ISLAMABAD: A growth and development oriented Federal Budget with a total outlay of 4313 billion rupees for the next financial year with special focus on attracting investment besides and providing relief to the common man has been announced.
Laying budgetary proposals before the National Assembly in Islamabad on Friday (June 5), Finance Minister Ishaq Dar said despite critical challenges faced by the government during the last two years, it has been successful to turn around the economy which is now on a positive trajectory.
He said the government has been successful to steer the country out of economic crisis being faced for the last many years and now it is stable and can meet any future challenge.
The finance Minister said the Government did not hesitate to take difficult decisions to bring back the economy on track and implemented on the policy given by the Prime Minister in this regard with all sincerity and good intentions.
He said the government devised a three point strategy in 2013 to revamp the economy which include save the country from default, gaining macro-economic stability and in the third stage creating more opportunities for employment and reduce poverty.
Ishaq Dar said today the economy is stable and heading towards sustainability. He said it is the result of the policies of Prime Minister Nawaz Sharif that inflation level has come down at eight years lowest level of six percent. He said foreign exchange reserves have surged to 17 billion dollars which will further grow to 19 billion dollars during the next financial year. He said Karachi Stock market which was 19,916 points has crossed the level of 34000 points which shows seventy percent increase in the stock market business with similar increase in market capitalization.
The Finance Minister said fiscal deficit which was five percent during the outgoing financial year will be brought down to four point three percent in the next financial year. He said this achievement was made through increase in revenue collection and decrease in expenditures.
Ishaq Dar said the government has prioritized the energy sector and has launched several projects in this regard. He said work is in progress to add seven thousand megawatts to the national grid besides another three thousand six hundred megawatts through LNG based power plants by December 2017. He said in addition projects like Dasu, Diamer Bhasha Dam and Karachi nuclear power plants are also being executed to address the energy crisis.
Ishaq Dar said two hundred forty eight billion rupees are being allocated for energy sector with an objective to generate additional cheap electricity and overcome load shedding by 2017.
He said work on on-going projects will be expedited during the current fiscal year and a huge amount has been allocated for this purpose.
He said work on various projects for the small dams and link canals will not only continue during the next fiscal year but it will be expedited in all the four provinces. Similarly he said the projects to overcome wastage of flood water will also be continued with focus to complete them in the shortest possible time.
The Finance Minister said under the Benazir Income Support Program (BISP) allocations are being enhanced up 102 billion rupees which will cater to thirty one million people of 5.3 million deserving families. He said similarly budget of Bait-ul-Mal is being doubled from two to four billion rupees.
He said under Universal Telecenters program twelve billion rupees are being allocated to set up 217 telecenters all over the country in the first phase. Work is underway to connect 128 tehsils of the country especially under developed areas with fiber optic. Another program in telecommunication sector is being launched at a cost of three point six billion rupees which will connect rural areas with the rest of the country.
Medium Term Macro-Economic Framework
The Finance Minister also announced a three year medium term macro-economic framework spanning over financial year 2015-16 to 2017-18.
GDP Growth Rate
Under the framework, the target for GDP growth rate for the next fiscal year has been kept at five point five percent which would be taken to seven percent by 2017-18.
Inflation would be kept to single digit, investment to GDP ratio at twenty one percent, fiscal deficit 3.5 percent and tax to GDP ratio thirteen percent.
He said foreign exchange reserves would be maintained at the minimum of twenty billion dollars.
The Finance Minister said GDP growth of five point five percent for the next year will be achieved through three point nine percent growth target for agriculture, six point four percent for industries and five point seven percent for services.
On the infrastructure projects, Ishaq Dar said Lahore-Karachi motorway is the priority of the government which will change the destiny of the nation. He said this project will generate many job opportunities. He said amount is also being allocated for the construction of Abdul Hakeem Multan section, Sukkur-Multan and Karachi- Hyderabad sections of the motorway.
Ishaq Dar said 185 billion rupees have been allocated for the construction of bridges.
He said China-Pakistan Economic Corridor (CPEC) project which will prove to be a game changer is a priority of the government and for this purpose work on Raikot-Islamabad road will be launched during the next fiscal year. For this purpose 29 billion rupees are being allocated. Similarly, ten billion rupees are being allocated for construction of Islamabad-D. I. Khan Road.
About the revival of Pakistan Railways, the Minister said a comprehensive plan has been devised in this regard which include dualization of railway track from Raiwind to Khanewal and Shaddra to Lala Musa. He said rehabilitation of Karachi-Khanpur track will be completed during the next fiscal year. He said 159 weak railway bridges will be rehabilitated by 2017. He said 170 new locomotives will be inducted into the system besides repairing 100 locomotives and purchasing of 1500 new passenger coaches. He said a program is also being launched to renovate railway stations throughout the country besides improving signaling system between Lodhran and Kotri.
