Saeed Offering Another Post Budget Socio-economic Agenda for 2010-2011

In the wake of recently proposed Federal Budget 2010-2011, Saeed khan Abbasi is going to propose post-budget socio-economic development agenda and suggestions to federal government of Pakistan.

Pakistan's Federal Budget 2010-2011

http://www.dawn.com/wps/wcm/connect/dawn-content-library/dawn/news/pakistan/06-people-at-the-heart-and-center-of-budget-rs-02  


SLAMABAD: The government announced on Saturday an overall consolidated budget of Rs3.259 trillion for 2010-11, including additional taxation measures of Rs133 billion, and offered some relief to the poor and salaried people.
Pledging to increase tax revenue, pursue a tight fiscal policy, check inflation and protect economic recovery and poorer sections, Dr Abdul Hafeez Sheikh, the Minister for Finance and Revenue, in his budget speech in the National Assembly described the tax measures as “fair, just and equitable guided by the principle of ‘ability to pay’ set in the context of a war economy”.
The budget outlay of Rs3.259 trillion (including provinces) is about 11 per cent higher than the Rs2.897 trillion budget for the outgoing financial year.
The budget sets a tax revenue target of Rs1.779 trillion, compared with the last year’s Rs1.494 trillion -- an increase of about 19 per cent. The Federal Board of Revenue has been given a collection target of Rs1.667 trillion which is 20 per cent higher than the current year’s target of Rs1.380 trillion.
Dr Hafeez said the budget aimed at seven major objectives -- protecting economic recovery, controlling inflation, achieving self-reliance through domestic resource mobilisation, targeted social protection regime for poverty reduction, controlling losses of public sector entities, reducing unemployment, improving investment climate and overcoming energy shortages.
The FBR’s revenue target of Rs1.667 trillion includes direct taxes of Rs657.7 billion and indirect taxes of Rs1.121 trillion. Direct taxes are about 22 per cent higher than the current year’s revised estimate of Rs540.4 billion. Indirect taxes are about 19 per cent higher than the current year’s Rs943 billion. Indirect taxes include Rs675 billion sales tax, Rs153 billion federal excise and Rs181 billion customs duty.
Against a total outlay of Rs3.259 trillion, the new budget forecasts total revenue at Rs2.574 trillion, leaving a fiscal deficit of Rs685 billion or four per cent of the gross domestic product (GDP). It will be met through net external financing of Rs186 billion, net non-bank borrowing of Rs332.6 billion and banking borrowing of Rs166.5 billion. An amount of Rs1.033 trillion will be transferred to the provinces under the seventh NFC award, compared to Rs655 billion during the current year, showing a substantial increase of about 58 per cent.
The next year’s current expenditure has been estimated at Rs1.998 trillion against the current year’s original estimate of Rs1.699 trillion, up about 17.6 per cent. This includes expected defence expenditure of Rs442 billion which is 17 per cent higher than the current year’s revised estimate of Rs378 billion.
Allocations for the Public Sector Development Programme have been increased by 2.6 per cent to Rs663 billion. The current year’s original allocation was Rs646 billion.
An amount of Rs873 billion has been set aside for debt servicing, compared to the current year’s revised estimate of Rs815 billion, showing an increase of about seven per cent. The servicing of foreign debt will consume Rs251 billion against Rs219 billion of the current year. The servicing of domestic debt has been estimated at about Rs622 billion against the current year’s revised estimate of Rs596 billion.
The finance minister said the total federal budgetary outlay had been estimated at Rs2.229 trillion -- 13.1 per cent of the GDP.
As an austerity measure, the non-salary current expenditure will stand frozen at the current year’s level. The government will be required to get an approval from the cabinet for any supplementary grant beyond 10 per cent of the approved budget.
The government has estimated total federal resources at Rs2.764 billion against the current year’s estimate of Rs2.462 trillion. Net revenue receipts have been estimated at Rs1.377 trillion. The current year’s estimate was of Rs1.352 trillion.
Dr Hafeez avoided discussing the much talked about value added tax (VAT), but said the general sales tax system would be reformed by October 1 in consultation with the provinces and other stakeholders. In the meantime, he said, GST rates would be raised by one percentage point to be replaced with the proposed single lower rate of 15 per cent on October 1.
The minister, however, said that operating under the international framework, the government would have to honour sovereign commitments to protect international credibility while aiming to be self-reliant and less dependant on foreign loans.
He praised the government for presenting the first budget after the consensus NFC award, reflecting the will of the people to transfer more resources to the provincial governments to steer development in education, health, law and order and municipal services.
Dr Hafeez said the reformed GST would not apply to health, education and food items consumed by the poor or to those whose annual turnover was less than Rs7.5 million. The proposed system would broaden the tax base instead of burdening the existing taxpayers.
A pilot scheme of Rs5 billion will be launched in 120 union councils in 12 least-developed districts and others which have suffered the most because of the security situation. Under the scheme, a guaranteed daily wage equal to minimum wage will be provided to unskilled workers for 100 days a year. The amount will be transferred from frozen non-salary current expenditure to benefit 200,000 households next year.
Dr Hafeez said that federal government employees would be allowed an ad hoc increase of 50 per cent in their basic salary without giving additional increase to those who had already availed it. This increase will not be allowed to cabinet members whose salaries would be cut by 10 per cent.
The government has allocated Rs131 billion for hydel, thermal and nuclear energy projects to augment generation and improve transmission. Diamer-Bhasha dam will be launched as a mega project during the fiscal year.
Dr Hafeez said that Rs50 billion would be spent under the Benazir Income Support Programme to provide targeted cash grants to the poorest of the poor. At the same time, a comprehensive exist strategy scheme based on international best practices will be introduced like Waseela-i-Haq to provide self-employment through small business.
Taxation proposals
Following are the highlights of taxation measures announced in the budget for fiscal 2010-11.
• The system of General Sales Tax will be reformed to replace multiple tax rates with a single lower rate of 15pc.
• The reformed GST will not apply to health, education and food items consumed by the poor.
• The GST will not apply to turnover of less than Rs7.5 million per year whereas the current threshold is Rs5 million a year. The system will be automated, reducing the possibility of corruption and refund delays.
• It will broaden the tax base, instead of burdening the taxpayers.
• The GST reform is expected to be in place by Oct 1 after consultations with the provinces and other stakeholders.
• As an interim measure, the GST rates are proposed to be raised by 1 percentage point. Once the reformed GST is in place, the proposed single lower rate of 15pc will become effective.
• One per cent Special Excise Duty levied on most items of imports and manufactured locally has been abolished.
• Federal Excise Duty incidence on all categories of cigarettes has been enhanced and an FED levy of Rs1 per filtered cigarette has been proposed.
• The rate of FED on natural gas has been increased to Rs10 per mmbtu, while a levy of FED at 10pc ad valorem on air-conditioners and deep freezers is proposed.
• Income tax exemption limit for the salaried class has been enhanced from Rs200,000 to Rs300,000, benefiting approximately 430,000 taxpayers.
• Exemption limit for non-salaried income is also proposed to be raised from Rs100,000 to Rs300,000 per year, benefiting approximately 350,000 taxpayers.
• Rate of income tax collected along with monthly electricity bill from industrial and commercial consumers is proposed to be reduced from 10pc to 5pc, providing a relief of Rs4.5 billion to 66,000 taxpayers.
• Under the Prime Minister’s Fiscal Relief Package for Khyber Pakhtunkhwa, Fata and Provincially Administered Tribal Areas, an additional tax relief of about Rs2 billion has been provided to benefit 300,000 taxpayers.
• Instead of monthly withholding tax statements, only quarterly withholding statement will be required to be e-filed.
• Taxation on interest free/concessionary interest loans provided by an employer is proposed to be waived.
• Rate of final withholding tax on non-specified payments to non-residents is to be reduced from 30pc to 20pc.
• Tax-free payments to non-residents on profits on debt will be allowed 10pc tax credit for balancing, modernisation and replacement to all companies.
• A 5pc tax credit is proposed to be allowed to a company in the tax year of its enlistment.
• 10pc withholding tax has been announced as final charge on profit on debt (in debt instruments) and also for the investment in government securities (treasury bills and PIBs) to allow hassle-free compliance by non-residents.
• It has been proposed that income tax be raised for the association of persons (AOP) at a flat rate of 25pc against the existing progressive rate averaging up to 20pc.—APP

IMF Says the global economic crisis will continue

http://www.thenews.com.pk/daily_detail.asp?id=198128

Sunday, September 13, 2009

BERLIN: The global economic crisis will continue and countries must do more to adopt financial market regulations, International Monetary Fund (IMF) Managing Director Dominique Strauss-Kahn told a German magazine on Saturday.

