A special cabinet meeting was also held on Friday under Prime Minister Nawaz Sharif to consider and approve budget proposals for the next financial year.
Compared to the 2014-15 budget of Rs 3.985 trillion, 2015-16’s outlay of Rs 4.313 trillion is 8.2% higher.
To put things somewhat in perspective, Pakistan’s 2015-16 budget at $42.66 is 56% of New York City’s budget – which is $75 billion.
The Finance Minister said estimate for the current expenditures during the next fiscal year is Rs 3.128 trillion while the revised estimates for the outgoing fiscal year are Rs 3.151 trillion.
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.
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During his speech, the minister said economy of the country had largely been stabilized since 2013, when the PML-N-led government took over.
Growth rate fixed at 5.5%
The GDP growth rate for the new fiscal year has been fixed at 5.5 percent, growth rate for agriculture sector at 3.9% and that of manufacturing sector at 6.1 %.
“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.”
The Finance Minister said GDP growth of 5.5 percent for the next year will be achieved through 3.9 percent growth target for agriculture, 6.4 percent for industries and 5.7 percent for services.
Pakistan’s GDP per capita stood at $1,512 – up 9.2% from $1,384 – means nominal GDP is approximately $290 billion
Mr. Dar described that flooding and anti-government protests in mid 2014 were the main reasons that government could not meet its growth rate target of 5.2%.
The Finance Minister takes a break in his Federal Budget speech as the Azaan is sounded in the National Assembly.
He said Karachi Stock Exchange was now trading at 34,000 – an increase of 70%. He added that the interest rate had been reduced to 7%, which resulted in increase of investment.
He said foreign exchange reserves would be maintained at the minimum of $ 20 billion.
Fiscal deficit pitched at 4.3%
The Finance Minister said fiscal deficit which was 5 percent during the outgoing financial year will be brought down to 4.3 percent in the next financial year. He said this achievement was made through increase in revenue collection and decrease in expenditures.
Finance Minister quotes an analyst from Morgan Stanley, Bloomberg News & an article from The Economist on how well the Pak economy is doing.
He said, by December 2017, a total of 10,600 MW will be added to the national electricity grid.
Defence budget up by 11.3%
The minister informed that defence expenditure had been increased up to 11.3% at Rs 780 billion ($ 7.66 billion).
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 Rs 100 billion are being allocated in the next budget for future security arrangements and return of IDPs of North Waziristan.
Minimum wage increased
The finance minister announced that minimum wage has been increased from Rs12,000 per month to Rs13,000.
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 100%.
He said exemptions worth Rs 120 billion given under different SROs in the realms of customs, sales tax and income tax are being withdrawn.
Sales tax on import of different varieties of mobile phones is proposed to be increased by hundred per cent.
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.
Benazir Income Support Programme
The Finance Minister said under the Benazir Income Support Program (BISP) allocations are being enhanced up Rs 102 billion which will cater to 31 milliom people of 5.3 million deserving families.
He said similarly budget of Bait-ul-Mal is being doubled from Rs 2 to 4 billion.
BISP allocation for 2015-16 has been increased to Rs 102 billion, Mr. Dar pointed towards the PPP benches and in a lighter tone urged for more clapping and desk-thumping.
The minister said: “We plan to increase GDP growth to 7% by 2017, bring fiscal deficit down to 3.5% and Tax to GDP ratio to 13%”.
He underlined that 217 places have been decided for setting up of universal learning centers. Besides, Rs.125 million for scholarships, decided last year for students of rural areas, will continue to be disbursed this year as well, he added.
Mr. Dar announced that Rs. 31 billion will be spent on water projects across the country.
Green Line Bus Project for Karachi
He said the “PML-N government will set up world class Green Line Bus transit system for people of Karachi.”
Mr. Dar announced that Rs. 16 billion had been allocated to complete Karachi Green Bus Line Project by Dec 2016.
IDPs and security
Mr. Dar said Rs. 100 billion allocated for Temporarily Displaced Persons (TDPs) and security enhancements across the country.
The Minister said under Universal Telecenters program Rs 12 billion 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 Rs 3.6 billion rupees which will connect rural areas with the rest of the country.
Allocations increased for HEC
The Finance Minister said a total of Rs. 71.5 billion allocated for Higher Education Commission, which is 14% higher compared to last year.
He said HEC will be issued Rs 20 billion for 143 new projects in the upcoming fiscal year.
PAEC budget reduced
Pakistan Atomic Energy Commission (PAEC) budget has also been reduced from Rs59.3 billion to Rs30.4 billion for the new fiscal year.
Ishaq Dar said the government has prioritized the energy sector and launched several projects in this regard. He said work is in progress to add 7,000 megawatts to the national grid besides another 3,600 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 Rs 248 billion 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.
PM Youth Loan Programme
The minister said under the PM Youth Loan Programme, as many as 15,000 loans approved, while 20,000 applications are under process – mark-up on this will be cut from 8% to 6%.
He added that Rs 1.75 billion loans given to 44,000 people in 2014-15 – recovery rate has been 100%.
Public Sector Development Programme
The Public Sector Development Programme for 2015-16 will be Rs 700 billion — that’s Rs 70 billion less than the defence budget for 2015-16.
Out of this, Rs 700 billion have been earmarked for the development projects to be carried by the federal government while Rs 814 billion will be disbursed amongst the federating units for their development programs.
Ishaq Dar said Rs 184 billion are being allocated for the construction of highways while 72 billion rupees are being earmarked for the power related projects.
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.
He said per capita income increased by 9.3% to $1512 from $1384
Turnover tax for KPK industries
The minister said turnover tax have also been exempted for KPK industries for five years.
Mr. Dar said trading in rupees also being allowed for exports to Afghanistan.
He said pension facility has been extended for widows and divorcee daughters.
Health Insurance Scheme
Dar announced to launch Prime Minister’s Health Insurance Scheme at a cost of Rs 9 billion to provide insurance to the patients suffering from serious and contagious diseases.
He said initially the scheme is being launched in 23 districts, which will be expanded during the next three years to facilitate 60% 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.
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.
The minister also tabled “The Finance Bill, 2015” in the House to give effect to the financial proposals of the federal government for the next financial year.
After the budget speech of Mr. Dar, the House was adjourned by Speaker Ayaz Sadiq to meet again at 4pm tomorrow.