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The federal government has proposed Rs916 million for the Prime Minister Office in the federal budget 2017-18, which is just 4.0 percent higher when compared with Rs881 million allocated in the outgoing fiscal year. Interestingly, the amount proposed for the Presidency is a bit higher than that of the PM Office. It saw an increase of 11 per cent to Rs959 million, from Rs863 million in the outgoing fiscal year which was later revised up to Rs941 million. However, the newly-proposed budget for the PM Office i.e. Rs916 million shows 3.6 percent reduction when compared with the revised budget of Rs950 million in the outgoing fiscal year. The PM Office’s budget of Rs881 million in the outgoing fiscal shows 4.6 per cent increase over its original budget of Rs842 million in FY2015-16, which was later revised upward to Rs860 million. Separately, the PM Office had received a supplementary grant of Rs154 million in the current fiscal year. The PM Office comprises two sections — Public (P) and Internal (I). The P section has been allocated Rs405 million, slightly lower than Rs406 million in the outgoing financial year, which was later revised upward to Rs445 million. On the other hand, the I section’s allocation witnessed an increase of 35.71 per cent to Rs3.8 million as against Rs2.8 million during the current fiscal, which was also revised upward to Rs3.3 million.


Pakistan on Friday increased its spending on defence by around 9.5 per cent for the coming fiscal year, as it sought to consolidate gains in the anti-terror fight and counter external threats – mainly from India. For FY2017-18, the government allocated Rs920.1 billion compared with Rs841.4 billion spent by the armed forces during the outgoing fiscal year, showing an increase of Rs79 billion. Out of the whole defence budget, Pakistan Army gets 47 per cent, 20 percent goes to Pakistan Air Force and the Navy’s share is around 10 per cent, said defence ministry officials. According to the budget document 2017-18, of the total Rs920.1 billion, Rs322.1 billion have been allocated for employees-related expenses, Rs225.5 billion for operating expenses and Rs244 billion for local purchases and import of arms and ammunition. However, the amount does not include Rs180 billion allocated for pensions of the military personnel that would be given from the civilian budget and a separate allocation for security-related expenses. In addition, the military would also be given Rs180 billion under the contingent liability and Rs86 billion out of Rs144 billion under the Coalition Support Fund (CSF). For the past five years, the country’s defence spending has shown an average increase of 11 percent annually. Defence spending has always been the subject of discussions with some, seeking greater transparency and open debate about the military’s budget. Unlike previous years, the government now provides more details about the defence budget. However, there has never been an open debate within parliament on the subject.


The Finance Minister Ishaq Dar on Friday unveiled Rs4.8 trillion deficit budget, which at the one end protected ‘status-quo’ and would, on the other, stoke inflation due to increase in taxation on consumer goods. The new budget for the fiscal year 2017-18 also revealed the government’s intentions to deviate from the path of fiscal discipline, earlier agreed with the International Monetary Fund (IMF). It presented a budget deficit target which is Rs217 billion higher than what had been agreed with the IMF, indicating the government’s spending priorities in the election year. The government allocated Rs1.001 trillion for federal development spending, including Rs272 billion for special schemes. Almost half of the total budget or Rs2.3 trillion will be spent on two major heads –servicing of ballooning debt and defense of the country. The amount is exclusive of money that the government gives to military for defence procurements, estimated at Rs180 billion. While delivering his fifth budget speech, the finance minister also tried to give relief where possible like on agriculture and tech startups. The salaried class was offered an olive branch by merging seven-year old 50 percent ad hoc allowance and giving further 10 percent increase in salaries but on ad hoc basis. However, the much-touted textile package remains under-funded as an amount of only Rs9 billion has been allocated against the old and the current package despite the textile division’s demand of Rs40 billion for the new package.


In the last budget of its tenure, the PML-N government has once again proposed Rs120 billion worth of new tax measures in a desperate attempt to broaden income tax base and curb import of goods, taking the total volume of new taxes imposed in five years to more than Rs1.3 trillion. The tax proposals would result in a surge in prices of goods besides squeezing people’s incomes by compelling them to join the tax net. It proposed to change the structure of Capital Gains Tax on stock market to a single-tier by abolishing the condition of holding period. This will significantly increase tax liabilities. The construction industry’s cost will significantly go up because of new taxes on cement and steel. The government has set a tax collection target of Rs4.013 trillion for the Federal Board of Revenue (FBR) for the new fiscal year 2017-18. This will be Rs492 billion or 14 percent higher than the downward revised target of Rs3.521 trillion for the outgoing fiscal year. It will be an exaggeration if I say that it is a non-tax budget, but we have levied minimum possible taxes, said Chairman FBR Dr Mohammad Irshad after the announcement of the budget. New tax measures are equal to 0.33 percent of the total projected size of the national economy for fiscal year 2017-18, with the government hoping to increase the tax-to-Gross Domestic Product (GDP) ratio to 11.2 percent, keeping it at the outgoing year’s level.



