CALL FOR CHECKING INFLATION THROUGH TIGHT MONETARY POLICY
June 16 - 22, 2008
LAHORE: Although certain initiatives were announced in the budget 2008-09 to curtail current account deficit and check trade deficit, but inflation is required to be checked effectively through tight monetary policy, experts say.
The national economy is required to be consolidated by reducing fiscal deficit to benefit vulnerable groups and increasing their incomes through targeted programmes like Benazir Income Support Programme. Fiscal measures, proposed in the national budget for 2008-09 are aimed at focusing on economic stability at micro level besides realizing the macro targets set in diverse sectors, experts told PAGE.
According to official circles, the government will gradually phase out the subsidies to ultimately ensure rationalization of subsidy structure in the economic interests of the country. Adjustment and duties and taxes will not only address the anomalies but will also mop up tax revenue from the affluent class of the society.
Highlighting key objectives set for the Budget 2008-09, they said that measures have been announced in the budget for restoration of macro-economic stability through significant reduction of fiscal deficit, rationalization of subsidies, reduction in current account deficit; and build-up of foreign exchange reserves to a minimum of $ 12 billion. Other measures, they said were aimed at protecting the vulnerable groups by increasing their incomes through a targeted programme of cash transfers, focus on agriculture and manufacturing sector to raise their productivity and competitiveness, restore investors confidence by declaring government's commitment to economic growth and investment and private sector's lead role in the process.
The experts opined that key bottlenecks should be removed in supportive infrastructure for spurring growth, increase social sector allocations to bring about a meaningful change in the social indicators and make significant additions to low cost housing to lessen the rising gap in housing stock, especially for the low income groups.
According to budget document, against a revised fiscal deficit of 7 % of GDP for this year, the budget envisages a budget deficit of 4.7 % of GDP, they said. The total outlay of budget is Rs 2010 billion and this is 29.7% higher than the size of budget estimates 2007-2008. The resource availability during 2008-2009 has been estimated at Rs.1836 billion against Rs.1394 billion in the budget estimates 2007-2008. The FBR revenues would rise to Rs. 1250 billion from revised estimates of Rs.1000 billion for 2007-08, representing an increase of about 25 %, it says.
The Current Federal expenditure has been budgeted at Rs. 1493 billion against the revised estimates of Rs. 1516 billion for 2007-08. Further savings in current expenditure would be achieved on the basis of measures proposed to be adopted for bringing fiscal discipline. The share of current expenditure in total budgetary outlay for 2008-2009 is 74% as compared to 77.8% in revised estimates 2007-2008, the document says.
The document says the size of PSDP for 2008-2009 is Rs 550 billion while for other development expenditure, an amount of Rs 44 billion has been allocated. The PSDP shows an increase of 20% over the revised estimates 2007-08. The provinces have been allocated an amount of Rs 150 billion for budget estimates 2008-09 in their PSDP.
In the National Budget 2008-09 the government increased the rate of Sales Tax and Federal Excise Duty from 15 percent to 16 percent to meet revenue requirements. Tax on the luxury items and introduction of pro-poor relief packages was an effort to bridge the gap between rich and the poor, the officials told PAGE.
According to the budget document, the budgetary measures of Sales Tax and Federal Excise are primarily aimed at providing impetus and a big push to the agricultural sector by offering number of incentives and simplifying sales tax and Federal excise law and procedures to facilitate the trade and industry for easy collection of revenue.