'People are at heart of this budget'

ISLAMABAD: Federal Minister for Finance Abdul Hafeez Sheikh presented the budget in the Parliament on Saturday:

"I am thankful to Allah Almighty for this great responsibility. It is the third budget of this government. It is a democratically elected government. This parliament has had the honour of restoring the 1973 Constitution. For this, I congratulate the leader of the House, the opposition leader and all the members of the House. Zulfiqar Ali Bhutto gave us a constitution which kept the nation intact. After 37 years people revisited the constitution of 1973 and restored it to its original form.

The tradition of consultation paved the wave for big decisions. In 1947, we were one, 1965 we were one, and in 1973 we were one as a nation. In 2005 we faced the great disaster of the earthquake as a nation. Now we again see the nation standing united at the time of this budget. Our economy should show the way of future.

At present we are going through a unique and difficult time. The whole world is facing recession. Even the strong economy of the USA has suffered. It is the toughest recession after World War II. Pakistan has also been affected by this universal recession. Our economy became fragile due to weak policies. Inflation reached 25 per cent, which was the highest in the history of Pakistan. Our growth rate hit its lowest, which was 1-2 per cent.

We had to increase the price of certain products according to the international market. International community promised to help us. To avoid default we had to go to IMF. In all these difficult times we did not forget the poor. 3.5 million families have been supported through BISP.

Now, the economy of the world is improving. Now, we can see a clear turn around in our economy. Our growth rate has reached 4.1 per cent. Our remittances have also increased. Over here the quotation of Benazir Bhutto is pertinent. She said that in the 20th century exports, economy, and the economic condition of the people will determine the fate of the nations. We accept the areas where our performance was weak. We were not very successful in increasing our revenues. We have not been able to cope with the energy crisis. We have not been able to provide job opportunities according to the needs of the people.

This budget has been made in a transparent manner. We consulted people from every walk of life. We have not kept anything under. We have shared each and everything with our consultants. Even before the budget speech, people knew about the budget. We do not want to play with the figures. We will try to present correct figures. We have tried that people should not be embarrassed by the finance ministry.

It is the first post-NFC Award budget. Allocation for the provinces has been increased. Fiscal space for the federal government will shrink. Maximum fiscal space will be given to the provinces. The more the resources with the provinces the better it is. We will meet our international commitments. We cannot detract from the terms and conditions of the international financial organizations.

Our next big issue is internal security. Our security forces are laying their lives for the security of their people. I salute the efforts of the Armed Forces. I assure them that whole nation is supporting them. The budget is a part of the economic management of the country.

The annual budget is a very important segment of parliamentary system of government. It is very important that the budget is based on facts. The budget is a record of government's revenues and expenditures.

The people are at the centre and heart of this budget.

We must protect the recovery. We must protect this fragile stability achieved during the last two years. We have to understand ground realities. The international situation is still volatile. The security situation has not been brought under control. Our economy is still fragile. Our concentration should be on austerity. Government must check its expenditures.

Best possible favour to people is to control the price hike. Inflation has to be controlled. Inflation is a monetary phenomenon. When the government’s expenditures exceed income, the government has to borrow, which affects inflation. When the government does the maximum borrowing then very a small share is left for the private sector. Private sector takes loans on high interest rates, which affects the price and ultimately the masses.

In the last four years our loans have been doubled. Our debt servicing has increased up to 55 per cent. The ratio of tax mobilization is less than 10 per cent. We have to move towards self-reliance.

We have to invent methods to increase our revenues. At the same time we have to protect the poor. We will improve the system of subsidies and continue the positive scheme introduced by the government.

The youth is our asset. Job opportunities are created when the economy progresses as a whole.

We are blessed with a lot of natural resources. We have coal, copper, and so many other minerals. The point is how we can utilise these resources in the best possible manner. We have so many rivers but fewer dams to produce electricity. We have lot of water still our farmers are deprived of it.

