Following is the text of budget speech delivered by Federal Finance Minister Senator Ishaq Dar
in the National Assembly on Friday:
As I rise to present the 4th Budget of our Government, the prime minister and the leader of the Parliament is recovering very fast after undergoing surgery. Prayers of this House, entire nation and millions of people from around the world are with him for his speedy recovery so that he can come back and take charge of the country’s leadership.
When we remember the economic challenges that were faced in June 2013 and the journey we had passed in the past three years under the leadership of Prime Minister Nawaz Sharif, we thank the blessings of Allah bestowed upon us, Alhamdulillah, the dangers faced to the economy are over, and the country is on the path to stability and growth. Those who had predicted Pakistan’s default by June 2014 have been defeated. We have not only prevented the country from economic default but also have stabilised the economy. Today international organisations are taking Pakistan’s name with respect.
We had a well-defined response for this purpose, which we had articulated in our Manifesto before the 2013 general elections on the basis of which we won the national elections. Our challenge was to put them in action and diligently remain on course until their fruits were borne. We have done precisely this and have not only prevented default but have solidly stabilised the economy and reinvigorated growth. Today, Allah has honoured us to present the 4th Budget of the country and in every budget we have done better than the previous one and all economic indicators testify to this claim.
Comparative Economic Performance 2012-13 vs. 2015-16
4. I would like to place before this august House the following key economic indicators, based on 9 or 10 months data or projected for the full current fiscal year (2015-16) in comparison with the situation that existed in a similar period or at the close of FY2013 or at End-June 2013:
1) Economic Growth, in the past two years, has remained above 4% in the past two years, and during FY2015-16 has been provisionally recorded at 4.71 per cent which is highest in the previous eight years. This performance could have been better if the cotton crop had not witnessed the loss of 28% due to which national economic growth was reduced by 0.5 per cent.
2) Per Capita Income, which stood at $1334 in FY2012-13 is projected to increase to $1561 in FY2015-16, showing a growth of 17 per cent in dollar terms, while it increased by 24 per cent in terms of rupee;
3) Inflation, which had averaged around 12 per cent during the period FY2008-13 before our government, was recorded at 7.4 per cent in FY2012-13. In the period Jul-May FY2016, the average inflation was recorded at 2.82 per cent, the lowest in a decade. This also means that the revival in growth has not been accompanied by rising in prices;
4) FBR Revenues had recorded an increase of merely 3.38 per cent in FY2012-13 when collections stood at Rs.1,946 billion. For the current FY2015-16 the target of RS.3,104 billion has been fixed and considering the collections to date, Inshallah this target will be achieved. This way tax revenues will be increased by 60 per cent which will be a historic increase. The tax to GDP ratio for FBR taxes that was 8.5 per cent in FY2012-13 has been increased to 10.5 per cent in FY2015-16.
5) Fiscal Deficit was 8.2 per cent of GDP in FY2012-13 is being brought down to 4.3 per cent of GDP in FY2015-16;
6) Credit to Private Sector that was negative Rs.19 billion in FY2012-13 has reached Rs.312 billion till May of current fiscal year;
7) Policy Rate of SBP was 9.5 per cent in May 2013, which has now been brought down to 5.75 per cent as on May 2016 which is the lowest rate in the past four decades.
8) Exports were $20.5 billion during Jul-Apr FY2012-13. Against this, exports for the same period in FY2015-16 were recorded at $18.2 showing a decline of 11 per cent. The main reason for this decline is global commodity prices.
9) Imports were recorded at $33.0 billion during Jul-Apr FY2012- 13 compared to $32.7 billion for the same period in FY2015-16. Savings in the import bill of oil were nearly 40 per cent but we diverted these savings to increased imports of machinery and industrial raw materials, thus enabling more growth-oriented activities. The imports of machinery over the last three years have increased by a cumulative growth of 40 per cent, which is again an indication of rising investment in the economy;
10) Remittances were recorded at $11.6 billion during Jul-Apr FY2012-13, which has risen to $16.0 billion for the same period in this fiscal year FY2015-16, For the current year target is $19 billion for which efforts of devoted Pakistani overseas workers and professionals are admirable.
