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The government’s budget for fiscal 2018-19 was announced on Friday, revealing a strategy that sees the PML-N trying to please almost everyone ahead of the crucial election scheduled in a few months’ time. The biggest difference from last year is a hard reprioritisation of expenditures from development to current spending, as provisions for expenditures, salaries, pensions were increased generously, particularly where they matter most for the government. On the revenue side, the government opted to reduce the tax burden on the common man — reducing income taxes significantly — while adopting a carrot and stick approach to herd in non filers and tax evaders into the tax net. However, some tax heads have been provisioned to record substantial levies, and people should expect to pay significantly more on imported items and petroleum next year.
Taxes The Federal Board of Revenue’s tax target has been increased by 10. Rs140bn of the increase will come from direct taxes, while indirect taxes will account for the remaining Rs282bn. The government had mentioned yesterday that it was attempting to rein in burgeoning imports through regulatory duties. Under the direct taxes head, the government expects its lowered income tax rates to result in a substantial broadening of the tax base and add another Rs132bn to income tax collection. In percentage terms, this reflects a 8. 36pc increase from the income tax target for last year. It remains to be seen how realistic the government has been in provisioning for that increase, given that some observes have predicted an almost Rs100bn negative impact on tax collection due to the lowered overall income tax rates.
Under the indirect taxes head, customs duties will be Rs154bn higher than the previous year, reflecting a 26. This will likely reflect in higher prices on imported items. Under the ‘Other Taxes’ head, the government will be cutting the Natural Gas Development Surcharge from Rs43bn to Rs16bn, but nearly doubling the petroleum levy to Rs300bn from Rs160bn. Expect to pay more for fuel in the coming year. Floating debt will account for the greater part of public debt, with the government expecting to raise a total Rs292. Rs200bn of this will come from treasury bill auctions — which represents a 344pc increase over last year — and the remaining from prize bonds.
Permanent debt will be cut to Rs113. 93bn last year, with the most significant cut provisioned for ijara sukuk bonds, through which the government expects to raise only Rs10. 62bn compared to Rs60bn last year. Current expenditures Given that this is PML-N’s election year budget, with constituents and power players to appease, nearly all heads under current expenditures register marked increases from last year’s budgeted amounts. The government’s interest obligations on both foreign and domestic debts are also higher — to Rs229bn and Rs1,391bn — representing increases of 73. Pension payments register a whopping 37.
9pc increase to Rs342bn, of which military pensions will account for Rs259. Defence affairs and services are similarly up 19. 6pc to Rs1,100bn from the budgeted Rs920. 2bn last year, mostly due to a 19. 6pc increase in defence services, which account for employee-related expenses, operating expenses, physical assets and civil works, will swallow up Rs1,098bn of the budget.
Separately, subsidies have also been jacked up 25. For itself, the government has budgeted a 23pc increase for the running of the civil government. 7bn and non salary expenses will be jacked up 33. Law courts have been given a 8. 8pc increase in their budget, which now stands at Rs5. Meanwhile, the allocation for police has been bumped up by 21.
The federal health budget, on the other hand, has been bumped up by only 8. 89bn, of which hospital services will eat up Rs11. The federal education budget has been enhanced by Rs6. 4bn, with the increases mainly provisioned for provision of services from pre-primary through tertiary education. The tertiary education budget on its own has been increased by only 5. 20pc compared to last year’s budgeted amount, falling to Rs800bn this year. Although the government mentions the total federal PSDP will be equal to Rs1,030bn, the additional Rs230bn will not come out of the federal government’s pockets, instead being provided by “self financing by corporations and authorities”.
The allocation for the water division has been more than doubled to Rs79bn in 2018-19, with the announcement coming just days after the provinces and the federation agreed to a national water policy. The Clean Drinking Water for All programme, with a Rs12. 5bn allocation in the current year’s budget, has been scrapped completely. 34pc as major projects including the Karachi-Hyderabad and Sukkur-Multan motorway near completion. The power division also gets a Rs24bn cut, and is down to Rs36bn in the upcoming budget. The provinces’ share of PSDP has also been slashed by around 24pc to Rs850bn, bringing both the federal and provincial PSDP closer to revised spending in the current year of Rs750bn and Rs800bn, respectively.