It will took some time and need some sacrifice from the public in the shape of tax paying. The observation of Finance Minister Ishaq Dar is right that the economy of previous year was running itself. His enthusiasm to put the agenda of PMLN programme of his party as Laptops, Ashiana and other housing schemes, Nandipur Power Project, M-4, 8 and 9, Karachi Circular Railway, Prime Minister’s Youth Training Programme, Prime Minister’s Youth Skills Development Programme, Small Business Loans Scheme, Fee Reimbursement Scheme for Less Developed Areas, Prime Minister’s Micro Finance
Scheme, continued provision of funds for parliamentarians under a favoured name and the Ramazan Package. With all this, the development budget goes up by as much as 50 per cent. A big issue of Budget the not increasing the salaries of Government employees also resolved. Finance Minister Ishaq Dar today announced a 10% increase in the salaries of government employees. The newly formed government had earlier decided against increasing the salaries of government servants for the first time in nearly three decades.
Now, The federal government’s decision affects up to 650,000 federal employees and more than two million provincial government mployees. The finance minister said that the new government has taken tough decisions because the aim is to move in the right direction from the very beginning. He said the government needs to ensure that GDP grows enough to support the swelling population. The Finance Minister Ishaq Dar said the government will save Rs40 billion because of the cuts in expenditure and austerity measures taken in the latest budget.
The PML- N government announced it will not keep more than 40 ministries in order to curb expenses. Dar, in his speech, also announced that all discretionary funds previously vailable to federal and state ministers will be abolished. Moreover, the PML-N government has also decided to abolish the Peoples Works Programme-II – the head used for the premier’s discretionary spending. According to Dar, however, Peoples Works Programme-I, which allots discretionary funds to all members of Parliament, has been retained.
The cuts in current expenditure still leave a revenue deficit of 1. 2 per cent of GDP. With the addition of the proposed Jump in the development budget, the PML-N government will be the first in the history of the country to start with a working fiscal eficit of 6. 3 per cent, financed by costly domestic borrowing. It is likely to end up with a much higher deficit, given the piecemeal nature of the tax measures announced.
Reliance on withholding taxes has been increased and specific and discretionary measures have been proposed rather than reforming the tax regime. In our tax culture, reducing the corporate tax rate and increasing the maximum rate for non-corporate businesses may not encourage corporatisation, but it will certainly closing at another record high, driven by blue chip stocks. Investors welcomed the ew budget where the government announced a cut in corporate taxes by a percentage point and pledged resolution of the circular debt issue in 60 days.
The suspense over the timing of a government request for an International Monetary Fund (IMF) bailout finally ended when Finance Minister Ishaq Dar said a new package will be negotiated but on Pakistan’s terms. Pakistan does not need to rush to the International Monetary Fund. The issue is to convert the present net outflow of resources into a net inflow. In parallel with austerity imposed on the current budget, nothing except the higher taxation of luxury ehicles has been announced on the import side.
Privatisation and access to international capital market have also been mentioned. I think concerted effort can end circular debt in the short term. The main thing is underlying causes to see a permanent end of this deficit. Reforms announced to improve the performance of the mismanaged public enterprises, especially railways, require political will for implementation. Much more needs to be done than granting autonomy and placing the right man or woman on the right Job. If these steps will taken sincerely this nation will get finally releife in some years.
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