11) Exchange Rate has shown remarkable stability in the last three years. Against Rs.99.66/$ in June 2013, the exchange rate is currently at 104.70/$. For an economy like Pakistan, Exchange Rate has a pivotal position, as it impacts pervasively on all other variables. The exchange rate stability we have achieved has not been witnessed in recent years and is a source of rebuilding the credibility of our economy;
12) Foreign Exchange Reserves were in a precarious level of $6 billion with the SBP in June 2013, that after payment of past liabilities and swaps were reduced to worrying some level of $2.8 billion. These have increased to $16.8 billion by end May. Including reserves with commercial banks have $4.8 billion, Alhamdolilah, the level of $21.6 billion has been achieved, which is a new historic record. And this way we have guarded the economy against frequent external fluctuations;
13) Current Account Deficit: In the last three-year, we have kept the average current deficit to a very low level of 1 per cent of GDP.
14) Stock Exchange (KSE) Index stood at 19,916 on 11 May 2013, has now surged to above 36,000. In the same period, market capitalization has increased from Rs.5.2 trillion to Rs.7.391 trillion and from $51.3 billion to $70.5 billion. The merger ofLahore, Karachi and Islamabad stock exchanges, that was pending for the past 15 years, was completed on 11th January 2016. It is expected that in the near future Pakistan’s stock exchange will be part of the emerging markets.
5. This brief review clearly demonstrates that we have not only achieved solid macroeconomic stability, but the country has been put on to a path of growth. International organisations, economic experts as well as world’s leading publications have lauded Government’s performance. Therefore, with Allah’s blessings, we remain committed to economic growth and this budget will reflect our commitment.
-Main Elements of Budget Strategy-
6. The main elements of our budget strategy are as follows:
1) Reduction of fiscal deficit: In FY2016-17 we will target a deficit of 3.8 per cent compared to 4.3 per cent in FY2015-16;
2) Improvement in the fiscal discipline: We are furthering advantages derived from the reduction of the fiscal deficit. In 2016-17, the fiscal deficit will be reduced from 4.3 per cent to 3.8 per cent of GDP. Through an amendment in Fiscal Responsibility and Debt Limitation Act 2005 we are about to undertake two deep-rooted reforms in our fiscal management system. First, we are putting a statutory limit on the deficit of the federal government. Starting 2017-18, in three years the federal deficit would be brought down to 4 per cent of GDP and thereafter to 3.5 per cent. Second, the Debt to GDP ratio would be brought down to 60 per cent of GDP in the next two years and then over a 15 years period it would be brought down to 50 per cent;
3) Raising Tax Revenues: Part-II of the speech will deal with tax proposals. At this stage, however, I would say that the proposed reduction in deficit will be achieved through a combination of better tax collection and tight expenditure controls;
4) Continued Focus on Energy: Energy has been our focus from the start. The country was facing a dreadful energy crisis in June 2013. We formulated short, solid policies to avert this crisis on the permanent basis due to which considerable reduction in load shedding. Today load shedding is being carried out systematically. Implementation of the plan formulated by the Cabinet committee formed by Prime Minister Nawaz Sharif’s will result in 10,000 MW of additional electricity to be added to the national grid by March 2018. Beyond March 2018 Inshallah, Dasu, Diamer-Bhasha, Karachi Civil Nuclear Energy and many other projects will also be completed besides coal-based projects under China-Pakistan Economic Corridor (CPEC).
