Budget 2010 - Assignment

8/7/2019 Budget 2010 - Assignment

1/6

Budget 2010-11: a difficult budget in difficult times

ZAHEER ABBASI

ISLAMABAD (updated on: June 06, 2010, 06:46 PST): The government on Saturday announceda consolidated budget outlay of Rs 3.259 trillion for next fiscal year, with 4 percent budgetdeficit, and what the Federal Finance Minister was careful to refer to as deferring the reforms ofGST, understood by the galleries as reluctant to use the three-letter word 'VAT', till October 1,2010 instead of July 1, 2010, but increased the GST from existing 16 to 17 percent.

VAT MADE TO WAIT TILL OCTOBER 1 The total revenue is projected at Rs 2,574 billion whilegross federal tax and non-tax revenue are projected at Rs 2,411 billion. The Federal Board ofRevenue collection is estimated at Rs 1,667 billion or 9.8 percent of the GDP. The provinceswould be transferred Rs 1,033 billion in the next fiscal year under 7th NFC Award as comparedto Rs 655 billion estimated for the on-going fiscal year. The federal budgetary outlay isproposed at Rs 2.229 trillion or 13.9 percent of the GDP.

Dr Abdul Hafeez Sheikh who took oath just a few hours before the budget as Finance Ministerto present his first and the third budget of the incumbent government, announced that thefederal government employees would be allowed an ad hoc monthly allowance equal to 50percent of one month's basic pay and announced to freeze all the current expenditure of thegovernment, except salaries under austerity measures.

However, the benefit of ad hoc increase would not be available to the federal governmentemployees who are already recipient of a monthly allowance equal to one month's basic pay.The minister said the budget is one important instrument of economic management however,the importance of this one-year ritual should not be over exaggerated.

The government also announced to double the medical allowance for employees working in BS-1 to 16 and increased the medical allowance by 15 percent of those above Grade 16. Thepension of those who had retired after 2001 was increased by 15 percent and those who hadretired before 2001 by 20 percent. The minimum monthly pension was proposed to beincreased from Rs 2000 to Rs 3000 while the rate of family pension was enhanced from 50 to75 percent. The government also announced a scheme for providing employment to the200,000 unskilled in rural areas with an amount of Rs 5 billion.

Federal Excise Duty (FED) has been increased by Rs 1 on per filter rod of cigarettes and FED onnatural gas to Rs 10 per mmbtu besides levying FED @ 10 percent ad valorem on airconditioners and deep freezers. Hafeez said no custom duty on any product would be increased

rather duty on 29 categories of products has been reduced to lower the burden of dearness onthe people.

He said continuous changes in the GST have distorted the tax and the government wanted toreform it to make it uniform rather than multiple tax rates between 16 to 25 percent. Theeducation, food and health would be exempted under reform mode of GST, governmentintends to implement from October 1, 2010 by taking on board all the provinces. The proposedGST reform would not apply to turnover less than Rs 7.5 million per year whereas the currentthreshold is Rs 5 million per year. This would help broaden the tax net instead of burdening theexisting taxpayer.

Outlining the ultimate objectives of the budget, the Finance Minister said priorities would be to

protect the growth by enforcing fiscal austerity, eliminating waste and tightly controllingexpenditure, curtailing inflation, which is primarily a monetary phenomenon, reducingborrowing from the State Bank of Pakistan and achieving a measure of self reliance throughbetter domestic resource mobilisation.

We are playing with fire by borrowing excessively and have to move towards self-reliance. The


2/6

government would provide targeted subsidy to the poor, reduce burden of public sectorenterprises and would ensure that the economic recovery is employment oriented. The ongoingenergy shortage and law and order situation are major hindrances in the way of economicgrowth, the minister added.

The minister said the first differentiation is that this budget is based on transparency in the

budgetary process involving widespread consultation while the second differentiating feature isthat the budget is realistic while third feature of the budget is that this is the first post-NFCbudget.

He said that the co-operation, partnership and enhanced role for the provinces is an integralpart of the budget and provinces would be transferred additional resources to spend on lawand order, education, health drinking water and municipal and ultimately reduce fiscal space offederal government.

Another feature of this budget is that the government is operating in the framework ofinternational commitments. "It is important that we as a sovereign nation keep ourcommitments and do not erode our international credibility," he said, adding that while

maintaining international obligations we must ensure that we become self-reliant and lessdependant on foreign borrowing and assistance.

Copyright Business Recorder, 2010

Measures taken in budget to reduce inflation, improveeconomy: Hafeez

ISLAMABAD (updated on: June 06, 2010, 15:40 PST): Federal Minister for Finance Dr. HafeezShaikh said on Sunday that several measures had been taken in the federal budget 2010-11which would certainly help reduce inflation, budget deficit and improve the national economy.

He stated this while addressing a crowded post-budget press conference here at PakSecretariat.

The Minister was flanked by Deputy Chairman of Planning Commission Dr. Nadeem ul Haq ,Secretary Finance Salman Saddique, Chairman of Federal Board of Revenue and SpecialSecretary to Finance Ministry Asif Bajwa and Principal Information Officer (PIO) RashidChaudhry. Senior officials of the Ministry of Finance and Economic Affairs and Planning

Commission were also present on the occasion.

The Minister said the current expenditures of the government had been cut down and freezedto help reduce inflation.

"Cut in the government's current expenditures would have positive impact on the inflation," heremarked.

Besides, he said, the government did not increase the customs duty, rather it had beenreduced on 29 items which would also contribute positively in reducing the inflation across thecountry.

