K O H AT U N I V E R S I T Y O F S C I E N C E & TE C H N O L O G Y

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International Business

Budget Review 2015-2016

Mr. Ammad Ahmad

IMS

Dr: Summer Abbas

16th June , 2015

Budget of 2015-2016 was presented on Friday (5 th June, 2015). Budget was presented
by the Finance Minister Ishaq Dar. According to the Finance Minister, the budget for
2015-2016 would prove very efficient for the development of Pakistan. The total
volume of the budget presented showed a volume of 4.313 trillion. This budget is 9.1
% higher than the running fiscal year 2014-2015. He said that Growth Rate GDP
target is set as 5.5 percent for the upcoming Financial Year 2015-16, this target is
higher than the running FY target which was 4.2 percent. The budget mainly
emphasized on the ability and development of the nation.
Budget has been divided in such a way that to some areas budget has been properly
allocated but some areas have been overlooked and should have been allocated with
more budget for example the defense budget was increased from 700 billion to 780
billion which is 11 % increase but areas like Sindh from which people are dying from
thirst have not been given that much concentration though there was budget
announced for projects like Dams through which those people could have been
facilitated but the dams were not built in those areas so those people have been left
out of focus.
The strategy of the budget for 2015-2016 was as follows:

Reduction of fiscal deficit: Dar says the government will continue to

consolidate gains it made in reducing fiscal deficit. In 2015-16 he is targeting
fiscal deficit at 4.3% of GDP compared to 5% in 2014-15.

Raising Tax Revenues: The minister says that the proposed reduction
in deficit will be achieved through a combination of better tax
collection and tight expenditure controls.

Continued Focus on Energy: Energy is a key government priority, which Dar

says can be judged by the fact that the prime minister is
devoting considerable time to oversee developments in the sector. A
Cabinet Committee on Energy has been constituted which is headed by
the Prime Minister himself.

Keeping in view the current gap in demand-supply of power in the face of

GDP target, the government plans to bring 7,000 MW on stream
besides setting up 3,600 MW LNG-based projects. By December 2016 the
government aims to bring 10,600 MW in the system. Beyond December
2017, other projects such as Dasu, DiamerBhashah, Karachi Civil
Nuclear Energy and many other projects will also be completed.
o
Exports Promotion: The government announces additional measures to
incentivize exports and taking other measures to ease the cost of doing
business and improving the overall regulatory regime to facilitate exporters.

Investment to GDP Ratio: The investment-to-GDP ratio, which was registered

at 12.4% during 2012-2013, improved to 13.4% during 2013-14 and is
provisionally estimated at 13.5% for the current fiscal year. The combined effect
of increased public sector investments has also played a role in reversing the
declining trend. Government projects this ratio to rise to 16.5% during 2015-16.

Public debt Management: Debt Management has received special attention in

our overall efforts for fiscal management. The fiscal consolidation we have

achieved has paved the way for a reduction in public debt, which fell from 63.9%
in 2012-13 to a now projected level of 62.9% at the close of current fiscal year. In
the next three years, Debt-to-GDP ratio will be brought down to less than 60% in
accordance with the provisions of the Fiscal Responsibility and Debt Limitation
(FRDL) Act, 2005.

Exports fall in current year

Dar said in the first 10 months of the ongoing fiscal year, exports fell 3.2% from
$20.89 bn despite volume being higher. The budget has created good opportunity for
improvement and the level of export and to give nation products and services
international exposure.

Salaries and pensions

The government on Friday proposed to raise 7.5% ad-hoc relief allowance on running
basic pay for all federal government employees with effect from July 01, 2015. Adhoc increases of 2011 and 2012 would also be merged in the pay scales, Finance
Minister Ishaq Dar told parliament in his budget speech. He said medical allowances
of all government employees and pensioners were being enhanced by 25%. One
premature increment will be allowed to employees of Grade 5. He said a uniform PhD
allowance of Rs 10,000 per month would be allowed to PhD/DSc degree holders
working under federal government. The rates of special pay to senior private
secretaries, private secretaries and assistant private secretaries were being increased
by 100%.

KSE rises
The Karachi Stock Exchange rose 70% to 34,000 levels from Jun 2013, says Dar. The
Karachi stock exchange have been performing outstandingly well from the past few
year it has won international award recently for being the most organized and well
settled stock exchange in the world. The performance of the stock exchange because
of this budget has many chances to grow.