Public Sector Development Programme
The Finance Minister also announced Public Sector Development Programme (PSDP) amounting to over 1513 billion rupees.
Out of this, 700 billion rupees have been earmarked for the development projects to be carried by the federal government while 814 billion rupees will be disbursed amongst the federating units for their development programs.
Ishaq Dar said 184 billion rupees are being allocated for the construction of highways while 72 billion rupees are being earmarked for the power related projects.
The finance minister said sixty two billion rupees are being allocated for China-Pakistan Economic Corridor (CPEC) Project. In the first phase, western alignment of the corridor will be completed on priority so that economic benefits reach the people.
He said the government plans to initiate new programmes to improve productivity in industrial and agricultural sectors and achieve food security and enhance exports.
Ishaq Dar said special emphasis will also be laid on the construction of motorways including Gojra-Multan, Sukkur-Hyderabad and Sukkur -Multan sections.
Under the development program, twenty billion rupees are being earmarked for the promotion of higher education and twenty billion rupees for health sector projects. He said it has also been decided to launch prime minister’s health insurance scheme during the next financial year.
Ishaq Dar said heavy investment is being made on the development projects in the water sector to ensure maximum water conservation for irrigation and power generation purpose.
He said Diamer Bhasha dam is most significant in this regard which is very important for the future of Pakistan. He said this dam will have the capacity of 4.7 million acre feet water reservoir besides generation 4500 megawatts of cheap electricity. He said 15 billion rupees are being allocated for the procurement of land for the dam while six billion rupees have been earmarked for construction of first phase of this dam.
He said special attention is also being laid on ensuring provision of water in Balochistan province. For this purpose, delay action dams, flood dispersal structures, canals and small dams will be constructed in the province which will be completed during the next two years. He said work on Basool Dam in Gwadar will be launched during the next fiscal year.
He said similarly attention will be laid on the completion of ongoing irrigation projects including Raini Canal, right bank outfall drain and Darwat dam.
He said work on Makhi Farash canal will be launched during the next fiscal year. In Punjab, he said work will be launched on Ghabbi Dam in Chakwal and Nala Dek in Sialkot.
Ishaq Dar said work on Kurram Tungi dam in North Waziristan and Gomal Zam Dam in South Waziristan will be continued with an objective to complete them at the earliest.
Funds for Higher Education
Coming to the education sector, the finance minister said the government believes in the promotion of education and ensure raising its standard. For this purpose, twenty billion rupees are being allocated for 143 projects of higher education commission besides allocating fifty one billion rupees for the higher education commission for current expenditures.
Ishaq Dar said the federal government stands by its commitment to increase expenditures on education sector equal to four percent of GDP during its tenure. However, he said after the 18th amendment, major portion of the education has gone to the provinces and both federal and the provincial governments will have to take visible steps to achieve their targets.
The Finance Minister said estimate for the current expenditures during the next fiscal year is 3128 billion rupees while the revised estimates for the outgoing fiscal year are 3151 billion rupees. He said the figure shows that the current expenditures are being reduced gradually.
He said defence budget is being increased by eleven percent as 780 billion rupees have been allocated for next financial year.
The finance minister said the nation has rendered matchless sacrifices in the war on terrorism. He said the armed forces are engaged to flush out terrorists through the ongoing Operation Zarb-e-Azb.
He said one hundred billion rupees are being allocated in the next budget for future security arrangements and return of IDPs of North Waziristan.
Ishaq Dar presenting new tax proposals said the country needs ample financial resources to ensure socio economic development and betterment of the people. He said the government considers significant increase in the taxes to ensure sustainable economic development of the country.
He said all-out effort has been made to save the poor segments of the society from imposing new taxes and measures will be taken to bring the rich segments of the society in the tax net.
He said measures will be taken to broaden the tax base and reduce the slabs and duty on custom tariff during the next fiscal year.
The finance minister said that to discourage undocumented economy, it has been decided that zero point six per cent withholding tax may would be imposed on the fund transfers and banking instruments. However, the tax payers who file their returns will be exempted from this tax.
He said tax rate on dividend is being increased from ten to twelve point five per cent. However, the tax rate on mutual funds will remain ten per cent.
He said that ten per cent advance income tax which was being received on the bills more than one hundred thousand rupees will now be imposed on the bills up to seventy-five thousand rupees due to decrease in power tariff.
Ishaq Dar said it is proposed that one time tax on rich persons and companies which have the income of more than five hundred million rupees per annum at a rate of four per cent to ensure raising of funds for IDPs which is estimated up to eighty billion rupees.
The Finance Minister also announced several tax relief measures to promote corporate culture and documentation of the economy.
Under the policy, the rate of tax on companies which was 33 per cent this year is being brought down to 32 per cent for the next financial year.