“The global economic crisis will continue, even if Germany and France had some good figures in the second quarter,” Strauss-Kahn was quoted as saying in an advance copy of an article to be published in Der Spiegel on Sunday. Strauss-Kahn said he wanted to see more action from nations to curb bankers’ pay and tighten capital requirements in the banking sector. “It is right to say that not enough has happened. I hope the Group of 20 meeting in Pittsburgh will bring new momentum,” he said. Leaders of the G20 meet later this month to try to agree on measures to help stop a repeat of the financial crisis.

Strauss-Kahn said the lesson of the financial crisis was that the market economy needed rules to function. “Without new rules, there will be a return to the old behaviour,” he said. Governments needed to develop ‘exit strategies’ from the stimulus packages introduced to boost economies, said Strauss-Kahn, adding, however, that it was dangerous to think the crisis was already over.

“We need such “exit strategies”. We are working on them, but I would disagree with any demand to think about implementing them now,” he said. Strauss-Kahn said a combination of higher interest rates and ending direct intervention of central banks would be needed.

IMF had sufficient resources for now but that if the body were to take on additional responsibilities to coordinate a financial safety net for countries in financial difficulty, it would need a further financial boost.

THIS SHOULD BE NOTED THAT THE ABOVE MENTIONED SITUATION ONCE AGAIN REQUIIRES PLANS LIKE MY OFFERED "SEMFO Global Plan"

No Direct US Aid to Pakistani Government

US says no direct money to PPP government

Sunday, September 13, 2009

Aid to go to specific projects

By Shaheen Sehbai

WASHINGTON: The United States made it absolutely clear on Friday, days before President Asif Ali Zardari is to meet President Obama and British Prime Minister Gordon Brown in New York, that bulk of the money it will provide under the Kerry-Lugar Bill will not go directly to the PPP government but to specific projects and purposes for which it is intended.

This statement was made at a State Department briefing by Jacob J Lew, US Deputy Secretary for Management and Resources, who returned to Washington on Friday morning from a trip to Iraq, India, Pakistan and Afghanistan.Lew spoke specifically about the “anxiousness” in Pakistan that money should flow through the government but he almost threw cold water on these hopes.

It was the latest indication that the US government was still grappling with the issue of a huge trust deficit and would not feel comfortable with aid money getting into the hands of the PPP government despite efforts in Washington to repair and whitewash the image of PPP leaders.

Jacob Lew told the briefing: “On the question of aid, there, as any of you who have seen the press releases put out would know, they’re very much anxious to have as much of the assistance as possible flow directly to the Pakistani government.

“We made clear that we’re looking at a variety of approaches, that we certainly intend to be supportive of Pakistani ministries where the programmes are ready to accept that support effectively, but that we also needed to look at the provincial level and to work with the traditional NGO community, and it wouldn’t be a one-size-fits-all approach.”

In a blunt statement, Lew said: “The key to us was that for each of the undertakings that we agreed upon, and they had to be things that were mutually attractive from the point of view of the Pakistani government and the US government, we had to choose a method of funding that was most likely to produce results efficiently and effectively, and that the money needed to go to the purposes for which it was intended.”

The official made it obvious that instead of providing aid to the government to spend wherever it liked, they would look at the ministry projects which are ready on a case to case basis and also provide direct aid to provinces and NGOs. That is what he meant by saying that “it would not be a one-size-fits-all approach.”

The News has learnt that the US is talking directly to provincial governments and other organisations working inside Pakistan to come up with specific projects.A top level delegation of the MQM, headed by Governor of Sindh Ishratul Ebad and Nazim Karachi Syed Mustafa Kamal, arrived in Washington on Saturday to talk directly to the State Department and other government agencies for projects in Karachi and Sindh. The visit apparently fits into the US policy of direct contacts for disbursing aid.

The visit of MQM leaders has been specially authorised by the MQM secretariat in London and sources in London told The News that the channels of the Pakistan government, including the embassy, had not been used to arrange these meetings. The Pakistan embassy comments on the possibility that the embassy may have been ignored for these direct MQM contacts with US officials were not immediately available.

Jacob Lew also spoke about his visit to Pakistan in general. “We focused on a number of issues. I think, as you all know, with the Kerry-Lugar programme being worked through now in Congress and the budget process working through, in terms of the appropriations, we’re ready to take the next step and put a detailed programme out there that really goes and specifies what forms of assistance will be provided.

“In the conversations we had with the Pakistani officials ñ we met with Prime Minister Gilani, we met with Finance Minister Tarin ñ they are very much focused on not just the amount of assistance in Kerry-Lugar, but the fact that it’s a multi-year commitment. They see it as an extremely important statement from the United States that weíre thinking in multi-year terms and thinking about a programme that has integrity over a period of time.

“We had detailed discussions following up on the secretary’s interest and the issue that Ambassador Holbrooke raised when he was there recently, of an energy relationship with Pakistan, how we could work together using the assistance that we’re providing to help Pakistan address what is one of its core economic issues. We raised also the fact that itís not just a question of assistance on projects, but that Pakistan had to take some very hard steps to reform its electric utility sector in order for there to be the real opportunity for sustainable progress. I was pleased that both in the conversation with the prime minister and with the finance minister, they heard that message and they responded very positively.

The US secretary also talked about his visit to the NWFP and said there was a “great deal of interest there, much as we heard at the federal level, in having US assistance provide a basis for partnership at ñ for provincial development. ìThere also seemed to be a fair amount of capacity at the provincial level. It was ñ we were impressed that the chief minister had a very good sense of his budget, his needs, and his limitations. And you had the sense that there was the capacity to partner quite effectively.”

Lew said he also met NGO and international organisation officials on the ground and asked a lot of questions about what they saw as being the next steps.“And thereís obviously two things that theyíre focusing on. One is kind of getting the first round of IDPs back home and safe for the winter. But they also are aware that with ongoing military activities, there could be new IDPs. So theyíre kind of working on coming to some kind of closure on the current experience while knowing that there may be more ahead.

“They were all focusing on the need for ongoing food and clothing support. It was not clear, frankly, the scope of damage to be repaired. Apart from the reports we got about schools and police stations, one didnít have the sense that there had been the ability to do the detailed assessment. The World Bank and the Asian Development Bank are supposed to complete an assessment even this week. So we will work together as we go through that.

“I guess the conclusion that I drew from the days we spent were that the government of Pakistan and the people of Pakistan have really done an extraordinary job in dealing with millions of displaced people in a way that, from the brief time we spent there, seemed to have left considerable feeling of ñ that people had been taken care of in very difficult circumstances. And it doesnít mean that there arenít problems. There certainly are still problems. But it ñ the notion of people taking tens of people into their homes, their small homes, on very modest incomes, it just ñ people-to-people ñ gave you great respect for the outpouring of help that came from just regular people,” he said.

World Bank okays $300m for Pakistan’s projects

Saturday, September 12, 2009

KARACHI: The World Bank has approved two projects worth $300 million to help Pakistan strengthen its social safety nets and improve higher education.

While fighting a Taliban insurgency in the northwest, Pakistan is struggling with a weak economy and over a third of its people live in poverty.

The World Bank said $200 million was being allocated for the Pakistan Social Safety Nets Development Policy Credit to establish an effective framework.

“Pakistani households are highly vulnerable to income shocks, and existing social assistance programmes cover only a very small fraction of the poor,” Yusupha Crookes, the country director for Pakistan, said in a statement received on Friday.

“This project will help build a robust safety net system that provides chronic and transient poor people with both basic income support and access to opportunities that will help lift them out of poverty.”

The World Bank allocated $100 million to support the government’s efforts to improve higher education.
(http://www.thenews.com.pk/daily_detail.asp?id=197909)

US Kerry Lugar Bill for Pakistan

Kerry Lugar Bill for Pakistan:

http://www.dawn.com/wps/wcm/connect/dawn-content-library/dawn/news/pakistan/13+kerry-lugar+bill+to+be+approved+by+september-za-04

Dawn.com

‘Kerry-Lugar Bill to be approved by September’
Friday, 28 Aug, 2009 | 09:05 PM PST |

The US also assured approval of the bill for reconstruction zones for FATA and the tribal areas.

ISLAMABAD: Former US vice Secretary of State for South Asia, and Economic and Developmental Aid for Pakistan, Rabin Raphael has announced that the Kerry-Lugar Bill would be approved by the American Senate by September.

Talking to media on Friday after round table talks in the American Embassy, he said that his appointment for managing the affairs in Pakistan pertained to oversee a coordinated disbursement of aid supplied to Pakistan under USAID and Kerry-Lugar schemes.

He said the reason for disbursement of non-military aid to Pakistan was to help Pakistan attain economic and developmental prosperity, help restructure the much damaged energy sector, cater to health, education, construction of highways and provision of basic facilities to masses.

He strongly refuted the notion of appointing an American inspector general to monitor the execution of American aid disbursement; however, he stressed for increased transparency, sincerity and honesty coupled with sheer objectivity in utilizing this aid; which was also the prime reason for his current visit, and stressed for enhancing the accountability process.

