Budget today

June 11, 2008

(For a detailed legal opinion on Finance Act 2008, please contact Al-Latif Corporate Legal Consultants and stay tuned for preliminary report this week)

Outlay likely to be around Rs 2.8 trillion
* Revenue target estimated to be around Rs 1.2 trillion
* Debate on budget to continue from June 14-30

By Sajid Chaudhry

ISLAMABAD: Salaries and pensions are likely to increase in the Rs 2.8 trillion federal budget for the 2008-09 fiscal year the Pakistan People’s Party (PPP) led coalition government will table in the National Assembly today (Wednesday).

Salaries of government employees belonging to grades 1 through 16 are likely to increase by 20 percent, and of those belonging to grade 17 through 22 by 15 percent through a “dearness allowance”, official sources told Daily Times. The Online news agency said a 10 percent increment was also likely in pension of retired government officials.

Finance Minister Syed Naveed Qamar will present the budget in the Lower House at about 6:30pm and his speech will be aired live on television and radio.

The government aims at lowering the budget deficit to around Rs 560 billion or 4.6 percent of the Gross Domestic Product (GDP) in 2008-09, after the highest-ever Rs 737.8 billion deficit this fiscal year (2007-08).

The sources said the new government had decided to increase the defence budget by 7.2 percent to Rs 295.5 billion against the Defence Ministry’s Rs 330 billion demand. Considering 10 percent inflation and the rising prices of oil, which accounts for major part of the defence spending, the increase is negligible, they added.

Following protest by the provinces, the government has decided to increase the allocation to the Public Sector Development Programme (PSDP) for 2008-09 to Rs 541 billion – 4.4 percent of the GDP – compared with Rs 523 billion last year. It will finance the PSDP with foreign loans worth Rs 67 billion.

Revenue target: The tax collection target is likely to be fixed at around Rs 1.2 trillion with an emphasis on increasing taxes and duties on luxury goods and including several un-taxed sectors in the tax net, with a possible amnesty for legalising undisclosed assets by paying taxes ranging from 2 percent to 10 percent.

The coming fiscal year has been termed “the year of fiscal consolidation”, and the government has set an economic growth target of 5.5 percent of the GDP. Economic growth remained 5.8 percent this fiscal year.

Citing official sources, Online said Rs 523 billion would be allocated to the Annual Development Programme in the budget – Rs 373 billion for the federation and Rs 150 billion for the provinces.

It said the government would allocate Rs 34 billion to subsidise essentials for the poor under a Benazir Card scheme. The current account deficit target is likely to be set at 5 percent, it added.

Official sources also told Daily Times the government will set up a Rs 50 billion “pro-poor fund” to provide cash grants to the poor to meet inflationary pressures and challenges.

Debate: Debate on the budget will begin on June 14 and the session will continue until June 30. The National Assembly proceedings will begin at 10am and end at 8:30pm every day during the budget session.

According to the state-run APP news agency, “The budget will focus on infrastructure, human capital and social sector development, poverty reduction, promotion of investments and exports, agriculture sector development and provision of relief to the common man.”

“The government is keen to provide relief to the people in the next budget for which concrete measures are being considered.”

main points

* Benazir Card scheme to provide Rs 34 billion subsidy on essentials

* Defence budget to increase by 7.2 percent to Rs 295.5 billion, against a Rs 330 billion demand

* Salaries of government employees belonging to grades 1 through 16 likely to increase by 20 percent, and grades 17 through 22 by 15 percent

* Pensions to increase by 10 percent

* Emphasis on increasing taxes and duties on luxury goods

* Amnesty for legalising undisclosed assets by paying taxes ranging from 2 percent to 10 percent

* Budget deficit likely to be Rs 560 billion or 4.6 percent of GDP

* Rs 541 billion to be allocated to the Public Sector Development Programme (PSDP)

* Rs 523 billion to be allocated to the Annual Development Programme

* Economic growth target set at 5.5 percent of GDP

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