Highlights of Pakistan Budget 2015-16

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Jun

052015

Finance Minister Ishaq Dar while presenting the budget for fiscal year 2015-16 on the floor
of the National Assembly said a growth rate target of 5.5pc had been set for the upcoming
year, which he said is budgeted to reach 7pc by the end of PML-N governments tenure in
2017-18
Before announcing the budget, the minister briefed the cabinet about the salient features of
the budget and said such measures have been proposed which may enhance more
exports, industrial growth, more employments.

Main elements of budget strategy

The main elements of the budget strategy are as follows:

Reduction of fiscal deficit: Dar says the government will continue to consolidate
gains it made in reducing fiscal deficit. In 2015-16 he is targeting fiscal deficit at 4.3% of
GDP compared to 5% in 2014-15.

Raising Tax Revenues: The minister says that the proposed reduction
in deficit will be achieved through a combination of better tax
collection and tight expenditure controls.

Continued Focus on Energy: Energy is a key government priority, which Dar says
can be judged by the fact that the prime minister is
devoting considerable time to oversee developments in the sector. A
Cabinet Committee on Energy has been constituted which is headed by
the Prime Minister himself.

Keeping in view the current gap in demand-supply of power in the face of GDP
target, the government plans to bring 7,000 MW on stream
besides setting up 3,600 MW LNG-based projects. By December 2016 the government
aims to bring 10,600 MW in the system. Beyond December
2017, other projects such as Dasu, Diamer Bhashah, Karachi Civil
Nuclear Energy and many other projects will also be completed.

Exports Promotion: The government announces additional measures to

incentivise exports and taking other measures to ease the cost of doing business
and improving the overall regulatory regime to facilitate exporters.

Investment to GDP Ratio: The investment-to-GDP ratio, which was registered at

12.4% during 2012-2013, improved to 13.4% during 2013-14 and is provisionally
estimated at 13.5% for the current fiscal year. The combined effect of increased public
sector investments has also played a role in reversing the declining trend. Government
projects this ratio to rise to 16.5% during 2015-16.

Public debt Management: Debt Management has received special attention in our
overall efforts for fiscal management. The fiscal consolidation we have achieved has
paved the way for a reduction in public debt, which fell from 63.9% in 2012-13 to a now
projected level of 62.9% at the close of current fiscal year. In the next three years, Debtto-GDP ratio will be brought down to less than 60% in accordance with the provisions of
the Fiscal Responsibility and Debt Limitation (FRDL) Act, 2005.

5.5% targeted growth

This year the government is promising to continue walking down the path of stabilisation
while moving towards stimulating growth in the economy.
On the other hand, Dar is also promising to hike the growth rate to 5.5 per cent, more than a
percentage point increase over the current financial years accomplishment.
A day earlier, Dar presented the Pakistan Economic Survey (PES) which charts the
countrys economic progress each year. The story told by the survey was also a humbling
one for the minister who prides himself on his business credentials. All targets from
growth to revenues were missed.
Growth rate target missed for 2013-14
Ishaq Dar lays out reasons for missing the growth target in 2014-15 which include floods
in September 2014 and political protests from August to December 2014.
The minister says fiscal deficit target of 5% for the year 2014-15 will be met by June 30,
2015.

Highlighting his governments achievement in significantly bringing down inflation, Dar also
brought to notice the historically low interest rate in recent months.

Exports fall in current year

Dar said in the first 10 months of the ongoing fiscal year, exports fell 3.2% from $20.89 bn
despite volume being higher.

Salaries and pensions

The government on Friday proposed to raise 7.5% ad-hoc relief allowance on running basic
pay for all federal government employees with effect from July 01, 2015. Ad-hoc increases
of 2011 and 2012 would also be merged in the pay scales, Finance Minister Ishaq Dar told
parliament in his budget speech. He said medical allowances of all government employees
and pensioners were being enhanced by 25%. One premature increment will be allowed to
employees of Grade 5. He said a uniform PhD allowance of Rs 10,000 per month would be
allowed to PhD/DSc degree holders working under federal government. The rates of special
pay to senior private secretaries, private secretaries and assistant private secretaries were
being increased by 100%. The rate of orderly allowance and special additional pension was
being increased to Rs 12,000 per month. The minister proposed 7.5% increase in net
pension, besides extension of family pension to widowed/divorced daughter for life or till remarriage.

Special security funds for Chinese

Rs2.5 billion have been allocated for special security forces to protect Chinese engineers,
project directors, experts and workers employed on various Chinese funded projects across
Pakistan for 2015-16.