Answering a question about the 5-year $1.5 billion annual, Kerry-Lugar aid for Pakistan, he assured that it would be approved by the American Senate in September.

Also assuring the approval of reconstruction zones’ bill for FATA and tribal areas, he said that these bills would also be approved, and assured minimizing any non-developmental expenditure in these projects.

He expressed his deep affirmation that he would strive for better relations with Pakistan, and see to the full compensation for Pakistan’s daring struggle in the war against terrorism.—Online


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http://www.geo.tv/2-6-2009/34551.htm

GEO World

Kerry Lugar bill to be tabled in US Senate soon
Updated at: 2029 PST, Friday, February 06, 2009

WASHINGTON: A legislation, which would triple non-military aid to Pakistan for the next one decade and would impose greater accountability on security assistance will be reintroduced in the US Senate in coming weeks, powerful Senator and its co-sponsor John Kerry has said.

"We would be introducing it (the legislation) somewhere in the next weeks," Senator John Kerry, Chairman of the Senate Foreign Relations Committee, told PTI.

The legislation called the Kerry-Lugar bill, is an updated and revised version of the Biden-Lugar Bill, which lapsed in the previous Congress and will triple military aid to Pakistan to USD 1.5 billion.

Senator Richard Lugar, the Ranking Republican member of the committee has been its co-sponsor on both the occasions.

The previous version of the bill was sponsored by Lugar and Joseph Biden, who is now the US Vice President. When the bill was introduced in the Senate in July 2008, Biden was the Chairman of the Senate Foreign Relations Committee.

Kerry said the new legislation is an improved version of the Biden-Lugar bill. "We are looking at a number of things," he said, without specifying it.

"We are looking at issues, we are looking at delivery of Government services and (want to) make certain that we are leveraging the right kind of policies and to the right amount of money," Kerry said.
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Pakistan's Foreign Loans Update 2008-09

IMF and other countries have so far provided a sum of USD:8.8 billion as loan to Pakistan during the fiscal year 2008-09, a report disclosed here.

According to the report, the International Monetary Fund (IMF) still stands as the leading loan/financial assistance providing organization for Pakistan among other donor countries and institutions which has given a sum of USD:3.948 bn for the said period in compliance with a total loan facility agreement of USD:7.6 bn.

Besides the IMF, following organizations have provided the loan facilities to Pakistan during the year 2008-09 :

Various International Financial Institutions (IFIs) : USD:4861.1 million

Asian Development Bank : USD: 1.5 billion

World Bank : USD: 1.17 billion

Islamic Development : USD: 678.44 million

World Bank's board of directors will meet on 10th of September in their head quarters Washington, to sanction a loan amount of USD: 25 milion for Pakistan.

According to the Pakistani ministry of Economic Affairs this loan amount will be consumed for their two projects i.e. Benazir Income Support Program ( USD: 15 millon) and Higher Education Program (USD: 10 million). It is expected that the said loan grant will be provided to Pakistan by the end of September 2009 at the discounted interest rate of 1.5%

Pakistan's Foreign Assistance Updates

IMF and Other Donors Provides USD:8.8 bn to Pakistan:

During the fiscal year 2008-09 Pakistan has received a total of USD:8.8 billion in terms of loans and financiasl assistance.

According to a report

Federal Budget 2009-10: Review, Analysis & SEMFO Plan

THE FEDERAL GOVERNMENT OF PAKISTAN HAS PRESENTED THE FEDERAL BUDGET 2009-10 ON 13th JUNE, 2009 IN NATIONAL ASSEMBLY.AS I HAVE ALREADY OFFERED THE GOVERNMENT IN NOVEMBER 2008 AND LATER ON TO AVAIL MY PROPOSED SEMFO GLOBAL PLAN THROUGH WHICH NOT ONLY THE BUDGET DEFICIT CAN BE ELIMINATED BUT PAKISTAN CAN RE-GAIN A SOUND SOCIO-ECONOMIC STABILITY.

UNFORTUNATELY NOBODY FROM THE FEDERAL GOVERNMENT TOOK MY OFFER SERIOUSLY BUT TO COMMENT AND DEBATE ON THIS CURRENT BUDGET IS MY RIGHT TOO.

FOR MORE ANALYSIS AND COMMENTS FROM MY END PLEASE WAIT.



http://www.dawn.com/wps/wcm/connect/dawn-content-library/dawn/news/business/07-federal-budget-2009-10-announced-ha-03

Government announces Rs2.89tn federal budget

Saturday, 13 Jun, 2009 | 04:55 PM PST |

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ISLAMABAD: The government of Pakistan, on Saturday, announced a federal budget of Rs. 2.89 trillion for the fiscal year 2009-10.
Addressing the National Assembly, Minister of State for Finance Hina Rabbani Khar said that Rs. 50 million will be allocated for the internally displaced persons of Swat.
The minister added that the salaries of the armed forces personnel will be increased by July 1, 2009.
Government of Pakistan has projected a 23.5 per cent increase in total expenditure to 2.5 trillion rupees, with development spending increased 17.45 per cent to 646 billion rupees in its 2009/10 (June-July) budget.
Defence spending has been increased by 15.3 per cent to 342.9 billion rupees, compared with 296.07 billion rupees allocated in the fiscal year of 2008/09, according to the ‘Budget at a Glance’ document.
Pakistan is targetting total tax revenue at 1,513.3 billion rupees, compared with 1,250 billion rupees targeted in the 2008/09 fiscal year.
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http://www.geo.tv/important_events/2009/budget2009/pages/budget_speechtext.asp



Text of Budget Speech


BUDGET SPEECH FOR FISCAL YEAR 2009-10

I rise to present the Budget for the Fiscal Year 2009-10.
Madam Speaker!
I have the honor to be the first woman in the history of Pakistan to present a budget before the august House. It is indeed the privilege of the Pakistan People’s Party to have given the country its first woman Prime Minister, Mohtarma Benazir Bhutto Shaheed. The People’s Party also has the singular honour of nominating the first woman Speaker of the National Assembly in Pakistan. These are important milestones in our quest for women empowerment and gender equality.

Madam Speaker!
The efforts of the government to manage the economic and financial
affairs of the country need to be viewed in the context of the prevailing state of security in the country. Pakistan today is not simply a front line state against the war on terror; in fact we are today fighting insurgency and terrorism within the country. The war on terror has already cost us over $ 35 billion since 2001-02 in economic costs. We now face the prospect of incurring huge costs on account of counter-insurgency expenditures. We have to meet the maintenance and rehabilitation costs of almost 2.5 million brothers, sisters and children displaced as a result of the insurgency. The International community has pledged its support
for this human cause. However, your government is fully conscious of its
responsibility and has allocated Rs. 50 billion, I repeat Rs. 50 billion, in the budget 2009-10 for the relief, rehabilitation, reconstruction and security of the internally displaced persons. I also take this opportunity to salute the efforts of the people of Pakistan in contributing generously to the relief effort and demonstrating that we are all one and stand united in the face of terrorism. I may also express the gratitude of the government to all those generous households who have opened their homes and hearts to the displaced people in the true spirit of Islam.

Madam Speaker!
Our armed forces are in the forefront of the war against terror and in
fighting insurgency in the country. Our western border is most volatile and faces the brunt of insurgency. The President of Pakistan has been pleased to announce an increase in the allowances of the personnel of armed forces deployed in the western theatre, equal to one month’s basic pay with effect from 1st July, 2009. He has further announced that this benefit be extended to the entire armed forces from 1st January, 2010. The government is in complete support of the President’s
decision. Today, the nation stands behind our valiant armed forces. No amount of compensation is adequate enough to cover the risk to one’s life. I hope this small gesture on the part of the government helps in building the morale of our jawans and officers in the war against terror.

Madam Speaker!
While presenting last year’s budget the government had given a detailed account of the economy as was inherited by us from the previous government. We had highlighted that our economy could not sustain a high level of artificial growth. We had presented that sustainable growth was only possible through investments in the real sectors of the economy that is, agriculture and industry. These, unfortunately, were neglected in the past. Instead growth was fuelled
through high consumption and extensive luxury imports and those too financed through external borrowings. No wonder the fiscal deficit mounted to 7.6% of GDP, the current account deficit became unmanageable, there was a run on foreign exchange reserves and the stock market crashed. More importantly, inflation started to rise steeply and peaked at 25% in October 2008. In the face of these developments the economy suffered but the poor of Pakistan suffered the most.

Madam Speaker!
Surely this state of affairs was intolerable! The government reacted to this by formulating a Nine Point Agenda of economic and social recovery. The first pillar of our agenda was to stabilize the economy. As a result of our efforts, the fiscal deficit would decrease by 3.3 percentage points in 2008/09.. The current account deficit was brought down from a high of 8.5% in 07-08 to 5.3% of GDP in 2008-09. Madam Speaker! It is now universally acknowledged that reducing inflation is the best recipe for reducing poverty. Through the efforts of your government, inflation declined from 25% to 14.4% in May, 2009. Inshallah, it is expected to be in single digit by the end of the next fiscal.

