After missing GDP growth target in consecutive two years, the PML-N government has once again set an ambitious growth target of 5.5 percent for the next financial year 2015-16 as against the growth of 4.2 percent of the outgoing year.

The government has admitted that inflation rate would increase in the upcoming fiscal year to 6 percent as against 4.8 percent of the ongoing year due to the expected raise in petroleum products prices in the international market. The government in Budget Strategy Paper 2015-18 set the GDP growth rate target at 5.5 percent for the year 2015-16, 6.5 percent for 2016-17 and 7.5 percent for the year 2017-18.

Similarly, the budget deficit target has been fixed at 4.3 percent of the GDP for the next financial year 2015-16, which would be brought down to 3.5 percent by the end of the year 2017-18.

Furthermore, government has estimated to increase the foreign exchange reserves to $19 billion by the end of the outgoing financial year 2014-15 and to $25 billion by 2017-18. The debt to GDP ratio would be brought down to 55 percent by 2017-18 from 63 percent of the ongoing year.

Secretary Finance Dr Waqar Masood presented the Budget Strategy Paper before the National Assembly’s Standing Committee on Finance and Revenue, which met under the chair of Omar Ayub Khan to discuss the upcoming budget and state of economy. The government would present the Budget Strategy Paper in Cabinet’s meeting for approval on May 26.

He informed that government would increase the volume of the Public Sector Development Programme (PSDP) by 10 percent to Rs 580 billion for next fiscal year from Rs 525 billion of the present year. The government would focus on investing in China-Pak Economic Corridor and energy projects.

Secretary Finance informed that Pakistan’s GDP growth had been recorded at 4.2 percent as against the target of 5.1 percent for the outgoing financial year. He attributed declining commodities prices in international market, economic disruptions due to prolong sit-in of political parties, floods in different parts of the country, dismal performance of industrial sector due to energy shortage and decline in credit to the private sector for lower growth in 2014-15.

He warned that oil prices could increase in international market, which would push the inflation rate to the higher side; therefore, government is setting the inflation target at 6 percent. The committee members showed concerns over the expected increase in inflation rate and stressed the government to take action to control the prices of the commodities.  Dr Waqar informed that government would control the budget deficit at 4.9 percent of the GDP during current financial year despite lesser revenue collection worth of Rs 200 billion and additional expenditures worth of Rs 40 billion on rehabilitation of TDPs and flood affected people.

Meanwhile, the sub-committee of the Standing Committee on Finance and Revenue also presented its suggestions for incorporating in the budget for next fiscal year.

The committee recommended to the government for reducing the sales tax substantially, which is currently too high. The SROs giving benefit to a particular industry/ beneficiary should be abolished.

The income tax return forms should be made quite simple and east to understand and should also be printed in Urdu. Present differential income tax/sale tax rates between commercial/ industrial importers should be substantially reduced.

The committee also proposed the government to Afghan trade should also be allowed in Pakistani currency. A joint committee should be constituted, comprising the representatives from FBR, chambers of commerce and trade organisations for making simplification of tax return forms. A nominal tax of 0.2 percent is suggested to be imposed on non-NTN holders transactions from banks/ financial and non-financial institutions. This tax would be deducted from senders of transactions. Bank’s accounts of the company or business should not be frozen until approval is granted by a competent court where the company/ business is given a chance of hearing and further 15 days shall be allowed for an approval.

According to the Committee’s recommendations, zero percent sales tax should be imposed on transportation charges against bilty, this would facilitate in documentation.