ISLAMABAD  -  In an apparent bid to appease all ahead of the elections, the outgoing PML-N led government yesterday presented a ‘relief-loaded’ budget – with a total outlay of Rs5.9 trillion and Rs1.9 trillion deficit that would be financed through massive borrowing.

It came amid a raucous protest marked by fist fights between the treasury and the opposition lawmakers, as the latter wanted the government to confine the financial plan to three months and leave the future decisions on the next regime.

The opposition also put the government on mat for elevating PM’s finance adviser Miftah Ismail to the status of finance minister, just hours before the tabling of budget document in the national assembly.

Apparently, it was a last minute decision as the budget speech copies provided to the parliamentarians and media persons carried the title of Dr Miftah Ismail, Adviser to PM on Finance.

Opposition Leader in NA Syed Khursheed Shah strongly criticised government for giving chance to an unelected member to present budget in the presence of an elected minister - Rana Afzal.

It was however another feather in the cap of the ruling Pakistan Muslim League-Nawaz that for the first time in the history of the country, it presented sixth budget in a row.

The GDP growth rate for next fiscal has been fixed at 6.2 percent while it is expected that government would manage to collect some Rs4,435 billion through tax and other government collections.

Similarly, the inflation rate would be kept down to 6 percent while the target of budget deficit would also be contained to 4.9 percent.

The size of the PSDP [Public Sector Development Program] has been estimated to be Rs1,650 billon, of which Rs850 billion has been allocated to the provinces, while Rs800 billon has been allocated to the federal government.

Shift from development to appeasement

Keeping development the hallmark of its previous five budgets, the government - which is departing in 35 days - changed its thrust to welfare and appeasement of public as well as special interest groups in its last budget.

Also, no proper direction was given on a number of critical issues, leaving it on the next government to deal with those on its own.

Besides the usual 10 percent increase in the pay and pension, the government suggested upward revision of slabs for the minimum pension.

The house rent was also increased by 50 percent for government employees, which would give solace to the people particularly serving in Federal Capital where the rents of houses is substantially high as compared to rest of the country.

The defence budget has been increased by 19.5 percent to Rs1,100 billion – which is 18.5 percent of the total budgeted outlay and the highest since the PML-N took over in 2013.

Also, the government has collocated Rs90 billion for the rehabilitation and reconstruction of millions of people who had to leave their homes in the areas of military operations.

The energy sector was slated to remain in focus with allocation of Rs138 billion for new projects while Rs39 billion were earmarked for Pakistan Railways.

Massive incentives have also been proposed in agriculture sector and import of agriculture-related machinery while rates of fertilisers were also proposed to be slashed down to provide relief to the farming community.

Duties and taxes have been curtailed on the import of computers, hybrid cars, equipments related to film industry and a number of other sectors which would benefit and give boost to the local industry.

Economic experts warned that these appeasement measures could turn out to be a financial nightmare for the regime that would assume power after the upcoming elections.

They pointed out heavy reliance on borrowing in the budget estimates, lack of a clear plan for soaring loan interest repayment and drastic cuts in taxes/duties in absence of a tested plan to meet the expectations about tax base expansion.

The few unpopular decisions taken by the government included increase in the prices of cement - which would affect the construction business - and massive taxation on property and real estate business that would also slow the booming business in this sector.

Duties on electronic home appliances and other luxury items could be listed among the unpopular decisions.

The noose has been tightened around the tax non-filers with the main aim to broaden the tax net and increase the government revenue.

The non-filers have been barred from purchasing a property valuing in excess of 40 lac rupees.

Finance Minister Miftah Ismail in his budget speech said that tax revenues reached 13.2 percent of GDP in 2017/2018, up from 10.1 percent in 2012/2013.

“This unusual increase in tax collection is a very big success,” he said.

A budget document said total tax receipts would reach 4.2 trillion for 2017/2018 - barely missing the official target - and Ismail projected they would jump to 4.43 trillion rupees next fiscal year.




Miftah’s speech

Miftah, in his speech, said total outlay of the budget for next fiscal year (FY2019) would be Rs5.66 trillion as against Rs4.99 trillion of the outgoing year showing an increase of 13.4 percent.


In expenditures, the minister said the government has allocated Rs1.6 trillion for interest payment, Rs342 billion for pensions, Rs477.9 billion for grants and transfers, Rs174.7 billion for subsidies and Rs463.4 billion for running civil government.

The government has earmarked Rs1.1 trillion for defence for FY2019 as compared to Rs999 billion of the outgoing year.

Meanwhile, the government has kept Rs1067 billion for the federal development programme, he said.

In revenues, the government has fixed the tax collection target of Federal Board of Revenue (FBR) at Rs4,435 billion and other taxes at Rs453.6 billion.

Similarly, the government has estimated to generate Rs771.9 billion for non-tax revenues. The provincial governments would give budget surplus of Rs285.6 billion.

He said: “It is my honour to present today the sixth budget of the PML-N government to this Parliament. It is indeed a historic moment for the nation and the Parliament to celebrate.

“Despite challenges, we have achieved a highest growth in thirteen years, low inflationary environment, and overall macro-economic stability.”

The minister highlighted the key targets of the budget strategy that included increasing Real GDP growth rate to 6.2 percent, containing inflation at below 6 percent, increasing tax to GDP ratio to 13.8 percent, containing budget deficit at 4.9 percent of GDP and brining net public debt at 63.2 percent of the GDP next fiscal year.