The Finance Minister said the government under income tax measures has enhancedexemption limit for the salaried taxpayers from Rs. 200,000 to Rs. 300,000.

In addition, he said, exemption limit for non-salary income has also been raised from Rs.100,000 to Rs. 300,000.


3/6

Highlighting the General Sales Tax (GST), the Finance Minister said that the government wascommitted to reform the existing system of General Sales Tax (GST) and introduce a uniformtaxation system in the country.

He said the GST reforms would eliminate multiple tax rates and replace it with a single lowerrate of 15 per cent adding that 1 percent raise in GST was only for three months. It would be

reversed to 15 percent after three months, he added.

He clarified that 1 per cent increase in the GST would not cause inflation rather after threemonths the uniform GST system would help reduce the inflation for the relief of the people.

The Federal Minister said that earlier discussions held on the issue of GST were not based onfacts adding that the government wanted to introduce uniform rate by reforming the existingGST in consultation with the provinces.

Replying to a question, Finance Minister said 50 per cent ad hoc relief announced for thegovernment servants would not be applicable to the cabinet members rather their existingwages would be cut by 10 per cent as an austerity measure and to reduce inflation.

He said the current 50 per cent ad hoc relief would also not be applicable to the police, armedforces and judiciary as their salaries had already been increased to 100 percent.

He said that the 50 per cent ad hoc increase for the government employees would beimplemented on their running basic salaries.

Dr. Shaikh said that all the corporations following the government pay structure would also beprovided resources to transfer the ad hoc relief to their employees.

The Minister said that Pay and Pension Committee had submitted its report on the salaries andwages of the government employees and the government was focusing to implement it inletter and spirit in next three years.

The committee, he said, had pointed out some inequities in different rental ceilings andallowances of the government employees like housing, medical and others.

The government would rationalize them offering relief to the government employees across theboard, he added.

Dr. Shaikh said that in the current budget provinces were provided more shares, upto 57 percent from the federal divisible pool for social safety net.

Now, he said that it was the responsibility of the provinces to bring the vulnerable segments ofthe society under social safety net more efficiently and honestly. In the light of this fact thefederal budget has rightly become less important, he added. Dr. Abdul Hafeez Shaikh said 52per cent increase in Public Service Development Projects (PSDP) of all provinces was a historicachievement of the government.

He said now the federal budget was less important after transferring of resources to theprovinces and now the provincial share from the federal devisable pool had been increasedfrom 50 to 57 per cent.

"Provinces development programmes are our programmes", he said.

The minister said in the past there was confusion over spending but now there wasadministrative arrangement between the federal government and the provinces.

He also said the health sector was no more the domain of the federal government afteradministrative arrangements. Now the provinces have bigger place in economy in terms of


4/6

health, education and infrastructure sectors, he added.

Copyright APP (Associated Press of Pakistan), 2010

Salient features of the National Budget for 2010-11

ISLAMABAD (updated on: June 05, 2010, 20:23 PST): Total outlay of the nationalbudget for new fiscal year 2010-11, presented at the National Assembly here Saturdayis to the tune of Rs 2764 billion, 12.3 percent higher than the size of the budgetestimates for outgoing fiscal 2009-10.

Following are cardinal features of the national budget for FY 2010-11: -

The total outlay of budget 2010-11 is Rs 2764 billion. The size is 12.3 per higher thanthe size of budget estimates 2009-10. -

The resource availability during 2010-11 has been estimated at Rs 2598 billion againstRs 2299 billion in the budget estimates of the outgoing fiscal year. -

Net revenue receipts for 2010-11 have been estimated at Rs 1377 billion indicating anincrease of 1.9 percent over the budget estimates for current fiscal year 2009-10. -

The provincial share in federal revenue receipts is estimated at Rs 1034 billion during2010-11 which is 57.9 per cent higher than the budget estimates for 2009-10. -

The capital receipts (net) for 2010-11 have been estimated at Rs 325 billion against thebudget estimates of Rs 191 billion in 2009-10 indicating an increase of 70.2 per cent. -

The external receipts in 2010-11 are estimated at Rs 387 billion. This shows a decreaseof 24 per cent over the budget estimates for 2009-10. -

The overall expenditure during 2010-11 has been estimated at Rs 2764 billion of whichthe current expenditure is Rs 1998 billion and development expenditure at Rs 787billion. Current expenditure shows decline of less than one per cent over the revisedestimates of 2009-10, while development expenditure will increase by 25.3 per cent in

2010-11 over the revised estimates of 2009-10. -

The share of current expenditure in total budgetary outlay for 2010-11 is 72 per cent ascompared to 78 per cent in revised estimates for 2009-10. -

The expenditure on General Public Services (inclusive of debt servicing transferpayments and superannuation allowance) is estimated at Rs 1388 billion which is 69.5per cent of the current expenditure. -

The size of Public Sector Development Programme (PSDP) for 2010-11 is Rs 663 billion.While for Other Development Expenditure an amount of Rs 124 billion has beenallocated. The PSDP shows an increase of 30 per cent over the revised estimates. -

The provinces have been allocated an amount of Rs 373 billion for budget estimates2010-11 in their PSDP as against Rs 300 billion in 2009-10. -


5/6

An amount of Rs 10 billion has been allocation to Earthquake Reconstruction andRehabilitation Authority (ERA) in the PSDP 2010-11.

Budget 2010 Reviews andSummary


6/6

Name: Iraj SohailRoll Number: 102505

Teacher: Shafiq-Ur-RehmanCourse: Business EconomicsProgram: MBA-Exe

Teachers Comments:

Budget 2010 - Assignment

Documents

Transcript of Budget 2010 - Assignment