5) Exports Promotion: In this budget, we would be announcing additional measures to incentivize exports and taking other initiatives to ease the cost of doing business and improving the overall regulatory regime to facilitate exporters. 6) Poverty and Unemployment: One major outcome of our economic policies has been the reduction in poverty and unemployment, both in the rural and urban areas. The recently published poverty report compiled with the support of World Bank, based on the Pakistan Social and Living Standard Measurement (PLSM), based on a cost of basic needs, indicates that poverty has been reduced from around 64.2 per cent in 2001-02 to 29.5 per cent in 2014. Based on food energy intake the poverty during this period has reduced from 34.6 per cent to 9.31 per cent. Similarly, unemployment has also been reduced from 6.2 per cent in 2012-13 to 5.9 per cent in 2014-15;
7) Income Support Program (BISP): This program is an effort to provide relief to the poor and weak segments of the society as a matter of our responsibility and their right. The following have been the main highlights of this program:
i. From Rs.40 billion in FY2012-13, we have progressively increased the size of the program to Rs.102 billion during the current year. We are further enhancing this allocation to Rs.115 billion, representing a nearly three-fold increase since 2012-13;
ii. By End-June 2013, the cash transfer program was covering 3.7 million families, which will be increased to 5.3 million by the close of June 2016. By the end of next financial year, the number of beneficiary families would further rise to increase to 5.6 million;
iii. The stipend under the program in 2013 was a mere Rs.12,000 annually, which had been set in 2008. During the last three year we have increased the stipend to Rs.18,800; iv. The budget for Bait-ul-Maal has been increased from Rs.2 billion to Rs.4 billion.
8) Development & Promotion of ICT Sector: A number of initiatives were announced in the last budget for the development of promotion Information and Communication Technology (ICT). These initiatives have been operationalized with the following key features:
Rural Telephony & E-Services (RTEs) Program: To extend IT and Telephone services to far-flung areas four new projects were started in 2016-17 under Universal Services Fund. A part of this project in Balochistan, Kharaan, Washuk, Dera Bugti, Kohistan and in FATA Waziristan areas, new lines for Rs.2.43 billion are being laid in these areas. For ongoing projects Rs.9.52 billion will be allocated. In 2016-17 for the provision of telephone services in rural areas an amount of Rs.11.94 billion has been allocated.
Broadband Program: The ongoing Broadband projects in Southern Telecom Region are expected to provide coverage to over 56,000 new subscribers in un-served/underserved areas in FY 2016-17. Furthermore, 125 Educational Broadband Centers (EBC’s) and 55 Community Broadband Centers (CBC’s) are to be established under these projects with the subsidy of 482.5 million.
Optic Fiber Cable Program: Under this scheme in FY2016-17 Rs.63.4 million have been allocated for on-going projects in Balochistan and Rs.1.9 billion for three new projects in Khyber Pakhtunkhwa, Balochistan, Sindh and Punjab;
Other than the above, work on; establishment of computer labs under Pakistan Bait ul Maal women empowerment centres, Prime Minister’s Information and Communication Technology scholarship, Prime Minister’s scholarship program for talented students of Balochistan and Prime Minister’s National ICT internship program, is underway. For the current year, 2016-17 around Rs.1 billion will be spent on these schemes.
Construction of Cross-Border Optic Fiber System between China and Pakistan: Only recently the Prime Minister has inaugurated the establishment of cross-border optic fibre project which will further open relations between the two countries.
Medium-term macroeconomic framework
7. As always, our budget strategy is embedded in a three-year medium term macroeconomic framework spanning the period 2016-19, the main features of which are as follows:
1) GDP growth to gradually rise to 7.0 per cent by FY2018-19;
2) Inflation will be contained to single digit;
3) Investment to GDP ratio will rise to 21 per cent at the end of medium term;
4) Fiscal deficit would be brought to down to 3.5 per cent of GDP;
5) Tax to GDP ratio will be increased to 13.9 per cent;
6) Foreign exchange reserves would reach $30 billion, inshaAllah.
8. In our view, this is a realistic macroeconomic framework given the performance we have rendered in the last three years.Development plan.
9. The past history of adjustments and reforms in Pakistan is replete with the common phenomenon of cutting the development expenditures to control fiscal deficit. Our Government has succeeded in breaking out from this cycle, as the fiscal discipline we have achieved is without sacrificing development spending.10. At the close of the third year of our Government, the development expenditure would increase from Rs.348 billion to Rs.661 billion and in FY2016-17 the target is Rs.800 billion.
11. The development plan is geared towards developing human and social capital of the country by enabling universal access to education and health facilities, empowering women and eradicating poverty; thereby capitalising the demographic dividend and increasing the total factor productivity.
12. For development process, Public Private Partnership policy has been prepared. For this purpose, transport, communications, financial, and industries and services have been identified. To enhance their share in the GDP a comprehensive strategy has been formulated.