KSE rises
The Karachi Stock Exchange rose 70% to 34,000 level from Jun 2013, says Dar.

Fiscal deficit improvement

Dar says the improvement in fiscal deficit is the result of improved tax collection that
resulted in higher revenue in addition to disciplined expenditure. He says tax collection
increased 3 per cent in the past 11 months.

BISP
Dar says funds allocated to the Benazir Income Support Programme have increased to
$102 billion for the upcoming year. He says 5 million families will be covered under the
BISP.

Tax-to-GDP
The finance minister says tax collection target as a percentage of GDP to be increased to
13.5pc by the end of fiscal year 2015-16.

Budgeted sector growth 2015-16

Dar says growth rate for agriculture sector in the upcoming fiscal year has been projected at
3.9pc, while manufacturing sector growth has been budgeted at 6.1pc and services sector
growth at 5.7%.

Scholarships for rural students

The government has allocated Rs125mn for scholarships to rural students for 2015-16.

PSDP allocation 2015-16

The government has allocated Rs700bn for annual federal development programmes and
Rs814bn for provinces, which translates into a total outlay of Rs1,514bn.

WAPDA
Dar says Rs112.28bn have been allocated for the Water and Power Development Authority
for fiscal year 2015-16.

Defence expenditure 2015-16

Dar says Rs781bn have been allocated for expenditure on defence, with Rs39.415bn
budgeted expenditure on civil armed forces for the next fiscal year.

Railways budget 2015-16

A total of Rs78bn has been budgeted for Pakistan Railways, of which Rs41bn has been
allocated for development programmes and Rs37bn for employees.

Electricity and power projects

For 2015-16, Rs141.42bn has been allocated for electricity and power projects, announces
Ishaq Dar.

Budget for CPEC routes

Dar announces Rs10bn for Islamabad and DI Khan route of the China-Pak Economic
Corridor (CPEC), and Rs19.5bn for the Raikot-Islamabad stretch of the CPEC.

Loans for solar tubewells

Dar says loans will be given out for solar-powered tubewells on low markups, and will
significantly reduce costs for farmers who have to run tubewells on diesel-powered
generators.

Funds for HEC 2015-16

Dar says Rs20.5bn has been allocated to 143 projects of the Higher Education Commission
(HEC) for fiscal year 2015-16.

Sales tax and federal excise duty

Increase in tax on cigarettes
Rates of federal excise duty (FED) on cigarettes are proposed 58pc to 63pc. For making
informal sector pay due taxes on cigarettes, adjustable FED is proposed to be levied on
filter rods at Rs0.75 rupees per filter rod.
Tax on imported mobile phones upped

Sales tax applicable on various categories of imported mobile phones is proposed to be

increased from Rs150, Rs250 and Rs500 to Rs300, Rs500 and Rs1,000, respectively. On
the implementation of new rates, regulatory duty imposed on import of mobile phones will
be withdrawn.

Support for widows of men killed in suicide attacks

The government has decided that loan, including a markup to Rs1 million as on June 30,
2015, obtained by the deceased husband in his own name will be borne by the government.
This is applicable to a woman who has not remarried after the death of the victim.

Minimum wage increased

Dar announced that minimum wage has been increased for Rs12,000 per month to
Rs13,000.

Tax measures for 2015-16

There is an emphasis on improving tax collection systems in order to increase tax revenue,
Dar said. Gross revenue receipts of the federal government for 2015-2016 are estimated at
Rs4.31tr, while provincial governments share of tax revenue is to be Rs1.849tr.
A reduction in taxes from 5pc to 2pc has been proposed for small salaried taxpayers with
taxable income of Rs400,000-500,000.
The capital gains tax rate proposed for fiscal year 2015-16 on 1- and 2-year securities is
15pc and 12.5pc.
Discriminatory tax exemptions in the form of special regulatory orders (SROs) were slashed
by Rs105bn or 1/3rd, despite presence of strong and influential pressure groups, said the
finance minister.

Education budget 2015-16

The government has allocated an overall amount of Rs97.8bn on education affairs and
services for fiscal year 2015-16 a 13.22% increase over budgeted expenditure in 201415.
However, last years (2014-15) budgeted expenditure was revised up from Rs86.4bn to
Rs94bn, which means that in the latest budget the increase in funds under the education
affairs and services is in effect only about Rs3.8bn.
Ishaq Dar, in his budget speech, said education expenditure as a percentage of GDP is
currently 1.67pc, which the government wants to improve to 4pc by the end of its tenure
(2017-18).Dawn