ISLAMABAD - The PML-N for the first time in its three stints in power presented its fifth growth-ambitious budget on Friday to an agitated assembly.

The budget for fiscal 2017-18 with a total outlay of Rs4.75 trillion, carrying a deficit of Rs1.5 trillion (4.1 percent of the GDP), focuses on infrastructure development, energy, agriculture and information technology.

The opposition members staged a token walkout from the house in protest against police brutality against farmers who had gathered at D-Chowk here from various areas of Punjab to protest the ‘unfair’ budget policies.

As the proceedings started, the opposition members stood up in their seats raising slogans against Prime Minister Nawaz Sharif and his government. Some of them also tore the copies of budget document and threw the pieces in the air.

Finance Minister Ishaq Dar, ignoring the deafening slogans, kept reading out his budget speech with full voice.

The government has set an ambitious growth rate of 6 percent for the upcoming fiscal year, which remained at 5.27 percent - against a target of 5.7 percent - during outgoing year 2016-17.

In his opening remarks, the finance minister said he felt proud in presenting the fifth budget of the PML-N government, as it was an achievement for Pakistan's democracy.

He said that during last four years the economy had been put on a strong footing as the government was taking measures to achieve the goal of economic stability. This 'turned around' was hard to imagine when they assumed power, he added.

Pakistan’s ratings by international monetary institutions have improved and the country’s economy has gone past the 5 percent threshold this year. Thanks to the confidence gained by it, the country has now set a target of 6 percent Gross Domestic Product [GDP] growth for the upcoming fiscal year.

Because of the development spur primarily brought by the China Pakistan Economic Corridor [CPEC], the country has earmarked Rs1.001 trillion for the Public Sector Development Programme [PSDP], 25 percent higher than last-year’s allocation.

Dar enumerated these and other achievements of the government. He said the macroeconomic successes included enhancing GDP growth to 10 years highest, increasing revenue by more than 80 percent, taking per capita income to $1629 from $1334, bringing budget deficit to 4.2 percent from 8.2 percent of GDP and curtailing inflation rate. He also claimed that power loadshedding has reduced in the country.

Revenues and expenditures

The tax collection target for Federal Board of Revenue is set at Rs4013 billion.

The major expenditures include Rs1.36 trillion for interest payment, Rs248 billion for pensions, Rs920.2 billion for defence, Rs430.2 billion on grants and transfers and Rs138.8 billion for subsidies.

The government has fixed historic public development sector programme (PSDP) at Rs1001 billion. The centre would transfer Rs2384.2 billion to provinces under National Finance Commission Award.

 A Costly Growth

For the next fiscal year, Ishaq Dar announced the measures that are expected to further accelerate growth and infrastructure development; reduce budget deficit and poverty; and increase resources through tax reforms.

The government has proposed heavy taxation measures of Rs120 billion and reduce the overall subsidy amount by Rs22 billion. These two measures would fuel the inflation rate in the next financial year, which is currently in control.

 Taxation Measures

CORPORATE SECTOR: Dar announced to reduce the corporate sector tax by one percent to 30 percent for the year 2017-18. Withholding taxes on new car registrations have been cut for lowest three categories.

AUTOMOBILES: Withholding tax on registration of motor vehicles is proposed to be reduced from Rs10,000 to Rs7,500 for engine capacity upto 850CC, from Rs20,000 to Rs15,000 for engine capacity between 851CC to 1,000CC and from Rs30,000 to Rs25,000 for engine capacity between 1001CC to 1,300CC. The rates for non-filers will remain unchanged.

CEMENT AND STEEL: The government has also announced to increase Federal Excise Duty on cement from Rs1 per kilogramme to Rs1.25/kg. Rates for dividend paid by mutual funds are also proposed to be enhanced from existing 10 to 12.5 percent in line with the increase on general dividend. Steel sector will be taxed at 10.5 percent compared to the current 9 percent.

SUPER TAX: The government has extended the super tax on the income of the affluent and rich individuals, association of persons and companies earning income above Rs500 million at a rate of 4 percent of income for banking companies and 3 percent of income for all others for another one year.

‘PUNISHMENT’ TO NON-FILERS AND SMOKERS: The rates of withholding taxes for non-filers on payments received for contracts, supplies and services, payments to non-residents, rental income, prizes on prize bonds and lotteries, commission, sale by auction, collection on gas bill of CNG stations and sale by manufacturers and commercial importers to distributors, dealers and wholesalers are proposed to be further enhanced.

In order to enhance duty from the non-essential sector of cigarette industry and to discourage smoking, the rate of duty would be enhanced on the existing tiers of the cigarettes.

 Salaries and Pensions

Salaries and pensions of federal government employees will be increased by 10 percent. Salary increase will be made by giving an adhoc relief after merging adhoc relief of 2008 and 2010.

Salaries of army and paramilitary personnel have also been proposed to be increased by 10 percent in addition to a ‘special allowance’, which is 10 percent of their income.

Minimum wage has been proposed to be increased from Rs14,000 to Rs15,000.

The officials up to BPS-5 employees are being exempted from paying house-rent charges at the rate of 5 percent. Daily allowance [domestic] is being increased by 60 percent. Orderly allowance is being revised from Rs12,000 to Rs14,000.

