Islamabad (April 27, 2018): Federal Finance Minister Miftah Ismail has presented the federal budget 2018-19 in National Assembly today.
PM’s Advisor on finance, Miftah Ismail, who was appointed as Federal Finance Minister hours before, presented the budget proposals eyeing the forthcoming elections.
Leader of the Opposition in the National Assembly, Syed Khursheed Shah criticized the government on presenting the budget for the next fiscal year.
He said that the present government can present the budget for only three or four months as it is going to complete its five-year term on May 30 and only the new government emerging from the Elections 2018 can present the budget for the whole year.Later, Prime Minster Shahid Khaqan Abbasi rejected Shah’s reservations saying the government enjoys authority to present the budget. The PM also defended the appointment of Miftah Ismail as federal minister.
Despite government assurances, the opposition members staged walkout of the budget session.
Budget 2018-19 Layout
According to a copy of the Budget 18-19, the total budgeted outlay has been set at Rs5,932.5bn from Rs5,103.88bn last year ─ a 10.6pc increase over revised figure, and a 16.2pc increase over last year’s budgeted figure. The revised outlay for 17-18 came to Rs5,361bn.
The target GDP growth rate for the upcoming fiscal year has been set at 6.2pc against FY17-18’s target of 6pc.
The total tax target is Rs4,888.6bn, of which the FBR taxes comprise Rs4,435bn.“This target will be achieved through improved tax steps and improved tax administration. The tax base is being expanded and the per cent of tax is being reduced,” the finance minister said.
The non-tax revenue target has been set at Rs1,246bn, according to a copy of the budget 18-19.
The provincial share in tax revenue will be increased from Rs2,316bn to Rs2,590bn, Ismail added.
As expected, the budget hikes current expenditures and cuts development. This is the first PML-N budget to do so. The hike in current expenditures is roughly 20pc, while development expenditure has been cut 20pc.
The share of current and development expenditure respectively in the total budgetary outlay is 80.6pc and 19.4pc. Current expenditure has been estimated at Rs4,780.4bn, while development expenditure is set at Rs1,152.1bn.The size of the FY18-19 PSDP has been estimated to be Rs1,650bn, of which Rs850bn has been allocated to the provinces, while Rs800bn has been allocated to the federal government.
Under the PSDP, Rs47bn has been allocated to the Higher Education Commission, Rs37bn for basic health and Rs10bn for the PM’s Youth Programme.
Development expenditure outside the Public Sector Development Programme (PSDP) has been estimated at Rs180.2bn for FY18-19, which is 18.4pc higher than FY17-18 estimates.
Bank borrowing in the coming fiscal year is expected to be 2.6 times higher than last year’s budgeted figure, although the increase is not reflected in borrowing from the State Bank of Pakistan.The government also plans to float Sukuk bonds while borrowing from local banks is expected to be significantly higher than FY17-18.
The defence budget has been set at Rs1,100bn from a revised budget estimate of Rs999bn in the previous year ─ 18.5pc of the total budgeted outlay, while the PSDP has been slashed to Rs800bn for FY18-19.
The government also intends to restrict the overall fiscal deficit to Rs1890.2bn or 4.9pc of the GDP, down from the revised estimates for the year 2017-18 which stood at 5.5pc, and inflation to below 6pc, Ismail said.
The government estimates forex reserves to come to about $15bn in FY18-19.The target tax to GDP ratio is 13.8pc, while the target net public debt to GDP ratio 63.2pc, the finance minister announced.
“The objective of the medium term macroeconomic policy, besides improved economic growth, is to correct the balance in the external account,” Ismail said. “The fiscal deficit will be reduced in the next three years and the environment for investment will be improved.”
“The government will continue investment in social protection and the Benazir Income Support Programme, and will take steps for the underprivileged communities through targeted subsidy schemes. Rs125bn has been allocated to the BISP, while Rs189bn has been set aside for total subsidies. Rs10bn has been proposed for PM’s Youth Scheme,” he said.Agricultural Sector
Agricultural production is slated to increase, Ismail said, with the government intending to continue implementing an agricultural policy in FY18-19 “until we end the tradition of subsidies”.
Estimated loans to the agriculture sector will increase to Rs1,100bn, he said.
“A second green revolution is needed for advancement in the agriculture sector,” the minister explained. “The next federal government will leave all decisions regarding subsidies to the provincial governments while the federal government’s focus will be on providing a favourable environment for research and development, an increase in production, access to markets and improvement in technology.”
“I am happy to announce that while we had proposed a 3pc sales tax on fertiliser, the PM has approved sales tax of 2pc only on the recommendation of Sikandar Bosan, the food security minister.”The 2pc reduction in GST on agricultural machinery has been proposed from 7pc to 5pc, while a relaxation in dairy and livestock taxes has also been proposed.
