ISLAMABAD -  The government is likely to fix the country’s GDP growth at 6.2 percent and budget deficit at 4 percent for the next financial year 2017-18.

“The broad contours of the budget are almost ready, which will be presented to the federal cabinet for approval after the return of Finance Minister Ishaq Dar from the United States,” said an official of the Ministry of Finance. The government had already decided to announce the budget for financial year 2017-18 on May 26. The announcement of the budget had been pulled earlier because Ramazan was expected to begin on May 28.

Sharing some of the initial estimates, he said that the government is considering fixing economic growth target at 6 or 6.2 percent for the upcoming fiscal year as against 5.7 percent target of the ongoing year. Similarly, the government is contemplating to fix budget deficit at 4 percent of the GDP (Rs1.44 trillion) as against revised target of 4.1 percent of the GDP of the outgoing year.

The government would set Federal Board of Revenue (FBR)’s tax collection target at Rs4 trillion, which would be almost Rs400 billion higher than the target of the current fiscal year. The government had kept tax collection target at Rs3,621 billion for the year 2016-17. However, it expects to collect around Rs3,500 billion after FBR faced mammoth shortfall of Rs168 billion during nine months (July-March) due to lower taxes on oil products and incentive packages for export oriented sectors.

The government is also planning to keep around Rs850 billion for the Public Sector Development Programme (PSDP) for the next financial year. However, Prime Minister Nawaz Sharif would take final decision on development projects. The government is likely to earmark major chunk for energy and infrastructure projects ahead of the elections, which would be held in next year 2018. Meanwhile, inflation rate could be fixed at 6 percent for the year 2017-18.

The government is likely to set Defence budget at Rs950 billion for next fiscal year as against Rs860 billion of the previous year. The country’s defence budget had increased by 10-11 percent in the last few years.

Meanwhile, the FBR has also made some of the taxation proposals for the next year. The government would target non-tax filers in the budget to broaden the tax base of the country. The government would enhance the withholding taxes (WHTs) for non-filers of income tax returns in the next fiscal year. The FBR has also proposed to enhance the withholding tax on banking transactions from 0.4 percent to 0.6 percent in the budget. Similarly, the government is expected to exempt withholding tax for up to Rs100,000 transactions in the next budget. Currently, withholding tax is imposed on over Rs 50,000 bank transactions.

The government has also decided to continue with imposition of super tax on affluent and rich individuals, association of persons and companies earning income above Rs500 million in next financial year to rehabilitate the temporarily displace persons (TDPs) of the Zarb-e-Azb military operation. The government had imposed a temporary 4 percent super tax on all banks and 3 percent on other companies and individuals with an annual income of over Rs500 million.