Madam Speaker!
While stabilization of the economy was necessary it was achieved at a cost. A tight monetary policy coupled with strict public expenditure management adversely impacted access to capital in the private sector and a reduction in the public sector development programme. The biggest casualty of stabilization was economic growth which declined to around 2%. The contraction in the economy adversely affected growth in manufacturing. However, our pricing policy for Agriculture sector helped this sector in recording a growth of 4.7% in 08-09 as compared to 1.1% in the previous year. The government was fully conscious that
stabilization and a contracting economy would impact the poor adversely. That is why it triggered the 2nd pillar of its nine point agenda that is, social protection. Through the Benazir Income Support Program (BISP) we targeted the poorest of the poor through an income grant of Rs. 1000 per month, allocating Rs. 34 billion for the programme. In the next financial year we propose to allocate Rs. 70 billion for BISP to bring over 5 million households in the ambit of the programme.

Madam Speaker!
Having attained a certain level of stabilization it is now time to move
towards growth by targeting the real sector of the economy that is Agriculture and Industry. Beginning with this year’s budget we propose to announce policies and undertake budgetary and legislative measures which would put our real sectors of the economy onto the path of greater productivity. This paradigm shift would help the country in attaining sustainable growth which would help in the reduction of
poverty. Madam Speaker, we propose to pursue growth with equity.

Madam Speaker,
We propose to pursue stabilization with a human face. This government
believes that the focus of government’s policy and investment program has to be the well being of the people, especially the poor segments of our society.

Madam Speaker!
The government is managing the affairs of our country within a strategic
policy framework expressed in its Nine Point Agenda of economic and social recovery. I take this opportunity to highlight these nine pillars:
I. Macroeconomic Stability and Real Sector Growth.
II. Protecting the Poor and the Vulnerable.
III. Increasing Productivity and Value Addition in Agriculture.
IV. Making Industry Internationally Competitive.
V. Capital and Finance for Development.
VI. Removing Infrastructure Bottlenecks through Public Private
Partnerships.
VII. Integrated Energy Development Programme.
VIII. Human Capital Development for the 21st Century.
IX. Governance for a Just and Fair System.

The budget 2009-10 has been prepared to obtain the twin purposes of
stabilization with a human face and growth with equity. I would wish to clarify as to what stabilization means. Stabilization is essentially an expression which advises households, organizations and governments to live within their means. Surely, this is what we all want. And if additional resources become available we need to use these to obtain the best dividend for our people. As a measure of support towards attaining a reasonable growth target the total expenditure, including Provinces, is estimated at Rs. 2897.4 billion. The total revenue is estimated at Rs. 2174.9 billion. The overall fiscal deficit of Rs. 722.5 billion would be 4.9% of the GDP. This deficit would be met through external financing
of Rs 264.9 billion and domestic financing of Rs. 457.6 billion. Pakistan is likely to receive external resources equivalent to 1.2% of its GDP (Rs. 178 billion) from pledges made in the Donors’ Conference at Tokyo. We further expect resources equivalent to 0.3% of the GDP (Rs. 48 billion) for expenditure on internally displaced persons. In essence the real deficit would be 3.4% of the GDP.

Madam Speaker!
The core budget of the federal government estimates net revenues of Rs
1377.5 billion with a current expenditure of Rs 1699.19 billion. The development expenditure (including Provinces) is estimated at Rs. 783.1 billion against the revised estimates of Rs. 421.9 billion, an increase of 85%. This increase is unprecedented. The Public Sector Development Programme approved by the National Economic Council is pitched at Rs. 626 billion in BE 2009-10 against Rs. 359 billion in RE 2008-09. It is expected that full utilization of the development allocation would strongly assist in revival of growth.

Madam Speaker!
May I offer a note of caution at this stage. Pakistan has one of the lowest tax to GDP ratios in the world. In the outgoing year we were only able to attain tax revenues equivalent to 9% of our GDP. We expect to improve our tax to GDP ratio by 0.6% in the next financial year. Allow me to state that if we as a nation do not imbibe the tax culture, if each citizen capable of paying tax does not do so, Pakistan shall never be able to stand on its own feet. It is, therefore, imperative that each one of us as a citizen of this great country meets his or her tax obligation. While government would be undertaking deep rooted reforms in tax
policy and its administration, success of any initiative would hinge on the support given by the entire nation. We have to broaden our tax base; there is no escape from this reality.

Madam Speaker!
The government made a commitment that it would pursue stabilization
with a human face. Our tax and duty measures in Budget for Fiscal Year 2009/10 would revolve around the following concepts:-
- Provide protection to the poor and vulnerable against the current economic downturn;
- Revive manufacturing and industry, especially export-oriented industry;
- Broaden the tax base instead of overburdening the existing taxpayers; and
- Restrain unnecessary imports to improve the Balance of Payment position.

Madam Speaker!
As a measure to broaden the tax base we had desired that the provinces
bring additional services into the net of sales tax. We had also desired that the provinces impose capital gains tax on immovable property. This would have marked a beginning towards further broadening of the tax base. However, the provinces would much rather wish to discuss these issues in meetings of the National Finance Commission. While we respect the decision of the provinces none-the-less measures would be taken in the Budget 2009/10 to bring additional services into the excise net as well as continue with Capital Value Tax. On reaching agreement with the provinces in the NFC discussions, the Capital Value Tax as well as excise on services would be considered for replacement by provincial taxation on these subjects.

I. MACROECONOMIC STABILITY AND REAL SECTOR GROWTH

Madam Speaker!
The immediate threat to economic stability and the servicing of
international debt obligations were overcome through a homegrown
Macroeconomic Stabilization Programme. The Programme has already ensured adjustment in petroleum prices and significant cuts in expenditures to reduce the budgetary deficit; while keeping a tight monetary policy in place. These measures are paying dividends under precarious global and domestic conditions. Recent trends in most macroeconomic variables also suggest that a disciplined implementation of this Programme has started paying off.

Madam Speaker!
- During the Fiscal Year 2009/10 real GDP is expected to grow by 3.3 percent and by 4 and 4.5 percent during Fiscal Years 2010/11 and 2011/12, respectively.
- This will be contributed by sectoral growth rates of agriculture amounting to 3.8 percent; manufacturing totaling to 1.8 percent; and services contributing 3.9 percent.
- For Fiscal Year 2009/10 the inflation target is 9.5 percent, which will be brought down to 7 and 6 percent during Fiscal Years 2010/11 and 2011/12, respectively.
- A targeted decrease in current expenditure to 15.3 percent of GDP in FY 2009/10 and 14.7 percent of GDP in 2010/11, owing to elimination of unproductive subsidies is planned in order to maintain the fiscal deficit at sustainable levels.
- The Government is going to take all necessary measures to ensure
documentation of the economy and broadening of the tax base in order to shift reliance on domestic resource mobilization.
- Total revenue will grow by 15.7 percent and Federal Board of Revenue collection is projected to grow by 16.8 percent.
- Tax to GDP ratio will be 9.6 percent, with measures, as against 9 percent during Fiscal Year 2008/09.
- Revenue as a percentage of GDP is projected at 14.7 percent in Fiscal Year 2009/10 and will increase to 15.1 percent during Fiscal Year 2010/11.

II. TARGETING THE POOR AND THE VULNERABLE

Madam Speaker!
The previous government pursued a policy of trickle down, expecting that the benefits of growth would automatically reach the poor. The flaw in this strategy was that the rich became richer and the poor became poorer. Our government is tackling the issue of poverty by launching a frontal attack against it. Our efforts at poverty-reduction aim to eliminate poverty.

As a tribute to our leader, Shaheed Mohtarma Benazir Bhutto, who laid
down her life for democracy, the introduction of the government’s flagship programme, named ‘Benazir Income Support Programme’ to provide direct cash transfers to the poor, is proof of its commitment to reach out to the most vulnerable to share their burden and ease their misery as much as possible. Following our Quaid, Shaheed Zulfiqar Ali Bhutto’s words, ‘The Masses Will Rule’.

Madam Speaker!
The conception behind the Benazir Income Support Programme was not
only providing financial assistance to the needy but also to ensure women empowerment and child care. During Fiscal Year 2008/09, Rs 22 billion was distributed to 1.8 million beneficiaries. During fiscal year 2009/10, it is proposed to increase the allocation of BISP to Rs 70 billion. Madam Speaker, this would constitute more than 200 percent increase; I repeat more than 200 percent increase over the last year’s distribution. Five million families would benefit from this increase in the coming financial year. A programme for the Internally Displaced Persons has also been started by Benazir Income Support Programme wherein the
Internally Displaced families are being identified and cash grants are being paid to them on regular basis.