“Pakistan is the 5th largest cotton grower in the world but lags behind in exports of cotton products,” Ismail observed. “In order to improve the quality and quantity, the subject of cotton has been handed over to the Ministry of Food Security and Research from the Textile Ministry.”
“The govt is starting an Agricultural Support Fund with Rs5bn which will support research on new kinds of seeds and plants in order to increase agri output,” the minister said, adding that another Rs5bn had been set aside for the promotion of agri technology.
“The government wants to introduce renewable energy in all sectors,” Ismail added. “It is proposed that the 16pc duty on charging stations for electric cars be ended.”
In the aftermath of the 7th NFC, the provinces have been issued an extra Rs2,500bn in eight years, and the federal government will have a reduced share in the NFC, he said.Karachi package
The government announced a Rs25bn special package for development in Karachi.
A large-scale desalination plant will be set up in Karachi to end the city’s water woes, Ismail said.
Rs5bn will be allocated for the construction of roads, fire brigades and bridges in the coming fiscal year. Rs8bn will be set aside for expansion of the Expo Centre, he added.
Packages for children
A special package called the 100,100,100 programme focusing on children’s development was announced by Ismail. Under the package, the government is targeting 100pc admission, attendance and graduation of children in schools.
The government will pay for the transportation of female students to school, he added.“This is a promise made by the Parliament to the people of Pakistan. We have failed for the past 70 years, but it will not happen anymore, although education is a provincial subject,” Ismail asserted.
Another special package amounting to Rs10bn ─ along with a supplementary grant ─ was announced for children’s health. “40pc of children experience stunted growth,” the finance minister said. “It will be tolerated no more,” he said, adding that stunting would end by 2020. “This is the prime minister’s promise.”
PM’s Health Programme
The PM’s National Health Programme, under which 3,000,000 families across Pakistan are already receiving coverage, will be extended to all districts in the country and will help us achieve the Sustainable Development Goals, Ismail announced.“A survey will be held every two to three years to provide us better statistics,” he added.
The customs duty on import of drama and film-making equipment is being reduced to 3pc, and sales tax is being brought down to 5pc.
A revolving fund will be set up to financially support the film industry and needy artists, Ismail said.
Review of PML-N’s performance
“Today we are the 24th largest economy in the world,” Ismail told the lower house.
“The GDP growth rate was 5.4pc last year ─ it has now grown to 5.8pc, the highest in 13 years,” he recalled.
“In the last five years, inflation has been kept below 5pc which was up to 12pc when we took over. The budget deficit will remain restricted to 5pc this year,” he said.
“The State Bank policy rate was 5.7pc which was the lowest in decades, coming down from over 9pc. The lowest interest rate in history has brought an increase in businesses” he explained.
“Exports have been under pressure… Imports have increased 17pc because of high machinery imports,” he said, adding that the current account deficit had increased Rs12bn in the first nine months of FY17-18.
“The government has made all efforts, and I am sure that foreign exchange reserves will be higher in June than they are today. In the ongoing year, foreign investment has risen from $1.9bn to $2.1bn.”
Some other salient feature are:
1- Individuals income exempted up to Rs 1.2 million.
2- Tax on individual income from Rs 1.2 million and above will be taxed as per slab which has been decreased.
3- Data mining introduced for new tax payers search.
4- Remittance up to $100,000 exempt, above this will be investigated.
5- Immoveable assets undeclared the government within six months can purchase by double price to the declarant if not proper.
6- FBR rate for property valuation abolished.
7- Filer tax rate 1% against property sale and purchase.
8- Gst exemptions same as per last year.
9- 5 Sectors under sro 1125 at 0 rated
10- Exports refund will be paid within 12 months 1/7/2018
11- Corporate tax decreased to 25% upto 2023
12- Real state investors tax reduced to 7.5%
13- Non Filer bank transactions tax rate reduced to 0.4%
14- Tax audit only once in three year
15- Super Tax to be decrease by 1% each year to end it up.
16- AOP slab decrease to 30%
17- Undistributed profit decrease to 5%
18- Tax on bonus shares abolished
19- Dividend tax decrease to 5%
20- Now with holding on services would be above rs. 30000/- and on supplies above Rs. 75000/
21-Rs 25 billion set aside for education
Tax on bonus shares has been removed, says Ismail.
The move would be a huge boost for stock market investors. The Pakistan Stock Exchange (PSX), as part of its budget proposals, had urged the government to remove the tax.
The defence budget will stand at Rs1,100 billion, says Ismail. Another Rs100 billion has been allocated as the Armed Forces Development Programme.
Witnessing the recent boom in Pakistan’s film industry, Ismail says the budget will propose a 50% reduction in income tax rates for the next five years.
An amount of Rs25 billion has been allocated for Karachi, Sindh’s provincial capital, says Ismail.
“A desalination plant would also be set up in the industrial hub. It will provide the city 50 million gallons of water per day.”