Profit on transmission line projects is being exempted from income tax for ten years to incentivise the private sector to invest in electricity transmission projects. The facility would be available to all those projects that would be launched by June 2018.
He said presently salaried taxpayers with taxable income between four hundred thousand and five hundred thousand rupees pay five per cent tax. This rate is being reduced to two per cent to provide relief to this segment of salaried taxpayers. The rate for non-salaried individuals and association of persons of the same category would be seven per cent as against ten per cent during current financial year.
Incentives to Boost to Construction Sector
Ishaq Dar said various incentives are being announced in the budget to give boost to the construction sector.
He said incentives will also be given to the industrialists so that they could provide more employment opportunities. He said under the green field industrial package of the Prime Minister, tax exemption is being extended up to 30th June 2017. Similarly, he said exemption in sales tax and custom duty on the import of solar panels is being extended up to 30th June 2016.
He said exemption in income tax on the equipment being used for the production of solar and wind energy plants are also being extended for the next five years.
Ishaq Dar said the companies in the business of Halal meat will be exempted from income tax for four years.
The Finance Minister said various tax rebates and exemptions are being announced in the budget for the promotion of fish business, import of agriculture machinery and equipments and production of these equipments besides installation of solar tube wells.
He said to facilitate the people of far flung and under developed areas, exemption of federal excise duty and withholding tax is being given in the civil aviation sector.
The Finance Minister said the government has decided to provide various incentives and tax exemptions in Khyber Pakhtunkhwa to flourish business and industries to overcome the losses incurred due to terrorism and extremism.
Incentives to Exporters
The Finance Minister announced various steps to give incentives to the exporters for giving a boost to the exports in the coming years.
He said special incentives will be given in various sectors of exports, including product diversification, value addition, trade facilitation, enhanced market access and institutional strengthening.
For this purpose, six billion rupees are being allocated in the budget besides taking steps for reconstitution of export development fund.
He said significant measures will be taken to enhance textile exports of the country.
Coming to agriculture sector, the Finance Minister said with the approval of the Prime Minister, it has been decided to issue interest free loans for the installation of solar tubewells and convert the existing tubewells to solar ones.
The Finance Minister said the government is focusing on expanding the volume of small agriculture loans for the benefit of growers and loans worth six hundred billion rupees will be disbursed during the next financial year.
The Finance Minister said the rate of federal excise duty on cigarettes is proposed to be increased from the existing 58 per cent to 63 per cent to discourage smoking.
Sales tax on import of different varieties of mobile phones is proposed to be increased by hundred per cent.
He said exemptions worth 120 billion rupees given under different SROs in the realms of customs, sales tax and income tax are being withdrawn.
He announced that the power of FBR to issue SROs is being withdrawn and now this power would be used by the Federal Government in special circumstances.
The Finance Minister announced a package of incentives for construction sector.
Bricks and crush is being exempted from sales tax for three years up to 30th of June 2018 so as to bring down the cost of construction.
PM’s Health Insurance Scheme
Ishaq Dar announced to launch Prime Minister’s Health Insurance Scheme at a cost of nine billion rupees to provide insurance to the patients suffering from serious and contagious diseases.
He said initially the scheme is being launched in twenty-three districts, which will be expanded during the next three years to facilitate sixty percent poorest segments of the society.
He said under this scheme, secondary medical coverage will also be provided in the tribal areas, Islamabad, Gilgit Baltistan and Azad Kashmir.
PM Youth Business Loan Scheme
He said under the PM Youth Business Loan Scheme, fifteen thousand loan applications have been approved while twenty thousand applications are under consideration. He said under this scheme, rate of markup is being reduced from eight to six percent in the next fiscal year.
Ishaq Dar announced to provide internship to fifty thousand unemployed graduates having education of sixteen years during the next fiscal year.
He said under this scheme, twelve thousand rupees will be given as stipend to the internees. He said under the PM laptop scheme, seventy thousand laptops have been disbursed among the outstanding students, which will continue in the next fiscal year. He said for all these schemes, twenty billion rupees are being allocated.
Supplementary Demands for Grants, Appropriation
The Finance Minister laid before the National Assembly the Supplementary Demands for Grants and Appropriation for the financial year, 2014-15.
The Finance Minister introduced “The Finance Bill, 2015” in the House to give effect to the financial proposals of the federal government for the next financial year and to amend certain laws.
NA Session Adjourned
The House will now meet on Monday at four in the afternoon.
Federal Cabinet meeting
Earlier, The Federal Cabinet at its meeting in Islamabad on Friday approved the budgetary proposals for the next fiscal year.
Prime Minister Nawaz Sharif chaired the meeting.
Finance Minister Ishaq Dar briefed the cabinet regarding budget proposals, including targets set for the next financial year, both development and non-development activities.