I want to comment on two issues, which are affecting our economy. The first is shortage of electricity. People need electricity. They are ready to pay the price and still they are not getting it. The main reason of this problem is poor policies. There was a time people had to wait for telephone connection for years, but now they can get it within minutes and seconds. For such improvements we have to put our policies right. We encouraged the private sector. We brought professionals in telecommunication sector. We reduced government's role for policy making and encouraged competition. We received very good suggestions during the energy summit meeting. Due to serious approach and deliberation we averted disaster and managed to arrange more energy. We took so many long term steps to produce electricity. We have to think about energy. We have to think about education. To conserve energy 300 million energy savers will be distributed.

Annual development budget to produce energy has been increased. To bring prosperity we must introduce the program of food security. Capacity of Mangla dam has been increased. Diamir Bhasha dam, a mega project has been started. Public Centre Enterprise is our biggest challenge.

Rs165 billion is the total expenditure of the government, which includes salaries as well. PIA is also getting subsidy of billions of rupees. Pakistan Steel is losing Rs 1 billion a month. If we develop economic consensus on these issues a lot of money can be put into the development sector. If cooperation does not improve they will not get the public money.

Subsidies given by the government do not differentiate between rich and the poor. Subsidies should only be given to the poor. Our first priority is to target the subsidies. In BISP we have tried to reach out to the deserving people. Rs46 billion has been distributed amongst the poor through BISP. The funds of this program will be increased to Rs50 billion. Government will start new schemes to benefit the poor. People are being provided medical insurance up to Rs25,000. Bait-ul-Mal will continue to function with Rs2 billion. Minimum wage has been increased to Rs7000. Unemployed post-graduates are being aid through internship.

Present budget is 10 per cent more than the previous budget. Rs1,033 billion will be transferred to the provinces. Except salaries, all the non-development funds of the government have been cut down.

Provincial development programs will be larger than the federal development programs. Provincial development programs will be 52 per cent more than the past. We have made federal development programs more realistic. Finance Ministry will not determine the release of funds to various projects. Now funds will be released automatically. We will concentrate on all those development programs which could be completed in near future. Laying foundation stones is of no use. People only get benefit once the projects are completed. All those programs nearing completion will be focused on priority.

There is no additional duty on customs products. Custom duty on 29 products will be reduced to benefit the masses. GST is being collected for the last 20 years. System of GST has room for corruption. We have tried to improve the system. We are introducing a system of fixed rate of 15 per cent. There will be no sales tax on health and education. There will be no sales tax on food items. In tax reform we have taken everybody along. GST on services is the responsibility of the provinces. In the new system taxes will be enforced in consultation with the provinces. New reforms will be introduced from October 2010. It will give us time to have consultation with the provinces.

Federal excise duty will also be relieved after new tax reforms. Excise duty on cigarettes will be increased. To conserve electricity, items like air conditioners and deep freezers will be levied 10 per cent federal excise duty.

Salaried persons earning less than Rs. 0.3 million per annum are relieved from income tax. Likewise, this net has been increased to Rs. 0.3 million for the private sector as well. 10 per cent tax charged on utility bills has been reduced to 5 percent.

Capital gain tax on the stocks under six months will be increased to 10 per cent.

Salaries of government employees from grade 1 to 16 will be increased by 50%. People who have already got allowance equal to one month pay are not included.

From grade 16-22 medical allowance increased by 15%. People retiring before 2001 will get 20% increase in pension, and people retiring after 2001 will get 15% increase in their pension. Monthly pension has been increased up to Rs3000. Family pension has also been increased.

0.2 million young people will be paid by the state for 100 days in a year.

Once again, I am thankful to the prime minister and my colleagues for the support. I appreciate the efforts of my staff who worked very hard to present this budget. This increase in salary will not apply on the cabinet. Cabinet salaries will be cut by 10 per cent.

Our fate is in our hands. What we are going to leave for our coming generations is the question. Let us make a promise, if the generation of Jinnah made Pakistan, we will make this country great and strong."