Pakistan’s debt burden is on an unrelenting upward trajectory. For the upcoming financial year 2017-18, the government has earmarked a whopping Rs1.64 trillion — almost one-third of the country’s entire money — to service its overall debt. While announcing the budget on Friday, Finance Minister Ishaq Dar said the Rs1.64 trillion figure includes repayment of foreign loans as well as payment of interest on the huge borrowing made from commercial banks. The heavy burden of servicing public debt has made the much-needed fiscal adjustment both difficult and disorderly. Yet it’s not getting the same attention as it deserves. What’s more, recent export figures point to what could be the start of a significant widening in the current account deficit, which will only add to the pressure on Pakistan’s foreign exchange reserves. This would leave the country vulnerable to the whims of foreign donors — i.e. those funding the debt. During the outgoing fiscal year, the government had spent Rs1.8 trillion on public debt retirement and interest payments. The overall expenditure during FY2017-18 is estimated at Rs5103.8 billion out of which current expenditure is Rs3763.7 billion and development expenditure is Rs1340.1 billion. Out of the total current expenditure, the government will spend Rs1.36 trillion on mark-up on domestic and public debt. The government will spend Rs1.23 trillion on mark-up on domestic debt whereas Rs132 billion will be spent to clear mark-up on foreign debt. Of the total current expenditure, the government will spend Rs286.6 billon to repay foreign loans during FY2017-18. Economists believe even though the government has been boasting of increasing foreign exchange reserves, pressure on the reserves will continue to rise due to the huge debt-servicing requirement in the future on account of CPEC-related projects.


Finance Minister Ishaq Dar announced on Friday that Pakistan would open international electronic payment gateways ahead of the likely arrival of PayPal and Alipay in the country. While presenting the budget for 2017-18 in the National Assembly, the finance minister said the State Bank of Pakistan (SBP) was developing a state-of-the-art e-gateway at a cost of Rs200 million. The system will facilitate transactions through mobile banking, he said. The Rs200-million investment is being undertaken by the SBP. Even though PayPal is a world-renowned international e-payment system, Alipay is not as common across the globe. However, recently, Prime Minister Nawaz Sharif developed an understanding with Alibaba Group Founder and Executive Chairman Jack Ma, who also owns Alipay, to open its office in Pakistan. Alipay will enable Chinese and Pakistani traders to make easy e-payments between the two countries. Meanwhile, information and communications technology expert Parvez Iftikhar said the establishment of the e-gateway system at the highest regulatory level – the SBP – was an effort towards replacing the existing manual trade payment system by opening Letters of Credit. The finance minister said the telecommunication sector was one of the important pillars of the country’s economic development. Hence, in order to further incentivise the sector, customs duties at the rates of 11 percent and 16 percent were being withdrawn and a uniform rate of 9 percent regulatory duty was being levied on telecom equipment in the coming fiscal year.


With the multi-billion-dollar China-Pakistan Economic Corridor continuing to be built, the president of Azad Jammu and Kashmir (AJK) has raised questions over Indian concerns over the project. Addressing a one-day international seminar on the Belt and Road Initiative: CPEC and regional integration, organised by the Institute of International and Cultural Affairs in Islamabad, AJK President Sardar Masood Khan termed Indian objections over CPEC as fake and disingenuous. A recent UN report has stated concerns that the China-Pakistan Economic Corridor may create more tension between India and Pakistan. The report titled ‘The Belt and Road Initiative and the Role of Escap’ was released by the UN’s Economic and Social Commission for Asia and the Pacific (Escap) at China’s request. The report considers the Pakistan-India dispute over Kashmir as a source of concern, stating CPEC might create geopolitical tensions with India and ignite further political instability. However, China on Thursday played down a UN report stating concerns that the China Pakistan Economic Corridor (CPEC) may create more tension between Pakistan and India.


The federal government has announced a 10 per cent ad hoc relief allowance to be added to the basic salary of all public sector employees as part of the Federal Budget 2017-18 presented in parliament on Friday. The government also announced a 10 percent raise in pensions of civil servants and increasing the minimum wage from Rs14,000 to Rs15,000. The new ad hoc allowance will be applied to the basic salary from first of July this year accounted after merger of similar allowances given to armed forces personnel in 2009 and 2010 and to the government employees in 2010. Finance Minister Ishaq Dar, who presented the sitting government’s fifth budget, termed the merger of 2009 and 2010 allowances into basic pay of civil servants “a significant move” owing to what he said its accumulative impact on the treasury bill under the head of salaries and pensions. In recognition of sacrifices by the armed forces, this increment would be in addition to special allowances they are already entitled to, the minister said in his budget speech. The allowances announced for the armed forces after the launch of Zarb-e-Azb would continue, he added. According to Dar, Ardali allowance is being raised from Rs12,000 to Rs14,000, and constant attendance allowance from Rs3,000 to Rs7,000. The allowances for burial and dead-body shifting are being jacked up from Rs1,600 to Rs4,800 and from Rs5,000 to Rs15,000 respectively.

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