Fiscal deficit improvement

Dar says the improvement in fiscal deficit is the result of improved tax collection that
resulted in higher revenue in addition to disciplined expenditure. He says tax
collection increased 3 per cent in the past 11 months.

BISP
Dar says funds allocated to the Benazir Income Support Programmed have increased
to $102 billion for the upcoming year. He says 5 million families will be covered
under the BISP. The fund even though have been increased for BISP which represent
the gourmet for the poor but the gourmet concern will only proved worthy enough

when the truly deserving people that there amount of share from BISP and no
corruption for fraud is done in it.

Tax-to-GDP
The finance minister says tax collection target as a percentage of GDP to be increased
to 13.5pc by the end of fiscal year 2015-16 the taxes though have increased but they
have a negative and positive both impact on the economy on the country.

Budgeted sector growth 2015-16

Dar says growth rate for agriculture sector in the upcoming fiscal year has been
projected at 3.9pc, while manufacturing sector growth has been budgeted at 6.1pc and
services sector growth at 5.7%.

Scholarships for rural students

The government has allocated Rs125mn for scholarships to rural students for 201516. The scholarship for rural areas holds utmost important because of the fight against
the terrorism in rural areas. People go have migrated from rural areas to urban areas
have left there home, there business, there jobs in rural areas and they are in serious
need and economic welfare. Since education and one of the three foundations
identified by the economist around the world for the development of the country and
this scholarship well help a lot in strengthen the educational foundation of the
countrys development.

WAPDA
Dar says Rs112.28bn have been allocated for the Water and Power Development
Authority for fiscal year 2015-16. Pakistan has been facing energy crises since late
1980 and electricity is one of the major energy crises that the country is facing the budget
that has been announced for wapda that not represents the true picture because of the
corruption done in this sector. Budgets resource 2015-2016 also shows that the
significant amount of budget have been allocated for this sector but the development in
this sector is slowing down .

Defence expenditure 2015-16

Dar says Rs781bn have been allocated for expenditure on defense, with Rs39.415bn
budgeted expenditure on civil armed forces for the next fiscal year.

Railways budget 2015-16

A total of Rs78bn has been budgeted for Pakistan Railways, of which Rs41bn has
been allocated for development programmers and Rs37bn for employees.

Electricity and power projects

For 2015-16, Rs141.42bn has been allocated for electricity and power projects,
announces Ishaq Dar.

Loans for solar tube wells

Dar says loans will be given out for solar-powered tubewells on low markups, and
will significantly reduce costs for farmers who have to run tubewells on dieselpowered generators.

Funds for HEC 2015-16

Dar says Rs20.5bn has been allocated to 143 projects of the Higher Education
Commission (HEC) for fiscal year 2015-16.

Minimum wage increased

Dar announced that minimum wage has been increased for Rs12,000 per month to
Rs13,000.

Tax measures for 2015-16

There is an emphasis on improving tax collection systems in order to increase tax
revenue, Dar said. Gross revenue receipts of the federal government for 2015-2016
are estimated at Rs4.31tr, while provincial governments share of tax revenue is to be
Rs1.849tr.
A reduction in taxes from 5pc to 2pc has been proposed for small salaried taxpayers
with taxable income of Rs400,000-500,000.
The capital gains tax rate proposed for fiscal year 2015-16 on 1- and 2-year securities
is 15pc and 12.5pc.
Discriminatory tax exemptions in the form of special regulatory orders (SROs) were
slashed by Rs105bn or 1/3rd, despite presence of strong and influential pressure
groups, said the finance minister.

Education budget 2015-16

The government has allocated an overall amount of Rs97.8bn on education affairs
and services for fiscal year 2015-16 a 13.22% increase over budgeted expenditure
in 2014-15.
However, last years (2014-15) budgeted expenditure was revised up from Rs86.4bn
to Rs94bn, which means that in the latest budget the increase in funds under the
education affairs and services is in effect only about Rs3.8bn.
Ishaq Dar, in his budget speech, said education expenditure as a percentage of GDP is
currently 1.67pc, which the government wants to improve to 4pc by the end of its
tenure (2017-18).Dawn