Pakistan Budget 2011-12

The Federal Finance Minister of Pakistan, Abdul Hafeez Sheikh, has stated that while framing the Pakistan budget 2011-12 opinions of the various political parties had been taken. He has also informed the media that industrialists and traders were involved in the discussions while preparing the budget and the Economic Consultation Council will be consulted as well.

Highlights of Pakistan Budget 2011-12:
According to Abdul Hafeez Sheikh the agricultural tax structure will be decided upon by the provinces. He has also stated that farmers whose earnings are in excess of 3 lakh rupees should be made liable to pay equal taxes.
The budget also has provisions for additional expenditure to meet the present power crisis in Pakistan. Without this extra expense the supplementary requests for the budget could be kept down to Rs 387 billion.
The federal budget has been valued at Rs 2.77 trillion and it has been in operation since 1st July 2011.
Rs 1,000 billion will be spend for retirement and debt servicing and Rs 800 billion has been earmarked for security expenses.
Pakistan government will need to loan money for developmental and operational purposes.
The government has located 700,000 additional prospective tax payers on the basis of their standards of living. They could be added to the existing number of 1.5 million taxpayers in Pakistan to stabilize the economy.
The budget has projected public expenditure amounting to at least Rs 7.347 trillion.
77 requests for grants have been approved in the budget. The total worth of these grants is Rs 990.4 billion.
This sum will be provided to respective ministries and federal departments.
Rs 6.199 trillion will be used in domestic debt repayment and Rs 714.671 billion will be used for domestic debt servicing.
Rs 243 billion has been earmarked for repaying overseas debts and Rs 76.3 billion will be spent in foreign debt servicing. At least Rs 36 billion will be used for repaying short term foreign credits.
Rs 49.6 billion will be spent for providing advances and loans for external development.
Pakistan Railways will be provided Rs 9 billion for meeting staff and operational expenses. Rs 482 billion have been allocated for the Pakistani President s allowance and household expenses.
Rs 9 billion have been set aside for meeting various expenses such as grants and aids between provincial governments and the central administration.
Rs 2 billion will be used for pensions and superannuation allowances. Rs 1.4 billion have been earmarked for elections.
The Pakistan budget 2011-12 does not introduce any new tax and removes the general sales tax exemptions.
As part of the new budget an independent commission has been established by the Federal Cabinet. This commission will be looking into needless expenses so that non-developmental costs can be reduced.
Several other bodies that will function on a semi-autonomous or autonomous basis will be set up as well.
It is expected that the process of setting up these organizations will be completed in 7-10 years.
A target has been set to reduce the fiscal deficit, which is a major problem for Pakistan s economic progress can be reduced to 4 percent of GDP in 2011-12 budget.
Agriculture has been left out from the ambit of income taxes. This sector, which contributes more than 20 percent of the national income of Pakistan, will be subject to provincial taxation.
It is expected that in 2011-12 inflation rate will be reduced to 9 percent, which is 50 percent of the previous rate.
Pakistan Budget 2011-12: Expert Analysis:
As per experts the federal government has been unable to implement a proposed 1 percent flat tax on properties and assets. A Revenue Advisory Council special committee, led by Dr. Hafeez Pasha, a well known economist, had stated that a minimum tax needed to be levied on assets as a substitute for the wealth tax. The opposition parties, PML-N in particular, had asked that the wealth tax be reinstated. However, the federal government has not been able to implement any of the two recommendations.

Economic analysts also opine that the Pakistan budget 2011-12 will not be hugely effective in improving the present situation. Pakistan has faced several critical economic problems over the years such as low revenue from taxes. It is expected that in 2011-12 Pakistan would generate 10 percent of its income from taxes.

This implies that the government will not have adequate resources to pay for social services aimed at the underprivileged people of Pakistan. Education and public health are other major areas where this South Asian country needs to develop significantly. Without additional expenditure the condition of these sectors will not improve.

The expenses of the larger public sector companies are also a major issue. Analysts feel that expenditure of these enterprises can be trimmed by reducing inefficient and wasteful spending.

Experts feel that critical problems like dependence on foreign financial aid, poverty and economic difference between underprivileged and affluent will take some time to be addressed properly and this budget might not be able to achieve that.

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