said besides financial assistance to the poor segment of the society, the BISP also aimed at ensuring women empowerment and childcare. He said after household income survey, primarily initiated in 16 districts, the government would issue smart cards to the households living below poverty line that would contain the whole bio-data of the concerned family. Besides, financial assistance, the BISP would also introduce health insurance schemes, covering full hospitalisation, pregnancy, daycare treatment, diagnostic tests and accident compensation for earning members of the family to a maximum limit of Rs 25,000 per family per year. Tarin said government had earmarked Rs 10 billion for the improvement of watercourses besides Rs 2.5 billion would be spent on food security and productivity enhancement. Besides the domestic resources, he said, a huge portion of Kerry Lugar bill which amounted to about Rs 80 billion would also be spent for infrastructure development and poverty alleviation in NWFP and Balochistan. Tarin said Rs 12 billion for Mangla Raising Project and Rs 7.5 billion for small and medium dams in all the provinces had been earmarked. He said the government was focusing on research and development by upgrading existing R&D facilities and initiating the establishment of two world class institutes of research for wheat and cotton. Establishment of ten model agricultural union councils for each major crop across the country will be undertaken, besides promoting the model organic farming. The model villages would be replicated to other parts of the country, he added. The policy measures undertaken by the government have led to an estimated transfer of resources of about Rs 294 million into the rural economy. Government has signed an agreement with Ms Monsanto of Untied States to formally introduce generally modified cotton into Pakistan on fast track basis, he noted. It had been planned that the farmers would be offered BT cotton hybrids varieties during the fiscal year 2009-10, he added. He said it was the vision of the government to treat livestock, agriculture and fisheries as industries. In this context, the nil customs duty regime on tractors, poultry inputs and cattle feed would be continued in future. Development of agriculture infrastructure including warehousing facilities would involve integrated agriculture marketing and storage infrastructure including feasibility study projects, the total cost of which was Rs 37 billion with Rs 500 million allocated for fiscal year 2009-10. About promotion of the industry, he said the policy objective was to revive the manufacturing sector through improved availability of energy supplies, better infrastructure and other incentives. He said the allocation for Ministry of Industries would be increased by more than 300 per cent from Rs 2 billion in 2008-09 (RE) to Rs 8.7 billion in 2009-10 (BE). He said allocation for Power sector would be increased by 100 per cent, from Rs 11.4 billion in 2008-09 to Rs 22.8 billion in 2009-10. Tarin said the energy deficit would be reduced in cost efficient manner for enhancing competitiveness of industrial products. He said the government would establish Export Investment Support Fund (Rs 40 billion) for boosting industrial productivity. He said SME development support fund (Rs 10b) would also be established in that regard. Regarding the infrastructure development, he said to facilitate the movement of goods and reduce the cost of doing business; infrastructure development played a crucial role. To achieve a high quality road and rail network, allocations for NHA and Railways would be increased from Rs 36 billion to Rs 40 billion in case of NHA and Rs 6.5 billion to Rs 12.7 billion in case of railways. Tarin said NHA network included many important road links connecting industrial hubs to facilitate movement of goods. Many federally funded infrastructure projects had been provided in all the provinces, he added. About Social Sector Development, he said in line with the spirit of the FRDL, allocations for health, education and population welfare had been substantially increased. Under Health, national programmes for primary healthcare and EPI would receive allocations of Rs 7 billion and Rs 6 billion respectively. He added that increased allocations for HEC was meant for funding institutes of higher learning, PhD programme and R&D activities in the universities. Regarding important programmes of Ministry of Education, he said establishment and operation of basic education and community schools would be carried out at the cost of Rs 2 billion. He said under Education for All, Rs 0.2 billion would be spent for provision of missing facilities in primary elementary schools. Tarin said under Capital Market Reforms, measures would be taken to ensure a vibrant capital market. He said Venture Capital Fund at a cost of Rs 10 billion would be established with government investment of Rs 5 billion over two years for improving transparency and regulatory supervision. He said the government would expedite the process of restructuring of National Savings Organisation. Regarding the Development of Special Areas, he said allocation for KANA and FATA had been increased by 60 per cent and 50 per cent respectively, from Rs 16 billion to Rs 25.5 billion in respect of KANA and from Rs 8.6 billion to Rs 12.8 billion for FATA. Tarin said an adhoc relief allowance of 15 per cent of basic pay of the serving government servants w.e.f. July 1,2009 had also been announced in the budget 2009-10. He added that the retired government servants and armed forces personnel would also get 15 per cent increase in their net pensions from July 1, 2009. He further said the limit for exemption of on income tax for salaried male was being enhanced from Rs 180,000 to Rs 200,000. Limit for exemption on income tax for salaried female was being enhanced from Rs 240,000 to Rs 260,000. Senior citizens would now enjoy 50 per cent relief in their tax liability in case of income up to Rs 750,000, previously this limit was up to Rs 500,000, he said.