Rate for transportation of dead bodies and local burial are being revised from Rs1,600 to Rs4,800 and Rs5,000 to Rs15,000 respectively. The above measures are estimated to cost an additional Rs125 billion.

 Social Welfare

The next general election being around the corner, priority has also been given to prime minister’s social welfare schemes.

The government has increased the budget for Bait-al Mal to Rs6 billion from existing Rs4 billion. The budget will be utilised for financial assistance to individuals, child support programme, orphanages through Pakistan Sweet Homes and Thalassemia Centre for treatment for poor children.

A scheme for paying loans under House Building Finance Corporation on behalf of windows has been re-launched. The government has increased the limit to Rs500,000 from Rs350,000, and it will be applicable for widows who have not remarried.

Water and Power

Ishaq Dar announced that power loadshedding would be history in next year. Around 10,000 MW of additional electricity will become part of the national grid in the upcoming year. The government is proposing Rs401 billion for power sector development. A new programme ‘Energy for All’ has been introduced with an initial outlay of Rs12.5 billion, he said.

The finance minister announced that the government is allocating Rs38 billion for the development of water sector. Key projects such as extension of right bank outfall drain (RBOD-II), RBOD-I and Kaachi Canal will be given the largest share in the water sector portfolio. Priority will be accorded to completion of Kaachi Canal. Collectively, these three projects will be allocated Rs17.7 billion.

Information Technology

Dar said that government has taken a number of measures for promoting IT. Government will set up an IT park in Islamabad with the help of Korean government at a cost of Rs6 billion. The start-up software houses shall be exempted from Income Tax for the first 3 years.

The government has also decided to provide relief to common man by reducing the withholding income tax on cell phone call from 14 to 12.5 percent and Federal Excise Duty from 18.5 to 17 percent. In order to encourage use of smart phones - customs duty shall be reduced from Rs1,000 to Rs650.

National Highways and Railways

The government has proposed Rs320 billion for highways as compared to Rs188 billion allocated in the outgoing year. This represents the largest increase of 70 percent for development of roads, motorways, highways and bridges.

Rupees 48 billion have been allocated for 230km Lahore-Abdul-Hakeem section, 35 billion for 387km Multan-Sukkur section, 2.5 billion for Sukkur-Hyderabad section, 38 billion for construction of Hakla to Yarik DI Khan Motorway, 10 billion for Faisalabad-Khanewal expressway and 3 billion for Burhan-Havelian expressway.

The finance minister said that government is fully committed to reinvigorate the railways. Accordingly, Rs42.9 billion has been proposed for the next year’s budget.

The government has allocated Rs15.8 billion for the procurement or manufacturing of 75 new locomotives. Meanwhile, Rs4.5 billion has been fixed for the procurement or manufacturing of 830 high capacity bogie freight wagons and 250 passenger coaches.

CPEC, Gwadar and Special Areas

CPEC projects would enter into their third year of implementation during 2017-18. Funds to the tune of Rs180 billion have been proposed for CPEC and its supporting projects during the next financial year.

The government included 31 projects for development of Gwadar in 2017-18. The projects include implementation of Gwadar master plan, New Gwadar international airport, a 200-bed hospital, 200 MW power generation, and desalination plant.

The development funds for Azad Jammu and Kashmir and Gilgit Baltistan have been increased from Rs25.75 billion to Rs43.64 billion for the FY 2017-18 - which is a historic increase of 69 percent, and Rs26.9 billion are being allocated for Federally Administered Tribal Areas (Fata).


The finance minister announced a scheme for the agricultural sector to reduce the mark-up rate from 14-15 percent to 9.9 percent per annum for small farmers with holdings of 12.5 acres. The other features of the scheme are small loan of up to Rs50,000 per farmer. Loans of Rs2 million loans shall be provided by ZTBL, NBP and other banks.

The volume of agriculture credit is being enhanced to Rs1,001 billion from the last year’s target of Rs700 billion which will be an increase of 43 percent.

It has been decided that DAP will be subject to fixed sales tax. As a result, GST is being reduced from Rs400 to Rs100. This will have a subsidy impact of Rs13.8 billion. Through reduction in tax rates and subsidy the price of per bag of urea shall be maintained up to Rs1,400 per bag. This will have a subsidy impact of Rs11.6 billion.

The government will continue provision of subsidised tariff on agri-tube wells at the rate of Rs5.35 per unit. The government is also abolishing customs duty and sales tax on import of combined harvest machinery. Import of hybrid seeds will also be exempted from duty.

Human Development

The government has allocated Rs35.7 billion for Higher Education Commission. A new programme for hospitals with the cost of Rs.80 billion is being started for which Rs.8 billion have been allocated for next year. In addition, the Phase-II of Prime Minister’s national health programme is being launched with the total cost of Rs.10 billion.

A special programme by the name of ‘Clean Drinking Water for all’ has been launched for which Rs.12.5 billion are proposed to be allocated for the next year’s budget. Furthermore, Rs.30 billion are being proposed for the Prime Minister’s SDG programme which would focus on national commitments to improvement in the social indicators.