With back to back meetings of both the National Economic Council (NEC) and the federal cabinet — to approve a development plan of over Rs1.675 trillion and a federal budget for 2016-17 worth Rs4.4tr — scheduled to be held on the same day, (today) Monday is going to be an exceptional day in the history of the country.
Prime Minister Nawaz Sharif is scheduled to preside, via video link, over the NEC meeting at 5pm, followed by a special cabinet meeting at 6.30pm, according to officials.
But this would pose a new challenge for the government — how to protect the federal budget and, more importantly the Finance Bill 2016-17, from being leaked “to the market” for more than three days, a former finance secretary said.
The budget date “is 3rd June, unchanged”, Finance Minister Ishaq Dar said. But the way this is to be ensured is unprecedented: for the first time in the country’s history, the federal budget will be approved electronically by the head of the government, who is currently in London awaiting heart surgery.
“The security and sanctity of the budget is a challenge,” said the former secretary. This is obviously an exceptional situation, since the PM is out of the country and the two most important meetings are being held on the same day with a gap of less than two hours.
The special budget meeting of the cabinet is always held just before the finance bill is presented in parliament, to ensure that the budget is not leaked to the media. But even then, portions of the proposed budget are on television screens before printed copies reach parliament.
Businessmen and media persons had friends in the cabinet who could not be expected to keep important budgetary decisions close to their chests for too long, the former secretary noted.
When asked how the government planned to keep the budget confidential this time around, a source close to the finance minister said it was not appropriate to comment on such hypothetical questions. However, the source said that the government had met several challenges thus far and assured that this would be no exception.
Officials said that there was always a three- to four-day gap between the NEC’s approval of the development programme and the macroeconomic framework and the budget’s tabling in the parliament. This enabled the ministries of finance and planning to incorporate NEC decisions in budget documents and send them for printing before they were presented to the special cabinet meeting for approval.
Sources said the government was already in a tight spot because of differences of opinion over various key numbers in the macroeconomic framework. They said the Annual Plan Coordination Committee (APCC) had, last week, approved next year’s growth rate at 5.7 per cent and investment to GDP ratio at 17.7pc, but all these numbers were still fluid.
Ahsan Iqbal, Minister for Planning and Development, said the development outlay for the federal and provincial governments had been finalised at Rs1.675tr. This included a Rs800 billion federal Public Sector Development Programme (PSDP) and Rs875bn for provincial programmes in the next fiscal year.
Talking to journalists on Sunday, he said the plan had been finalised after consultations with all four provinces, Azad Kashmir and Gilgit-Baltistan.
Before finalising budgetary proposals for the next year, Mr Dar assured a delegation representing the export sector that the zero-rating regime would be revived to ensure that they did not have to face tax refund issues, as promised by the prime minister.
These sectors, which include textile, carpets, leather, surgical and sports equipment, were assured by the finance minister that the government was ready to zero-rate their use of furnace oil and diesel, in return for which they would have to ensure a 25pc growth in exports.
Sources said that next year’s federal budget outlay would be more than Rs4.4tr, including interest payments of about Rs1.254tr – an increase of 5.8pc over the current year; defence expenditure of Rs860bn – an increase of 10pc; PSDP at Rs800bn – an increase of 14pc; pension expenditure of Rs245bn – a 6pc increase; and subsidies at Rs170bn for the current year.
Salaries of the government employees are expected to rise by 7-10pc next year. Special incentives would be offered for the revival of the agriculture sector, which pulled down the current year’s economic growth rate by 0.7pc.
The foreign exchange reserve target for next year would be set at $23.6bn. The overall size of the economy (GDP) has been estimated at Rs34.801tr next year, up from current year’s 30.672tr.
The Federal Board of Revenue would be given a target to collect more than Rs3.6tr taxes, against the Rs3.1tr target for the current year, which the government expects to achieve or miss by a small margin.
A proposal to double the withholding tax on cash withdrawals from banks by currency exchange companies was also on the table, while pension funds, and non-governmental organisations could also come under the income tax net.