The federal government will provide buses for school-going girls in a bid to promote education in the country’s remote areas, says the finance minister.
Budget deficit’s target has been set at 4.9% for next year. The current fiscal gap is 5.5% of GDP, says Ismail.
With huge exemptions on offer and low tax revenues, the target seems to be ambitious, say experts.
The government is targeting a tax-to-GDP ratio of 13.8%, says Ismail.
The Federal Board of Revenue (FBR) will target a revenue of Rs4,435 billion in the next fiscal year.
Pakistan will target 6.2% GDP growth in 2018-19, says Ismail.
The country’s economy grew at 5.8% in 2017-18, according to Pakistan Economic Survey 2017-18.
Remittances, for long Pakistan’s saving grace, are expected to hit the $20-billion mark, according to the finance minister.
Foreign exchange reserves of the State Bank of Pakistan (SBP) will be at a higher level than they are right now, says Ismail.
The current level is below $11 billion, which was at one point over $17 billion.
The finance minister says agriculture disbursement stood at Rs336 billion in 2012-13, which would increase to Rs800 billion in June this year.
Taking credit for low inflation figures, Ismail says food inflation in 2017-18 has been 2%.
However, the low inflation figure has come mainly on the back of low oil prices in the global market.
Ismail says the inflation target for 2018-19 has been set at below 6%.
Ismail says the country was on the verge of bankruptcy when the current government took over in 2013.
“Pakistan has now achieved a 13-year high in GDP growth and is currently the world’s 24th largest economy,” says the newly-appointed finance minister.
5.30pm: Federal Minister Miftah Ismail has started presenting Federal Budget 2018-19 in National Assembly of Pakistan.
“This is a historic moment for the parliament that the 6th budget is being presented. A government cannot run for a day without the budget. The provincial government’s cannot decide their budgets without approval of the federal budget,” Ismail explained.
“We cannot interrupt the 5.8 per cent GDP growth. However the next government will have the right to make changes to the budget,” he assured the opposition.
“Today’s budget is a reflection of Nawaz Sharif’s vision. We are missing him here today.”
“In 2013 the PML-N government came to power and set up a programme for the economy. We faced certain challenges under the leadership of Nawaz Sharif. Serving the public was our only motivation,” he added.
Ismail went on to review the government’s performance over the past fiscal year.
Prior to Miftah’s presentation, Opposition leader in the National Assembly Khursheed Shah said the government did not have the right to present the budget for the full year. Shah also expressed reservations over the appointment of Miftah Ismail as finance minister.
Pakistan Tehreek-e-Insaf (PTI) leader Shah Mehmood Qureshi was also critical of Miftah’s appointment, stressing that the government was setting a bad example by having someone present the budget who was not an elected official.
“It was the cabinet’s decision for Miftah Ismail to present the budget and there is nothing unconstitutional in that,” Prime Minister Abbasi replied to the opposition.5.15 pm: Pakistan Muslim League Nawaz to present sixth budget of its tenure in National Assembly shortly. Federal Minister for Finance Miftah Ismail to read the budget speech, who took as fulfledged Federal minister earlier.
Prime Minister Shahid Khaqan Abbasi, the newly appointed Finance Minister Miftah Ismail and other PML-N leaders are in attendance at the Parliament House.
Pakistan Peoples Party (PPP) and the Pakistan Tehreek-i-Insaf (PTI) are expected to oppose the budget as leaders of both parties earlier lambasted the government’s decision to present a full-year budget, terming it “illegal and unconstitutional”.The opposition wants the government to present a budget only for one quarter, saying that the rulers cannot snatch the right of deciding a budget from the next government expected to come into power in August, after the general elections.
The protest has been planned as opposition parties, including both the major political parties, Pakistan Peoples Party and Pakistan Tehreek-e-Insaf believe that the outgoing government of Pakistan Muslim League-Nawaz has no justification for presenting budget for the whole year.
The opposition would also protest the budget presentation by PML-N during Senate session.At the outset of the session, Opposition Leader in the National Assembly Syed Khursheed Shah protested against the the outgoing PML-N presenting a full-term budget instead for the remaining three months of its tenure.
“Unfortunately, the government is snatching the right of the next assembly with today’s budget,” said Shah. “My wish is that whichever party wins the elections, has the right to present the budget.”
The budget will lend focus on improving economic growth, maintaining fiscal discipline, boosting exports besides providing relief to the masses and promoting investment for job creation.
The total outlay of the budget likely to be 5500 billion rupees, tax revenue collection target will be set Rs 4433 biillion while the total deficit of the budget will be 1870.The target of growth rate has been proposed to set at 602 per cent, agricultural development target will be 3.8 per cent and the salaries of government employees will be increase by 10 percent.
It will also focus on social sector development and revenue enhancement measures.
On revenue side, the government would introduce measures for bringing improvement in the system of tax collection, broadening the tax base, and facilitation to tax payers.