13. In addition to increasing the public Investment, concerted efforts are being made to entice the private investment through a variety of mechanisms such as promoting public-private partnerships, FDI, creating special economic zones with fiscal incentives. 14. I would now present some highlights of the development budget, focusing mainly on the sectors that will contribute most to economic development.
15. As usual, one of the key sectors claiming significant resources is the water sector, where we are investing Rs.32 billion for projects in various parts of the country. Other than these allocations, a project that will be the future lifeline of Pakistan is the Diamir Bhasha Dam, which will store 4.7 MAF of water and generate electricity of 4500 MW. We have provided Rs.32 billion for the project. Another important hydropower project is Dasu, which will have the capacity to generate 2160 MW in phase 1. We have allocated Rs.42 billion for phase 1 of Dasu Hydro Power Project.
16. Water projects in Balochistan are the second most important focus of water sector investments comprising construction of delay action dams, flood dispersal structures, canals and small storage dams. The main focus will be on the existing projects that can be completed within the next 2 years. In this regard, work is in advanced stages on projects such as Kachhi Canal (DeraBugti and Nasirabad), Naulong Storage Dam (JhalMagsi), the extension of Pat Feeder Canal to DeraBugti and ShadiKaur Dam (Gawadar). Recently work on Basool Dam in Gawadar has also started. This year an amount of Rs.300 million has been allocated for further advancing the project of construction of 100 small dams.
17. Similarly, in Sindh, projects that are advancing gradually are Rainee Canal (Ghotki and Sukkur), extension of Right Bank Outfall Drain from Sehwan to sea, and Darwat Dam. In Punjab construction of Papin Dam in Rawalpindi will commence. In Khyber Pakhtunkhwa, other than Dasu, funds will be provided for construction of small dams in district Mansehra, and a sizeable project of Chashma Right Bank Canal – 1st Life Cum Gravity will begin. In FATA funding for Kurram Tangi in North Waziristan, and Gomal Zam Dam in South Waziristan will continue.
18. Besides, numerous schemes of the lining of water-courses will be undertaken in Khyber Pakhtunkhwa, Sindh and Punjab to reduce water wastage together with flood protection and drainage schemes all over the country.
19. I have already explained how intensely we are committed to alleviating the problems of the energy sector. We have taken a number of steps to Budget Speech 2016-17 address structural problems of the sector including the reduction in system losses, improvement in recoveries, elimination of theft and settlement of inter-corporate circular debt. However, our real focus is on developing additional resources of energy so as to permanently overcome energy shortages.
20. As in the past, we have allocated the largest amount of resources to add new and economical capacity in the national grid. During the current year, a sum of Rs.380 billion will be invested in this sector up from Rs.287 billion allocated in last year’s budget. Of this, Rs.130 billion will come from the PSDP this year as compared to Rs.112 billion allocated last year. 21. Large projects, other than Dasu and Diamir-Bhasha, that are part of this year’s allocation include:
(a) Rs.61 billion have been allocated for Neelum Jhelum Hydro Power Project having a capacity of 969 MW;
(b) Rs.16.5 billion have been allocated for completion of Tarbela-IV Extension Hydro Power Project with a capacity of 1410 MW;
(c) Two LNG power plants in Baloki and Haveli Bahadurshah will be allocated Rs.60 billion. Combined, the two power plants will produce 2400-MW of electricity.
22. In addition, a number of other projects such as two Karachi Nuclear Coastal Power Projects (2200 MW) with Chinese assistance;
Chashma Civil Nuclear Power project (600 MW); Golan Gol Hydro Power Project (106 MW); Evacuation of power from wind power projects at Jhimpir and Gharo Wind Clusters; Interconnection of Chashma Nuclear Power Plants III and IV are also included in the plan. 23. The broad-based configuration of pipeline projects based as it is on a number of hydel, coal, wind energy and nuclear fuels will correct the energy mix to provide cheap electricity to the people of Pakistan, while the improvement of the transmission and distribution system will reduce the system losses.
Steps against electricity theft will reduce the burden on the common citizens.
Budget 2016-17: Full text of Finance Minister Ishaq Dar’s budget speech
Following is the text of budget speech delivered by Federal Finance Minister Senator Ishaq Dar