Govt unveils pro-growth people-friendly budget for 2011-12 with incentives for working class

Federal Minister for Finance, Dr. Abdul Hafeez Shaikh on Friday expressed the government’s resolve to bring down fiscal deficit to 4 percent, cut down inflation to single digit and announced a raft of measures for enhancing growth rate. He unveiled the Federal Budget  for the Fiscal Year 2011-12 with an outlay of Rs. 2,504 billion showing an increase of 12.3 per cent against last year.The budget offers a raft of incentives to the government employees including pensioners and gives top priority to increasing economic growth for generating more job opportunities.

The government has increased the salaries of government employees of Civil and Military. Presenting the National Budget for 2011-12 in the National Assembly, the Minister expressed the government’s resolve to bring down fiscal deficit to 4 per cent, bringing inflation down to single digit, enhancing resources to meet the development requirements for the socio-economic development of the country.

He said that the government in the outgoing budget approved 50 per cent adhoc relief to its employees besides ensuring their medical allowances and pension.

He said that despite the difficult economic situation, the government is fully aware of the problems of the government employees. In this regard the government in the national budget 2011-12 has also taken a number of measures and
proposed a 15 per cent increase in pension of  those government employees, who had retired on July 1, 2002 and onwards while for those pensioners who had retired on June 30, 2002 or before would be given 20 per cent raise in the pension with effect from  July 1, 2011.

Similarly, he said that it has been proposed that the government employees from Grade 1 to 15  will be given 25 per cent raise in their conveyance allowance in the budget.

He said that all civil and armed forces employees irrespective of their station of duty would get the allowance according to its rate. The government, he said in the budget has proposed to increase different allowances of the government from grade 1-15.

The Finance Minister said that in the Budget 2011-12 it is proposed that adhoc relief allowance given to the government employees upto July 2009 will be merged in Basic Pay Scales of 2008 and new pay scales are being proposed in the budget.

He said that for the employees of grade 20 to Grade 22 the government in the budget has proposed to compulsory monetization of their transport facility.

The Finance Minister said that for the reduction of government expenditures, it is necessary to review and know which public sector expenditures were vital for the welfare of the people.

Earlier Prime Minister Syed Yusuf Raza Gilani while  presiding over the Special Cabinet Committee meeting to approve the Budget for Financial Year 2011-12 said that revival of the economy was key concern of his government and noted with satisfaction that the coming financial year  would open window for resumption of growth cycle.

“We have earmarked Rs 730 billion for the Public Sector Development Programme (PSDP), including provincial allocations. This development expenditure will indeed trigger a multiplier effect on the entire economy,” he said.
He was addressing the special Cabinet meeting to discuss and  approve budgetary proposals for the year 2011-12.
He said there was no room for complacency and urged the economic team and line ministries to proactively work in the coming year in core areas of power sector reform, revitalizing of tax machinery to improve tax to GDP ratio, fast track development of hydel projects and better governance in the bleeding public sector corporations.

He said,”while formulating this year’s PSDP, I have specifically asked the Planning Commission to consolidate ongoing projects, rather than throwing money after projects, which eventually turn into a wasteland of development”.
“This way scarce resources will be concentrated in projects which are substantially complete and ensure optimal results,” he said.

He expected the budgetary proposals to be pro-poor and enhance investment in social protection programmes.  He mentioned the Benazir Income Support Programme (BISP) as a flagship programme of the government, aimed at providing a targeted and transparent social safety net for poor people.

Gilani said Pakistan was entering into the new financial year after tremendous fiscal stress in the current financial year as the economy was devastated by unprecedented floods causing damages to the tune of Rs.800 billion as per independent estimates.

  • He mentioned the prolonged power outages which resulted in income losses for households, businesses and industry impeding GDP growth.
  • The resource availability during 2011-12 has been estimated at Rs. 2463 billion against Rs. 2256 billion in the budget estimates of  the outgoing fiscal year.
  • Net revenue receipts for 2011-12 have been estimated at Rs. 1529 billion indicating an increase of 11 percent over the budget estimates of fiscal year 2010-11.
  • The provincial share in federal revenue receipts is estimated  at Rs. 1203 billion during 2011-12 which is 16.4 per cent higher  than the budget estimates for 2010-11.
  • The capital receipts (net) for 2011-12 have been estimated at Rs. 396 billion against the budget estimates of Rs. 325 billion in 2010-11 indicating an increase of 11 per cent.
  • The external receipts in 2011-12 are estimated at Rs. 414 billion. This shows an increase of 7.1 per cent over the budget estimates for 2010-11.
  • The size of Public Sector Development Programme (PSDP) for 2011-12 is Rs. 730 billion. While for Other Development Expenditure an amount of Rs. 97 billion has been allocated. The PSDP shows an increase of 58 per cent over the revised estimates of 2010-11.
  • The provinces have been allocated an amount of Rs. 430 billion for budget estimates 2011-12 in their PSDP as against Rs. 373 billion in 2010-11.
  • The government in the budget has announced Reduction in the rate of Sales Tax from 17% to 16%.
  • Reducing overall the scope of federal excise duty and completely eliminated – special excise duty to reduce the burden of multiple  taxation.
  • It has announced Enhancing the sales tax revenues by rationalizing exemption regime with the objective to minimize additional burden on the lower segments of the society and Distributing the burden of extra taxation measures on exempted sectors of the economy.
  • It has also withdrawal of special excise duty to reduce the quantum of taxation on all items including those used by the middle and lower middle class of population and proposed to enforce through amendment in Federal Excise Act, 2005 and withdrawal of SRO 655(I)/2007, dated 29.06.2007, effective from the 1st July, 2011.
  • It has enhanced tax incidence on cigarettes in line with international practices.
  • Withdrawal of special excise duty to reduce the quantum of taxation on all items including those used by the middle and lower middle class of population.
  • Enforced through amendment in Federal Excise Act, 2005 and withdrawal of SRO 655(I)/2007, dated 29.06.2007, effective from the 1st July, 2011.
  • Review of federal excise duty regime by reducing the number of goods liable to federal excise.
  • Enforced through amendment in Table-I of First Schedule to the Federal Excise Act, 2005, effective from the 1st July, 2011.
  • Reduction in the quantum of excise duty on cement and withdrawal of excise duty on white cement is basically aimed at encouraging construction activity which will result in adequate increase in employment opportunities.
  • Enforced through amendment in Table-I of First Schedule to the Federal Excise Act, 2005, effective from the 1st July, 2011.
  • Reduction in the rate of federal excise duty leviable on aerated beverages from 12% to 6% to provide a level playing around vis-…-vis its substitute like fruit juices, etc.
  • Enforced through amendment in Table-I of First Schedule to the Federal Excise Act, 2005, effective from the 1st July, 2011.
  • Federal excise duty levied on services provided by property developers or promoters to reduce the level of taxation which will in turn reduce the quantum of taxation on housing sector already subject to levy of Capital Value Tax.
  • Enforced through amendment in Table-II of First Schedule to the Federal Excise act, 2005, effective from the 1st July, 2011.
  • Exemption on local supply of reclaimed lead to recognized manufacturers of lead batteries has been proposed to check misuse of the facility whereby taxes are charged by the suppliers of reclaimed lead but is not deposited into the exchequer – APP