In the short to medium term, the Benazir Income Support Programme will
also serve as a platform for complementary social assistance programmes, the main being health insurance for the poor and the vulnerable. This will cover full hospitalization, pregnancy, daycare treatment, diagnostic tests and accident compensation for earning members of the family to a maximum limit of Rs 25,000/- per family per year. In addition, cash transfer programmes will be complemented to promote household independence via various poverty exit strategies, which can help to upgrade the poor beneficiaries to the level of selfsufficiency by various means including transition to Conditional Cash Transfers; training and employment of one person per household; and provision of workfare through small public works under a social mobilization programme initiatives.

The latter programme is based on the concept of small development schemes for construction of paved streets and water and sanitation facilities at the local level with help of community contribution.

Madam Speaker,
I hold out an assurance that the government is committed to ensuring
complete transparency in the management of BISP. A census would be
completed within three months in 16 districts of Pakistan as a pilot to bench mark incomes. This would be extended to the entire country within the calendar year.

The Benazir Income Support cards would serve as vehicles of transparent management and addressing the needs of the vulnerable.
The government also plans to bring in legislation during the next financial
year for creating a social security protection programme for the haris. It is the firm resolve of the government to mainstream the marginalised haris, provide them with social protection available to other labour in the country and to make them proud citizens of Pakistan.

The government also plans to revamp the Ministry of Social Welfare by
replacing it by a Ministry of Social Protection and Development in order to provide a common platform for safety nets and enhanced institutional capacity for social service delivery.

Peoples’ Works Programme

Madam Speaker!
This programme covers basic areas like provision of electricity, gas, farm
to market roads and water supply. An allocation of Rs 35 billion is proposed in the Fiscal Year 2009/10 for this purpose. This will create sizable employment opportunities and, therefore, will increase the incomes of the less privileged.

Workers Welfare

Madam Speaker!
• For the Fiscal Year 2009/10, an amount of Rs 10.8 billion has been
allocated for different Worker Welfare development schemes in the
housing, health, education and technical education sectors. Quota has been abolished with the result that every worker will now be provided marriage grants irrespective of number of daughters. The rate of marriage grant has been increased from Rs 50,000 to Rs 70,000 per daughter. Construction of 9,469 housing units and flats for industrial workers is also proposed.
• The President of Pakistan has directed to take necessary measures for
empowerment of employees of State Owned Enterprises through their
representation on the respective Boards by transferring 12 percent shares to employees in order to revamp privatization process.

Microfinance

• Microfinance plays a critical role in improving lives of the poor and
particularly women.
• The Government has set the target to increase outreach of the
microfinance services from 2 million to 3 million borrowers in fiscal
09/10.

Housing

Madam Speaker!
Our founder leader Shaheed Zulfiqar Ali Butto’s vision and foresightedness identified four decades ago that housing is the basic necessity and raised the slogan of Roti, Kaprha Aur Makan.
We, being the followers of Shaheed Zulfiqar Ali Bhutto, have taken the
following initiatives to turn the dream of our leader into a reality.
• Affordable housing under a phased programme for the low-income
population through community participation and squatter-settlement
regulation; and
• For facilitation of working journalists, the Ministry of Information &
Broadcasting managed to reserve a good number of residential plots in
Islamabad for them.
• In this budget, tax credit limit on interest paid on loans for construction of a new house or acquisition off a house is proposed to be enhanced from Rs 500,000 to 750,000.

III. INCREASING PRODUCTIVITY AND VALUE ADDITION IN
AGRICULTURE

Madam Speaker!
The Government’s agriculture policy is aimed at ensuring food security;
generating jobs; and enhancing farm profitability and competitiveness through realizing the existing productivity potential of various crops. The vast and rapidly changing agriculture sector offers enormous opportunities to millions of rural poor to move out of poverty.

‘Increasing productivity and value addition in agriculture’ will receive
high priority. Self-reliance in commodities, food security through improved productivity of crops as well as development of livestock and dairy would be the main pillars of policy. More importantly government would continue to ensure a minimum guaranteed price to the farmers based on international comparisons. The response given by the farmers to the price policy of the government for the wheat crop raises hopes for improved production of other crops. Government would continue with this pricing policy. Other areas of support for agriculture and livestock would be through:
- focusing on research and development by upgrading existing R&D facilities and initiating the establishment of two world class institutes of research for wheat and cotton;
- development of new technologies;
- more productive use of water through precision land leveling and high efficiency irrigation systems;
- promoting production and export of high value crops;
-- accelerating the move towards high-value activities, such as livestock rearing, dairy production, fisheries, and horticulture;
- creating necessary infrastructure; and
- ensuring availability of agricultural credit.
- Formation of common facilitation centres.
- encouraging research and extension.
In addition:
- Establishment of ten model agricultural union councils for each major crop across the country will be undertaken;
- Promotion of model organic farming would be supported.

Overall PSDP allocation for Agriculture will be increased by 25 percent from Rs 14.4 billion in Fiscal Year 2008/09 to Rs 18 billion during Fiscal Year 2009/10. An amount of Rs 2.5 billion is proposed for Fiscal Year 2009/10 to ensure food security and productivity enhancement of farmers.

Madam Speaker!
Interventions made in this light have already started providing dividend in
the shape of record production of major food crops like wheat and rice. The policy measures undertaken by the government have led to an estimated transfer of resources of about Rs 294 billion in to the rural economy. Government has made an agreement with Ms Monsanto of United States of America to formally introduce Generally Modified cotton into Pakistan on fast track basis. It has been planned that the farmers will be offered BT cotton hybrids varieties during Fiscal Year 2009/10. It is the vision of the government to treat livestock, agriculture and
fisheries as an industry. In this context, the nil customs duty regime on tractors, poultry inputs and cattle feed would be continued in future.

Water Use Efficiency

Madam Speaker!
To boost production of crops and improve water use efficiency, a major
initiative of ‘National on Farm Water Management Programme’ was implemented by the Ministry of Food and Agriculture.
Water sector has been allocated Rs 60 billion, which comes to 14 percent of the total federal progamme. A total of 32 small and medium dams, 8 in each province are being financed. Similarly, adequate allocation has been made to projects such as National Programme of Watercourses, irrigation system, rehabilitation, lining of canals, and distribution, etc. Improved water management efforts under the PSDP for Fiscal Year 2009/10 to raise agricultural productivity will involve allocations of:
- Rs 12 billion for Raising of Mangla Dam including resettlement;
- Rs 10 billion for the improvement of water courses; and
- several projects in all the provinces with allocations of Rs 15 billion for canal improvement and rehabilitation of irrigation system

Madam Speaker!
For Fiscal Year 2009/10 the strategy adopted is to complete ongoing mega projects side by side with construction of small/medium dams. The Government has launched a massive programme of water resource development and is earmarking an amount of Rs 47 billion in the PSDP for Fiscal Year 2009/10.

Major water sector irrigation projects being completed in the water sector include raising of Mangla Dam, Gomal Zam, Dam and Satpara Dam. Preparatory works on Basha, Akhori, Mujda, Naigaj Dam have been initiated. Kachi Canal in Balochistan and Rainee Canal in Sindh will be completed in mid 2010.

The lining of irrigation channels in saline zones is being undertaken in
Punjab, Sindh and NWFP to save the seepage and other losses. A national programme of Small Dams covering all the four provinces is being implemented. A comprehensive plan is also being developed for rainwater harvesting and ground water recharge.

Madam Speaker!
Development of agriculture infrastructure including warehousing facilities
will involve Integrated Agriculture Marketing and Storage Infrastructure
including feasibility study projects the total cost of which is Rs 37 billion, with Rs 500 million allocated for Fiscal Year 2009/10.

To assist small farmers the Government is launching the Benazir Tractor
Scheme costing over Rs 4 billion over two years.

In order to ensure food security and to improve productivity of small
farms, the Government is implementing a phased ‘Special Programme for Food Security and Productivity Enhancement of Small Farmers’ covering 13,000 villages by the year 2015 starting with 1,012 villages. This programme will be executed in all the four provinces in addition to Azad Jammu & Kashmir, FATA and FANA during the first phase at a cost of Rs 8.013 billion.

Madam Speaker!
A new Agriculture Model Village Programme has been initiated in 26
villages under the auspices of Zarai Taraqiati Bank Limited. The objective is to organize the farming community at the village level ensuring farmers easy access to agri credit.

In Fiscal Year 2009/10 the Government plans to initiate new programmes
like commercialization of the seed sector in order to enhance high quality supply through setting up an industry on the concept of Public Private Partnerships and diverting major investments in building and strengthening infrastructure in the sector.