He added that government would increase the foreign exchange reserves at $15 billion and would continue the social protection programmes.




Miftah Ismail said that government has proposed to allocate Rs138 billion for the power sector.

Key investments in the sector are proposed as follows Rs27.5 billion have been allocated for installation of two 600 MW coal fired power project in Jamshoro, Sindh and Rs76 billion have been allocated for Dasu Hydro Power Project for Stage-one in district Kohistan, Khyber Pakhtunkhwa.

Similarly Rs32.5 billion have been allocated for Neelum Jhelum Hydro Power Project, and Rs13.9 billion have been allocated for Tarbela Fourth Extension Hydro Power Project.



Renewable Energy Initiatives

The government has proposed to withdraw 16 percent customs duty on charging stations for electric vehicles to promote usage of electric vehicles, which are environment friendly.

Customs duty on import of electric cars is proposed to be reduced from 50 percent to 25 percent in addition to exemption from regulatory duty of 15 percent. Similarly, import of CKD kits for assembly of domestically produced electric cars is proposed at 10 percent. The government has also proposed to withdraw 5 percent customs duty on LED parts and components.



Agriculture Sector

Miftah said that there will be a reduced uniform General Sales Tax (GST) rate of 2 percent on all fertilisers from next fiscal. It has also proposed to reduce GST on agriculture machinery from the current 7 percent to 5 percent.

The government would continue to provide electricity for agriculture tube well at reduced rates. This scheme will continue in these areas where the provincial governments agree to share cost of subsidy on a 50:50 basis.

The government has also proposed setting up an Agriculture Research Support Fund with an initial allocation of Rs5 billion. The Fund will provide financial grants for research and development of modern plant and seed varieties for achieving higher crop yields.

The government has recommended establishing a separate Fund for indigenization of agriculture technology with an initial allocation of Rs5 billion. It will work with partner organizations and promote indigenization of agriculture technology.

Estimated loans to the agriculture sector will increase to Rs1,100 billion.



Export Promotion

The finance minister said that government has planned to rationalise subsidies and concurrently reduce cost of production to enhance the exports.

Five export sectors namely textiles, leather, sports goods, surgical goods and carpets shall continue to remain in zero-rated sales tax regime.

The government has decided to provide freight support on export of potatoes. The government has allocated Rs10 billion for export promotion schemes under textile policy and strategic trade policy framework.

Tariffs on various lines, which are mainly industrial raw materials, are proposed to be reduced. Tariff Restructuring shall increase competitiveness of exports and help in reducing the current account deficit.

Refund claims currently pending will be cleared in a phased manner over the next 12 months starting 1st July 2018. After 1st July 2018 all new refund claims will be paid as per the time stipulated in law and regulations on monthly basis and there will be no delay.



Human Development

The minister announced to enhance PSDP allocations for Higher Education Commission to Rs57 billion, for primary health programmes to Rs37 billion and for programmes for youth by Rs10 billion.

In addition, the federal government is proposing to build 100 sport stadiums all over the country on cost-sharing basis with the provincial governments.



Package for children

Miftah announced a special package called the 100,100,100 programme focusing on children’s development. The government is targeting 100 percent admission, attendance and graduation of children in schools.

“This is a national commitment that I make today to the children of Pakistan. We will educate you. And we will insist on 100 100 100,” he added.

The government has also decided to allocate Rs10 billion for ending child stunting, as 30 percent of Pakistani children are stunted due to malnutrition and inadequate food.




Special Areas

For the AJK and Gilgit Baltistan, an amount of Rs44.7 billion is proposed to be allocated. For the people of AJK, we announce today a special project of Lipa Tunnel construction which will facilitate the local population.

For Fata, Rs24.5 billion have been proposed. To bring Fata in the mainstream, a ten-year Fata development plan with total outlay of Rs100 billion has been approved. During 2018-19 Rs10 billion are proposed to be provided.



Karachi package

The government has announced a package of Rs25 billion for Karachi. This package includes providing infrastructural and other social sectors facilities.

So far, three projects covering roads and flyovers and up-gradation of firefighting system has been approved and Rs3.0 billion has been earmarked during current financial year. An allocation of Rs5 billion has been proposed in the PSDP-2018-19.



Development of Gwadar

Thirty-one projects for development of Gwadar are part of the proposed PSDP 2018-19 with an estimated cost of Rs137 billion.

The government allocated resources for the completion of on-going projects such as; Gwadar airport and its access road network, improving port facilities, development of a desalination plant for provision of clean-drinking water, upgrade of existing 50 bed hospital to 300 beds, development of infrastructure for Gwadar export processing zone, construction of a China-Pakistan Economic Corridor Institute, and construction of dams.



Film and Drama Industry

The finance minister informed the National Assembly that government has announced an incentive package to revive Pakistan’s film industry.

The government has proposed to reduce custom duty to 3 percent on the import of film & drama production equipment and sales tax to 5 percent.

The government has also proposed for establishment of a revolving Fund for promotion of film and drama industry and to provide financial support to deserving artists. It will rebate of 50 percent in Income tax to companies investing in film projects for 5 years.



‘Relief-loaded’ Rs5.6tr budget rolled in