Pakistan Perspective
MOVING ON THE RIGHT TRACK

One praiseworthy feature of the budget is a significant step-up in Public Sector Development Programme (PSDP) to PRs. 130.0 billion as compared to PRs. 102.1 billion in the revised estimates for 2000-2001, an increase of 27.3 per cent. The share of federal ministries/divisions in PSDP is at PRs. 53.2 billion while that of corporations has been budgeted at PRs. 26.7 billion.

The allocation for Social Action Programme (SAP) which is designed for improving social services in priority areas such as primary education, nutrition, primary health, population welfare, rural water supply and sanitation is PRs. 11 billion. The PSDP also includes an allocation of 20.2 billion for special programme which include Khushhal Pakistan. The budget makes provision for increase in the first phase, govt employees' salary, effective from 1-12-2001, by 50 per cent. In the second phase, the remaining differential vis-a-vis the increase in cost of living will be filled.

Net pension will be increased by 15 per cent for those retired before introduction of 1991 pay scales, 10 per cent for those retired before introduction of 1994 pay scales and 5 per cent for those retired after 1994 pay scales.

Other highlights:

(a) Extension of exemption capital gains by another three years; (b) increase in Income Tax exemption limit to PRs. 60,000; (c) elimination of Central Excise Duty (CED) from 11 items which include enameled copper wire, filter rods, carbon black etc; (d) rationalisation of tariff regime which would result in downward revision of duty on 4,000 items; (e) the numbers of SROs reduced from 120 to 60; (f) reduction in the income tax rate on banking companies from 58 per cent to 50 per cent with effect from the assessment year 2002-2003; (g) extension of Self-Assessment Facility to public limited companies; (h) tax deductibility on mark-up paid on housing loans up to 25 per cent of income with a maximum of PRs. 50,000; (i) increase in the present low rate of depreciation of computer equipment from 10 per cent to 30 per cent with a view to encouraging investment in and development of Information Technology (IT) industry; (j) complete protection to Foreign Currency Accounts (FCAs) under a new ordinance; (k) reduction in duty on inputs of fertilizer industry such as sulphur and zinc dust from 10-35 per cent to 5 per cent; (l) promulgation of a Fiscal responsibility law that would limit the government's access to borrowing for financing its expenditures; (m) provision of PRs. 2.2 billion for providing physical structure for police reforms, which are estimated to cost PRs. 14 billion.

The budget for FY 2001-2002 has been prepared within a three year medium-term budgetary framework (MTBF) with a view to ensuring more efficient management of resources and expenditures in future.

Economy is expected to revive in the next three years with the real growth rate of GDP increasing from 4 per cent in 2001-02 to 5.2 per cent in 2003-04.

Inflation inevitably undermines economic and financial discipline; it arbitrarily redistributes income and wealth; it produces distortions and imbalances in the economy and it can induce wholly unnecessary and costly elements of volatility in interest and exchange rates. Endemic rise in prices is a source of anxiety for wage and salary earners who see before them the wealth and luxury of those who reap easy benefits and make huge fortunes on account of persistent inflation.

GROWTH AND INFLATION

% age increase

Items  2000-01      3002-02      2003-04

Real GDP          4.0          4.7          4.5

Agriculture          2.0          4.7          4.5

Manufacturing

(Large-scale)          6.5          6.8          7.0

Manufacturing          6.1          6.4          6.5

Other Sectors          4.1          4.2          5.1

Inflation (CPI)          5.0          5.0          5.0

Source: Ministry of Finance.

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