Livestock and Dairy

Madam Speaker!
Livestock plays an important role in our economy. The Ministry of
Livestock & Dairy Development, created in November, 2008 envisages food security, greater availability of quality products at competitive prices and the promotion of deep sea fishing to enhance foreign exchange earnings to address livelihood concerns of fishermen. A number of initiatives to strengthen livestock sector include:
a. Prime Minister’s Special Initiative on Livestock;
b. livestock production and development for meat production;
c. Prime Minister’s Special Initiatives for White Revolution, that is, Doodh
Darya and Dairy Pakistan projects are serving as a primary vehicle to
bring about a white revolution through fundamental changes in the dairy
sector;
d. National Programme for the control and prevention of Avian Influenza;
e. upgrading and establishing animal quarantine stations;
f. efforts to enter into the halal food market; and
g. improving reproductive efficiency of cattle under smallholders system.

Projects foreseen during the Fiscal Year 2009/10 include:
a. ‘Capacity Enhancement of Dairy Products under Public Private
Partnership’ a project worth Rs 3,500 million, for which Rs 300
million will be allocated during Fiscal Year 2009/10;
b. ‘Poverty Reduction through Small Holders Live Stock and Dairy
Development’ worth Rs 3,539.13 million, from which an amount
of Rs 400 million will be allocated in Fiscal Year 2009/10;
c. More model dairy community, biogas and breeding farms, cooling
tanks, rural services providers and pasteurization plants.

Fisheries

Madam Speaker!
During the Fiscal Year 2009/10 focus will be on:
a. lifting European Union’s ban on fisheries export by upgrading
fishing vessels;
b. improvement of infrastructure facilities for value added products;
c. establishing a fisheries training centre at Gawadar;
d. landing sites along the coastal line;
e. reducing post harvest losses through improved fish handling along
the food chain and marketing; and
f. establishment of shrimp aquaculture in the country.
IV. MAKING INDUSTRY INTERNATIONALLY COMPETITIVE
V. CAPITAL AND FINANCE FOR DEVELOPMENT
VI. REMOVING INFRASTRUCTURE BOTTLENECKS THROUGH

PUBLIC PRIVATE PARTNERSHIPS

Madam Speaker!
40. As a result of international recession, energy shortages, and a contraction in the economy, the industrial sector in Pakistan has been adversely affected. This sector posted a negative 3.3 percent growth in the outgoing year with large scale manufacturing posting a negative 7.7 percent growth. The industrial sector is our engine of production and employment. The government proposes to declare fiscal 2009/10 as the year of industrial recovery. Our industry is fragmented and lacks consolidation. It is being provided the following support measures:

Financial Measures:
• With a view to moving industry towards consolidation and value
addition an Export Investment Support Fund, worth Rs. 40 billion has
been proposed for FY 2009-10. The government will contribute Rs 10
billion towards this fund; another Rs 10 billion would be contributed
by the Export Development Fund; balance Rs 20 billion would be
contributed by governmental agencies through mopping up of
surpluses in commercial banks.
• In order to support the SME sector by providing access to credit, a
fund worth Rs. 10 billion for Credit Guarantees is going to be
established. This fund would be financed by the government and the
private sector in the ratio of 50:50 over the next two years. The
government has already proposed Rs 2.5 billion in the Budget 2009/10
as its share to the fund.
• For citizens who lack equity financing, a Venture Capital Fund of Rs
10 billion is also proposed to be established which shall be financed in
the same manner as the SME Credit Guarantee Fund. A provision of
Rs 2.5 billion has again been proposed for this fund in Budget
2009/10.
• A new DFI is being created for industrial financing.
• Industrial clusters are going to be involved for the skill development to
ensure ownership, monitoring/oversight and relevance of programs
• The allocation for M/o Industries will be increased by 335 %, I repeat
335%, from Rs.2.0 billion in FY 2008-09 (R.E) to Rs.8.7 billion in FY
2009-10.
• The budgetary allocation for Science & Technology has doubled from
Rs 1,510 million in FY 2008/09 to Rs 3,140.4 million during FY
2009/10.
Government is not going to enhance tax incidence on industry, except
tobacco; rather following tax facilitations have been proposed:-
• In order to assist automobile manufacturers and their vendor industries
a reduction of 5% excise duty on automobiles (CKD) is proposed.
• In order to revive the construction sector a reduction of Rs 200 per ton in the excise duty on cement. This decrease shall be passed on to the consumer.
• In order to support Textile sector, withdrawal of FED on import and
supply of Viscose Staple Fiber (VSF) and zero rating of chemicals
used in manufacturing of fire retardant fabrics is proposed
• Cellular service providers have been provided the following relief:
o Elimination of Regulatory Duty of Rs 250/- per set.
o Reduction in Customs Duty from Rs 500/- per set to Rs 250/- per
set.
o Reduction in Excise Duty from 21 percent to 19 percent.
o Sim activation charges reduced from Rs 500/- to Rs 250/-.
• Incentives for documented sector in case of 90% purchases from sales
tax registered suppliers.
• Zero rating duty on exports sector will continue this year as well.
• To protect the local industry from under invoicing by importers,
improvement in Customs valuation and enforcement mechanism would be ensured.
• Refund procedure would be streamlined - FBR to pay interest on
refunds delayed beyond 90 days.
• To facilitate all tax payers including industry harmonization of tax
laws (Sales, Excise, Income, Customs) would be ensured.
• The limit of credit on donations in case of companies is proposed to be
enhanced from 15% to 20%.

Madam Speaker!
In order to revive our industrial sector, following additional initiatives
have been proposed:-
• Industry would receive priority in allocation of gas and electricity.
• Cross subsidy in electricity and gas tariffs would be reduced in a
phased manner to provide relief to the industry.
• Large Export Houses would be established to support the export
industry.
• Development of Special Economic Zones and Special Industrial Zones
would be fast tracked.
• Market access to USA and EU is being negotiated to provide level
playing field to our industry in international market.
• Corporate Rehabilitation Act (CRA) is being finalized to improve
bankruptcy and insolvency regime.
• Proposals to form Resolution Trust Corporation (RTC) to promote
consolidation of industry are being finalized.
• SECP Reforms like Holding Company Formation facilitation and
number of other business environment improvement initiatives are
underway to develop competitive markets for the private sector
• Capital markets are being developed for financing of trade and
industry.
• The Industrial Relations Act 2008 has been passed by the Parliament
to improve the labor-owner relationship regime.
• In order to provide opportunities to the entrepreneurs for expansion as
well as assist the government in disposing off public assets, a
transparent privatization policy based on Public Private Partnership is
being pursued through sale of 26 percent shares to the private sector or
allow privatization of management on profit sharing basis.
• To improve industrial competitiveness implementation of the National
Trade Corridors Improvement Program has been launched.
• To achieve a high quality road and rail network, allocations for
National Highway Authority amounted to an increase from Rs.36
billion to Rs.40.2 billion whereas in the case of Pakistan Railways
from Rs.6.6 billion to Rs.12.7 billion.
• Custom duty is proposed to be reduced on a number of items to
provide cheaper raw materials to different sectors like poultry, dairy,
fish processing and pharmaceuticals. Adequate protection is also
proposed to be given to local industry.

VII. INTEGRATED ENERGY DEVELOPMENT PROGRAMME

Madam Speaker!
Uninterrupted supply of energy is not only the need of the citizens but of
all sectors of the economy. The industrial sector has already been hit very badly in the outgoing financial year. Prime Minster’s Economic Advisory Council has developed an integrated energy plan to cater for the short, medium and long term energy needs of the country. This is the first ever integrated energy plan of Pakistan as previously energy sector had been dealt in isolation.

Government is well aware of the problems that have arisen in the wake of energy crisis in the country. The previous regime’s short sighted policies handed over its legacy in the form of abrupt powers shortages, load shedding and unaffordable energy mix. We have taken a number of measures in order to improve energy scenario of the country to give impetus to our agriculture and industrial sector

Madam Speaker!
In this light, PSDP allocations for the power sector will be increased by
100 percent, from Rs 11.4 billion in Fiscal Year 2008/09 to Rs 22.8 billion during Fiscal Year 2009/10.
The previous Government left a huge backlog of circular debt in the
energy sector. A total lack of decision making to address this issue in a timely manner on the part of the previous government has left the present government with a huge challenge. We have not shied away from our responsibility. In this regard the government has taken up the challenge to resolve the issue of circular debt which has reduced the efficiency of the energy sector. In order to improve the liquidity position of the power sector, the Government/ specially created holding company:
- will assume the entire bank loan liabilities of Rs 216 billion and pay the markup on these loans from budgetary resources;
- has already arranged TFC facilities of Rs 92 billion for PEPCO from
banks to discharge its payment obligations towards Independent Power
Producers and oil and gas companies;
- will assist to settle the remaining payables of PEPCO at Rs 61 billion;
- has decided to pick up the entire past arrears of PEPCO against FATA consumers to the tune of Rs 80 billion and pay the current electricity bill of FATA; and
- will help PEPCO to clear its outstanding receivables from federal and
provincial government departments and entities, mainly KESC and
KW&SB.

