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Cabinet approves budget 2018-19 at outlay of Rs 5,500bn

The federal cabinet approved budgetary papers with total outlay of Rs5,500 billion for budget 2018-19, where tax collection has been set at Rs4,500 billion. Finance Division presented the Budget Strategy Paper for Financial Years 2018-19 to 2020-21 in a meeting chaired by the Prime Minister Shahid Khaqan Abbasi, last week.

While briefing the Secretary Finance said the Budget Strategy is based on four broad targets including sustained growth momentum, ensuring fiscal consolidation, managing balance of payments and ensuring debt sustainability.

It was also informed the recently announced Economic Reforms Package, including lowering tax rates, widening tax base, real estate reforms, and local amnesty and tightening of foreign exchange regime, will help increase revenues and reduce deficit.

According to details the target for non-tax revenue for the next fiscal year has been set at Rs1, 050 billion.

The Public Sector Development Program (PSDP) is to see a cut of Rs251 billion with the total size to be Rs750 billion.

Cut in expenditures will control fiscal deficit by 1 percent.

The budget for defence expenditures is set to increase by 8-10 percent with total defence outlay target of around Rs1, 010 billion.

The provinces will get Rs2, 565 billion during the next fiscal year as their share in the federal budget. The debt repayment during next fiscal year has been estimated at Rs1, 550 billion.

The cabinet approved subsidy allocation of Rs230 billion, which will be given on around 100 items.

The budget deficit for the next fiscal year has been targeted at Rs1, 870 billion.

The Ministry of Commerce has identified 515 items for reduction/removal of customs duty and regulatory duty in the budget 2018-19 with object to make exports more competitive and facilitate participation of local manufacturers.

The Commerce Ministry also proposed removal or reduction of regulator duty on various items.

A tariff policy for industrial expansion including the medium and long-term measures is being developed, in the short term the immediate rationalization of tariff is being considered on 515 tariff lines.

Commerce Division is currently working on the formulation of Strategic Trade Policy Framework 2018-2023 in consultation with the stakeholders.

One of the key enablers identified for increasing the competitiveness of the export sector is the rationalization of tariffs on critical inputs of the export-oriented industry.


The objective is to rationalize the tariffs in order to make exports more competitive and facilitate participation of local manufacturers, including SMEs, in global and regional value chains.

The proposed tariff rationalization will improve the competitiveness of the leading export sectors including textiles, apparel, leather, spices, chemical products, plastics and articles thereof, iron and steel.

Miftah Ismail, Adviser to Prime Minister on Finance, Revenue and Economic Affairs said the government is not introducing any new tax in the forthcoming budget.

In the next budget the government would focus on economic growth instead enhancing revenue collection.

Dr. Mehar said that the lower GST rate would not only discourage the corruption in taxation system, but it would also reduce inflation. He explained that lower GST rate would increase the sale of goods and services.

On the other hand Haroon Akhtar, Special Assistant to Prime Minister on Revenue, on Wednesday said the government is ready to review and adjust high taxation rates in case they are causing impediment to growth of any sector or industry.

The government is not in favor of counter-productive taxation as prime objective is to promote growth and help businesses flourish and contribute more revenue to the national exchequer. He said that the upcoming budget would be pro-investment and pro-businessman in nature.

The investment environment had considerably improved in Pakistan as indicated by recent perception surveys, indicating marked improvement in law and order and ease of doing business.

Ishaq Dar-led Finance Ministry presented five budgets, revenue was purposely overestimated to show a deficit lower than was in fact the case yet the shortfall was never as high as 800 billion rupees. Given that the projected growth rate for next year is from between 6.2 percent to 6.5 percent, the envisaged decline in revenue indicates that tax structure remains inequitable and higher growth does not generate higher revenue for the government.

In other words, the need for revenue reforms remains paramount. The entire fiscal year 2018-19 in parliament because an elected rather than a caretaker government is empowered to do so and added that the next government may make any amendments it deems appropriate. This rationale does have merit yet it can be challenged by the opposition on three counts.

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