Govt likely to expand next year’s budget
Extra resources from Coalition Support Fund and 3G auctions to provide ‘relief’.
ISLAMABAD:
The federal government is likely to increase the size of next fiscal’s budget to Rs2.9 trillion, higher than what the cabinet approved in its budget strategy paper, a populist move aimed at creating space to give more subsidies and ‘relief’ in the all-important election year.
The additional space is created by increasing the projections for non-tax revenues from earlier estimates of Rs562 billion to Rs737 billion, higher by Rs175 billion, said sources in the finance ministry. The government has decided to roll over Rs75 billion of profits made by Pakistan Telecommunication Authority (PTA) on account of 3G spectrum auctions.
An addition of Rs99.5 billion from the Coalition Support Fund (CSF) in the budgetary projections for 2012-13 has also been made, they added.
However, a senior finance ministry official said that non-tax projection was raised in spite of the fact that neither the auctions nor the CSF materialised well, due to PTA’s mishandling of auctions and strains in relations with the US, respectively.
In April, the cabinet had approved the budget strategy paper, indicating the size of next year’s budget would be Rs2.738 trillion, which was 6.6% or Rs170 billion higher than the revised budget outlay of the outgoing fiscal year.
However, in the same cabinet meeting, several ministers called for increasing power sector subsidies to provide relief in a bid to lure voters during the upcoming general elections. The ministers also recommended providing relief to the agriculture sector by reducing taxes on inputs like fertilisers.
In the budget strategy paper, the finance ministry recommended Rs120 billion for subsidies, which were Rs70 billion less than the budgeted subsidies for this fiscal year.
Sources said the new size has yet not been formally revised but there is a strong possibility that it will be over Rs2.9 trillion. The proposed budget will be at least Rs300 to Rs345 billion higher than this year’s revised budget estimates, which is in line with official inflation rates.
The sources added that subsidies could be increased from the earlier proposed Rs120 billion to Rs160 billion. Another finance ministry official said that though the exact size has not been worked out yet, it will range somewhere between Rs150 billion and Rs200 billion. The finance ministry is now of the view that whatever gap exists between determined and notified electricity prices should be reflected in the budget.
In the coming days, the official added, the water and power as well as the finance ministry will hold a meeting to make a decision over the required increase in electricity tariffs, subsidies, and whether to pick up fuel adjustment surcharges in the next fiscal year.
With a revision in the proposed non-tax revenue for 2012-13, the gross projected revenue receipts will increase to close to Rs3.2 trillion as against earlier estimates of Rs3.01 trillion.
Against estimated expenditures of Rs2.9 trillion, the net total revenue, excluding provinces shares in federal taxes, has now been estimated at Rs1.78 trillion, with a budget deficit close to 5% of the Gross Domestic Product.
Sources said the government was also considering increasing the medical allowance of civil servants after it turned down a proposal to give health insurance as long as employees were provided allowance.
Terming a huge increase in salaries ‘mere speculation’, an official of the finance ministry said that maximum increase would be in the range of 20% to 25%, costing an additional Rs28 to Rs34 billion to the exchequer. The increase may be offered as ad-hoc relief and will not be treated as an increase in basic salaries.
Published in The Express Tribune, May 22nd, 2012.
The federal government is likely to increase the size of next fiscal’s budget to Rs2.9 trillion, higher than what the cabinet approved in its budget strategy paper, a populist move aimed at creating space to give more subsidies and ‘relief’ in the all-important election year.
The additional space is created by increasing the projections for non-tax revenues from earlier estimates of Rs562 billion to Rs737 billion, higher by Rs175 billion, said sources in the finance ministry. The government has decided to roll over Rs75 billion of profits made by Pakistan Telecommunication Authority (PTA) on account of 3G spectrum auctions.
An addition of Rs99.5 billion from the Coalition Support Fund (CSF) in the budgetary projections for 2012-13 has also been made, they added.
However, a senior finance ministry official said that non-tax projection was raised in spite of the fact that neither the auctions nor the CSF materialised well, due to PTA’s mishandling of auctions and strains in relations with the US, respectively.
In April, the cabinet had approved the budget strategy paper, indicating the size of next year’s budget would be Rs2.738 trillion, which was 6.6% or Rs170 billion higher than the revised budget outlay of the outgoing fiscal year.
However, in the same cabinet meeting, several ministers called for increasing power sector subsidies to provide relief in a bid to lure voters during the upcoming general elections. The ministers also recommended providing relief to the agriculture sector by reducing taxes on inputs like fertilisers.
In the budget strategy paper, the finance ministry recommended Rs120 billion for subsidies, which were Rs70 billion less than the budgeted subsidies for this fiscal year.
Sources said the new size has yet not been formally revised but there is a strong possibility that it will be over Rs2.9 trillion. The proposed budget will be at least Rs300 to Rs345 billion higher than this year’s revised budget estimates, which is in line with official inflation rates.
The sources added that subsidies could be increased from the earlier proposed Rs120 billion to Rs160 billion. Another finance ministry official said that though the exact size has not been worked out yet, it will range somewhere between Rs150 billion and Rs200 billion. The finance ministry is now of the view that whatever gap exists between determined and notified electricity prices should be reflected in the budget.
In the coming days, the official added, the water and power as well as the finance ministry will hold a meeting to make a decision over the required increase in electricity tariffs, subsidies, and whether to pick up fuel adjustment surcharges in the next fiscal year.
With a revision in the proposed non-tax revenue for 2012-13, the gross projected revenue receipts will increase to close to Rs3.2 trillion as against earlier estimates of Rs3.01 trillion.
Against estimated expenditures of Rs2.9 trillion, the net total revenue, excluding provinces shares in federal taxes, has now been estimated at Rs1.78 trillion, with a budget deficit close to 5% of the Gross Domestic Product.
Sources said the government was also considering increasing the medical allowance of civil servants after it turned down a proposal to give health insurance as long as employees were provided allowance.
Terming a huge increase in salaries ‘mere speculation’, an official of the finance ministry said that maximum increase would be in the range of 20% to 25%, costing an additional Rs28 to Rs34 billion to the exchequer. The increase may be offered as ad-hoc relief and will not be treated as an increase in basic salaries.
Published in The Express Tribune, May 22nd, 2012.