Projects have been undertaken to reinforce the transmission and
distribution systems to minimize power losses and outages so as to provide a stable and reliable supply to consumers. Currently 15 Independent Private Power Houses with a total capacity of 2,921 Megawatts are in different stages of development. Out of these, 9 projects for 1,861 Megawatts will be commissioned in 2009; 4 projects for 776 Megawatts will be completed in 2010; while 2 projects for 284 Megawatts are due for completion in 2011.

Madam Speaker!
To meet the Government’s target of eliminating load shedding by 2009,
agreements have been made with 5 rental Power Projects for 800 Megawatts.

Work on 16 Hydropower Projects in the private sector with a total capacity of 4,160 Megawatts has been initiated. Two new combined cycle power projects of 500 MW each in the public sector to supplement total capacity are planned at Chichoki Mallian and Nandipur.

The Government has also made an elaborate plan for electrification of all
villages where electricity can be extended from grid supply. This was achieved in 6,419 new villages last year.

Demand side measures including conservation have been initiated
including:
- massive media campaign to raise public awareness;
- induction of energy saver lamps for peak chopping; and
- enforcement of Daylight Saving Time during summer.

Other major activities proposed to be undertaken in the Fiscal Year
2009/10 include:
- induction of two hydro projects i.e. Khan Khwar & Jinnah Hydro, with
total capacity of 168 Megawatts;
- setting up call centres in all Distribution Companies to improve
customer services; and
- infrastructure development to reduce energy losses.
The PSDP allocation of Rs 4,000 million for FY 2009/10 has been made
for the 4,500 Megawatts Diamer Basha Dam Project. Construction of more than 30 small and medium Dams in different provinces has also been funded.

In order to ensure transparency in the pricing of petroleum products and to reduce its use as well as assist in the cause of environmental protection, the petroleum development levy is being abolished and replaced by a specific Carbon
Surcharge.
The government has determined the ideal policy mix for energy needs of
Pakistan. These are hydel, coal, wind and solar. A comprehensive renewable
energy policy is being formulated. The following steps are being taken in FY 2009-10:-
- A 50 Megawatt Solar Thermal Power Project to be established in
Southern Punjab;
- Development of Wind Farms in areas in addition to Gharo-Keti
Bandar, identifying new corridors of available wind potential in
Punjab, Balochistan and NWFP;
- Solar Water Heaters Programme;
- Production of solar cells and modules up to an annual capacity of 80
Kilowatts;
- Depreciation allowance for renewable energy being enhanced by 100
percent;
- Allowance of duty free import of equipment under nine categories of
alternate energy being considered.

VIII. HUMAN DEVELOPMENT FOR THE 21ST CENTURY

Madam Speaker!
‘Human resource development’ is a prerequisite for improving all
aspects of the quality of life of our citizens. The government is aware that improvement in social indicators needs to be expedited and has, therefore, adopted human resource development as a priority area particularly in education; health; clean drinking water and sanitation; population planning; and gender equality.

Education

Madam Speaker!
Significant reforms in education sector include:
-s Strengthening the planning and implementation capacity of the
government;
- Improving utilization of resources by educational institutions;
- Enhancing governance for greater accountability of education service providers to the community;
- Capacity building of district and local level institutions; and
strengthening the role of communities through school committees.
Budget proposal for Fiscal Year 2009/10
- Major programmes of the Ministry of Education include:
(i) Establishment and operation of basic education and community schools in the country; (Rs 2 billion) and
(ii) Education for All through providing missing facilities to primary schools.

- Development funding to Higher Education Commission is being enhanced by 60% to Rs 22.5 billion in Fiscal Year 2009/10; current budget provision is being enhanced by 26% to Rs 21.5 billion.
- National Vocational & Technical Education Commission is targeting one million trainees every year in a phased programme. An allocation of Rs 2.2 billion has been provided in FY 2009-10.
- Skill development (vocational/technical) programmes aimed for labour export market are being planned.

Health

Madam Speaker!
The health strategy has been constructed on the key principles of equity, universal access to essential healthcare, timeliness, results, accountability, strong leadership and strategic coordination of the overall effort. The Strategy envisages addressing special needs of the vulnerable population, especially women and children particularly in the rural areas. The health sector continued to remain the focus of attention of the elected Government during Fiscal Year 2008/09 and received a special thrust in terms of enhanced PSDP allocation and initiation of a
number of new projects aimed at improving the health of the nation.
- Allocations for health under the PSDP have increased by 66 percent, from Rs 13.99 billion in Fiscal Year 2008/09 to Rs 23.15 billion during Fiscal Year 2009/10.
- National programmes for Family Planning and Primary Healthcare; and Expanded Programme of Immunization continue to receive top priority with respective allocations each of Rs 7 billion and Rs 6 billion.
- The Prime Minster’s Emergency Action Plan for disease has been launched and will cost Rs 11 billion in the next five years.
- A concessionary import duty rate on 35 raw materials used in
pharmaceuticals, medicines and diagnostic kits is also being proposed.
- Zero rate sales tax on import and supply of wheelchairs for the special people is proposed.
- Tobacco taxation is being increased as per World Health Organization recommendations for protecting health of the population.
Clean Drinking Water for All and Environment

Madam Speaker!
Clean drinking water is the first line of defense in protecting public health. The Clean Drinking Water Project is a promising initiative for the masses prone to waterborne diseases. The work for installation of filtration plants is going on and about 600 plants have been operationalized till now.

It is proposed that 3,500 plants will be installed one in each union council by end of Fiscal Year 2009/10 for which an amount of Rs 6 billion is being allocated. Besides providing safe drinking water, the project will also create sufficient job opportunities contributing to reduction in unemployment.

The budget for environmental protection has been increased from Rs 1.14 billion in Fiscal Year 2008/09 to Rs 2.96 billion for Fiscal Year 2009/10. This amount will be spent on forestry; environment friendly public transport and on provision of clean drinking water.

Gender Equality

Madam Speaker!
Pakistan has also expressed its commitment to gender equality and
equitable development in many international forums and conventions including Convention on the Elimination of all Forms of Discrimination against Women and the Beijing Platform for Action. In order to advance the goal of gender equity in the process of implementing socio-economic policies, the Federal Budget for Fiscal Year 2008/09 showed a hefty increase in budgetary allocations for women specific expenditures amounting to Rs 44.7 billion compared to Rs 7.7 billion during Fiscal Year 2007/08.

The Government is committed to maintain gender equality in policies and
programmes. It is pertinent to mention that health and education, the two core social sectors, are the main recipients and sources of gender specific allocations, with the Benazir Income Support Programme also having emerged as a key source of growth in gender targeted allocations. Targeted and pro-women allocations in the federal budget with the intention to bridge the gap between men and women in acquiring access to basic service is surely a commendable policy.
Gender mainstreaming project is being run at the Planning Commission and an engendering budget exercise is being also carried out under the Medium Term Budgeting Framework in the Ministry of Finance.

Human Rights

Madam Speaker!
Following the footprints of former Prime Minister, Mohtarma Benazir
Bhutto Shaheed’s dreams of addressing the problems of the oppressed in Pakistan, for Mohtarma created a wing of Human Rights, we have built upon that and have established a full fledged Ministry of Human Rights.
64. Steps are being taken to establish “Benazir Shaheed Human Rights Fund” and the bill for creation of the National Commission of Human Rights has been tabled on floor of the House. The Board of Governors of the Women Distress and Detention Fund has been reconstituted. The Provinces are being requested to allocate their share in the fund. We have distributed cheques to eligible petitioners out of the Relief and Revolving Fund to redress their grievances.

Youth Affairs, Culture and Sports

Madam Speaker!
Youth is the most important asset of our country, particularly at this stage when we are endeavouring to rapidly modernize and introduce technological innovation. They can play an important role in the decision making process for development of the country. During the fiscal year 2009/10, following initiatives have been envisaged,
- Different programmes for youth motivation, character building,
awareness and integration, and establishment of youth activity centers
will be undertaken under the National Youth Policy.
- Approximately 30,000 educated postgraduates will be offered
internships under the National Internship Programme for which the
Government has allocated Rs 3.6 billion for Fiscal Year 2009/10.
- A Mobile Youth Computer Literacy and Awareness Programme have
been started through Mobile Computer Vans to educate/train the youth
of rural areas.
- Approximately 15,000 volunteers from all walks of life have been
registered for community development activities and disaster
management.
- An amount of Rs 450 million for Fiscal Year 2009/10 for cultural
development has been allocated which is an enhancement of Rs 186
million over the previous year’s allocation.
- The government is placing special focus on the development of sports in the country. An amount of Rs 583 million has been allocated in
PSDP in FY 2009/10 against an allocation of Rs 140 million in RE
2008/09. Government wishes to promote sports with private sector
participation to afford the children and youth an opportunity for
healthy recreation and sports related employment opportunities.

IX. GOVERNANCE FOR A JUST AND FAIR SYSTEM

Madam Speaker!
Improved ‘Governance’ is a must for a just and fair system. The manner in which public institutions and officials acquire and exercise authority to shape public policy and provide public goods and services is at the crux of our agenda.

Political instability, corruption, volatile law and order situation and inadequate infrastructure have all left a detrimental impact on Pakistan’s business environment. Autonomous institutions are needed, capable of outlasting their creators and resisting capture by individuals lusting for power and money. They must so function as to inspire confidence, which means that they must protect the rights of society against the exercise of arbitrary power.

Madam Speaker!
To strengthen governance, an additional amount of Rs 500 million was
provided to the provincial implementing agencies of the ongoing Access to Justice Programme to support improvements and development measures in Fiscal Year 2008/09. An opportunity has now been created for the people of Pakistan under Access to Justice Programme to build upon the existing framework of reform initiatives for securing immediate and visible improvements in the system of justice administration. The initiatives that will be carried out in the near future under this programme include:
• Establishment of Public Defender and Free Legal Aid System across the
country;
• Establishment of Fast Track and Evening Courts at the federal level and provincial headquarters; and
• Pro-poor legislation and automation of the justice sector.

Madam Speaker!
During Fiscal Year 2009/10, greater focus will be on administrative
reforms. We have already constituted a Pay and Pension Commission to make recommendations to the government linking compensation with performance. We believe that the compensation package of government servants should be brought close to market salaries in a phased manner. The Pay and Pension Commission is expected to make realistic recommendations regarding the following concepts which we have included in our agenda of governance reforms:-
- Monetizing incentives for civil servants;
- Making public sector the ultimate choice for talent, in other words
‘Employer of choice’;
- Improved service delivery;
- Greater transparency and self-accountability;
- Market-based competitive salary structure.

Madam Speaker!
We realize that the government servants are not adequately paid. In order to revise the compensation package a Pay and Pension Commission has already be constituted. During the course of the year, we would be benefited by the recommendations of the said Commission. However, to compensate government servants, I have the pleasure to announce:
• an ad-hoc relief allowance of 15% of pay of serving government servants from 1st July, 2009.
• An increase in the allowance of armed forces deployed on the western
front equal to one month’s initial basic pay with effect from 1st July 2009, as announced by the President of Pakistan.
• For the remaining armed forces personnel, allowance equal to one
month’s initial basic pay will be admissible from 1st January 2010 in line
with the Presidential announcement; in the interim period, an adhoc relief
allowance of 15% of pay will be allowed. This adhoc relief allowance
will be withdrawn w.e.f. 31st December 2009.
• The retired government servants and armed forces personnel will also get 15% increase in their net pension from 1st July 2009

In addition:
• Limit for the exemption on Income Tax for salaried male is being
enhanced from Rs 180,000 to Rs 200,000
• Limit for the exemption on Income Tax for salaried female is being
enhanced from Rs 240,000 to Rs 260,000
• Senior citizens will now enjoy 50 percent relief in their tax liability in case of income upto Rs 750,000/-; previously this limit was upto Rs 500,000/-.

The government would also take measures during the next financial year
to undertake the following actions in its drive towards governance reforms:
• Public sector enterprises including Pakistan Railways, Pakistan Steel
Mills, Pakistan International Airlines and the Power Distribution
Companies would undergo financial reforms to improve their
management and service delivery.
• National Savings Organisation and the Federal Bureau of Statistics
would move towards becoming corporate entities displaying the
highest level of efficiency and service delivery.

Madam Speaker!
Federal and provincial solidarity is a must in the process of governance
reform. Criticism must be genuine and solutions should be just and realistic. The line between government and opposition should not be based on vendetta and abuse, but on a sincere difference in principles.
National Finance Commission

The present government has constituted the National Finance Commission which would be convened immediately in the next financial year. It is our belief that decision making on financial matters relating to the distribution of resources between the federation and the provinces need to be addressed in an institutional manner. This notwithstanding, we have made efforts to increase the share of the provinces in the divisible pool of taxes alongwith special grants from the existing
47.5% to 49% during fiscal year 2009-10. On a cumulative basis the provinces would receive federal transfers in excess of Rs 708.1 billion against Rs 600 billion in the last financial year, an increase of 18%.

National Assembly Secretariat, Provinces and Parliamentary Affairs and Opposition

Madam Speaker!
The National Assembly is an important organ of the Federation’s
consultative process and needs further strengthening. A budget provision of Rs 1.1 billion was approved for the activities of National Assembly Secretariat during the Fiscal Year 2008/09, while for fiscal year 2009/10 an amount of Rs 1.3 billion is being allocated. Other improvements to strengthen the Parliament made during FY 2008/09 include:
- Sovereignty of the newly elected Parliament has been ensured through discussion and debate on all issues of national importance in the
Parliament;
- The Defence Budget was presented in the Parliament for the first time after 1964;
- The Prime Minister regularly attends the National Assembly sessions
and himself responds to questions, points of orders, motions and other
important issues;
- Formation of Standing Committees in time and in proportion to the
political parties’ strength in the Parliament;
- Chairmanship of the Standing Committees has been given to the
Opposition according to their strength;
- Chairmanship of the Public Accounts Committee has been given to the Leader of the Opposition for the first time in the Parliamentary
history of Pakistan in line with established traditions of parliamentary
democracy in the developed world; and
- Equal distribution of development funds has been made amongst the
members of the Parliament irrespective of party affiliations.

Taxation Proposals

Madam Speaker!
Allow me to give you the highlights of taxation proposals for the year
2009/10. I have already presented the important fiscal incentives for the different sectors of the economy. Allow me to add that the tax measures being proposed by the government are fair and equitable guided by the principle of “ability to pay”, set in the context of an economy fighting a war.

Excise duty on petroleum products is being levied in the shape of a carbon surcharge which would eliminate the existing petroleum development levy. This would ensure transparency in the pricing of petroleum products, curb consumption, save foreign exchange and reduce carbon emissions.

In order to discourage consumption of cigarettes excise duty and sales tax on cigarettes is proposed to be enhanced. This would generate estimated revenues of Rs 15 billion.

As a revenue measure and to broaden the tax base, FED in VAT mode is
proposed to be levied on the following additional services:
• Fees charged by banking services.
• Fees charged by import cargo handlers.
• Fees charged by stock brokers.
• Fees charged by insurance companies.
• Fees charged by electronic media for advertisements.
The estimated revenue impact of these measures is Rs 16 billion

It is proposed to enhance the rate of withholding tax on imports of
commercial nature from 2% to 4%. This measure would result in estimated revenue of Rs 23 billion.

Following the policy of broadening the tax base and putting the burden on those who can bear it, it is proposed to enhance the rate of Capital Value Tax on property from 2 to 4 percent. Government intends to adopt effective measures to ensure its collection. It is estimated to generate revenues of Rs 15 billion.

To help the internally displaced persons, it is proposed to levy for a single year:
• a nominal tax of 5% on the tax payable by every individual deriving
income above rupees one million.
• It is further proposed to levy a flat rate of 30% on bonuses earned by
individuals in the corporate sector drawing salary exceeding Rupees one
million.

It is proposed to levy a Minimum Tax under section 113 of the Income
Tax Ordinance 2001 on the income of a resident company, provided that this will not be applicable to a company which has declared gross loss before set off of depreciation and other inadmissible expenses under the Ordinance.

To promote documentation of the economy, it is proposed that certain
sectors may be pulled out of the presumptive, or final, tax regime. These sectors will now be required to file returns. Phasing out the presumptive tax regime will be an on going process.

Madam Speaker!
What the nation and the people need now is a guarantee for permanence in policy, permanence in ideology and permanence in approach which cannot be found in elusiveness. Our power is the power of the people. Our founding father, Quaid-e-Azam, Mohammed Ali Jinnah pledged that Pakistan would have a government and a constitution chosen by the people. Mankind has reached great heights by pursuing democratic ideals. Democracy is our polity and all power belongs to the people.

Madam Speaker!
As Shaheed Zulfiqar Ali Bhutto stated, “A new era is emerging in the
political life of the nation. The politicians of Pakistan are facing a crucial new test as destiny stands at the dawn of a New Year. A new look amid a new style will have to emerge. The old ways will no longer appeal to the people. A new allround approach will have to be found in every facet of politics. The hand must reach the ground, the eye must perceive the sub-surface movements and the ear be able to hear the sound of music in the far distance. Crescendos of ‘Zindabad’ and warm ovations at public meetings are not going to be the final tests of political acumen.”

Pakistan is a rich country in terms of both natural and human resources.
Yet clearly, Pakistan has not fully exploited its potential. In this scenario, the government will ensure that clearer priorities and pro-poor sectoral programmes are in place that will provide an appropriate strategic framework to effectively reduce poverty.

Madam Speaker!
“Let us welcome the sound of bells of another year which is likely to bring more hope for all than the one that has ended. Time and with it events are moving faster……But as a new page is being turned in an old book, let us end on a hopeful note.”

Pakistan Paindabad!
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