Speech by Naveed Qamar, details on every channel. Discuss thoughts and reservations.
Whats good and what’s not so good?
Rs 2300 bln budget for 2008-09 announced
ISLAMABAD: Finance Minister Naveed Qamar unveiled the federal budget for year 2008-09 with a total outlay of 2300 billion rupees in the parliament, which is 29.7 percent higher than the budget of the outgoing financial year.
According to the budget document, the expenditure of 2.01 trillion has been estimated. The government targeted to generate net tax revenues of 1.25 trillion rupees through Federal Board of Revenue, showing an increase of 23.1 percent over this fiscal year.
Total resources available for the expenditure will be 1.84 trillion rupees against 1394 billion available in the outgoing financial year. The budget deficit likely to remain at 4.7 percent of the GDP or 582 billion rupees.
The federal government has allocated 549 billion rupees for the Public sector development programme.
The federal government will do 149 billion of bank borrowing coupled with the non-tax revenue receipts of 427.8 billion rupees, during the year. The government will receive net capital receipts of 221.3 billion rupees as well.
A total of 929.5 billion rupees will be spent on the general Public service. In the budget 296.1 billion rupees have been provided for defence needs showing an increase of 7.6 percent. Another 201.2 billion rupees have been made available for economic affairs. For public order and safety affairs 26.8 billion have been provided.
For education 24.6 billion rupees have been allocated. 5.5 billion rupees have been allocated for education sector in the country.
The country will spend 4.8 billion rupees on social protection and 1.4 billion rupees on housing and community projects. Allocation of funds A meager 0 .2 billion rupees have been allocated for the environment protection.
ISLAMABAD: The Economic Survey 2007-08, released, paints a dismal picture about the state of the national economy where Pakistan has missed all its envisaged macroeconomic targets during the outgoing fiscal year owing to domestic and external shocks.
Conceding that the country’s economy is in serious difficult situation, the survey states, the country’s GDP growth fell to 5.8 per cent against target of 7.2 per cent, fiscal deficit surged in the range 7 per cent owing to higher POL and food prices against target of 4 per cent, growing vulnerabilities in the wake of hike in current account deficit touching to 6.9 per cent of the GDP as well as ballooning inflationary pressures to 10.3 per cent against target of 6.5 per cent, posing serious challenges for the economic managers.
The public debt is rising on account of twin deficits — fiscal and current account — and likely to rise up to 56 per cent of the GDP for 2007-08 against 53 per cent for the previous year and witnessing reversal in the trend by moving from bad to worst.
“Fiscal year 2007-08 witnessed violation of various aspects of the Fiscal Responsibility and Debt Limitation Act 2005,” the Economic Survey 2007-08 admits. The food inflation is estimated at 15 per cent for the outgoing fiscal year, clearly indicating that the higher prices of food fleecing the poor voiceless consumers.
The Economic Survey 2007-08 was launched by Finance Minister Syed Naveed Qamar here at P Block during a press conference on Tuesday. Flanked by Special Adviser to the Prime Minister on Finance Hina Rabbani Khar, author of the Economic Survey Dr Ashfaq Hassan Khan and others, the finance minister announced that the PPP government would launch another poverty survey along with upcoming census to get more reliable data and analysis on this issue.
The external debt rose to $45.9 billion in first nine months of the current fiscal against $40 billion last year, registering an increase by $5.4 billion. The foreign exchange reserves dwindled to $12.3 billion by the end of April 2008, significantly lower than June 2007 level of $15.6 billion.
The rupee also depreciated against the US dollar by 6.4 per cent during the first 10 months of the fiscal 2007-08 compared to the previous financial year. Dwelling upon the reasons for higher fiscal deficit, the Economic Survey 2007-08 states the oil subsidy is projected to rise to Rs 175 billion — surpassing the target level by Rs 160 billion. Similarly, the subsidy on electricity tariff stands at Rs 113 billion against the budgetary allocation of Rs 52.9 billion.
On positive side of the economy, the per capita income rose to $1,085 and it was claimed that the poverty level has come down from 23.9 per cent in 2004-05 to 22.3 per cent by 2005-06. Through the Economic Survey, the PPP government has endorsed the Shaukat Aziz regimeís claim of reducing the poverty whereas the growth remained at an average rate of 7 per cent during the last five years.
But the Economic Survey also admitted that the inequality has been rising since 2001 where gap between the rich and the poor is widening. The country’s exports recorded a growth by 10.2 per cent and increased to $15.3 billion while imports went up to $32.1 billion in July-April period, registering a trade deficit to the tune of $17 billion.
Against the backdrop of extreme political instability and heightened security concern, Pakistan succeeded in attracting $3.5 billion foreign direct investment (FDI) in the first 10 months of the current fiscal year - almost $700 million less than last year.
Total investment declined to 21.6 per cent of the GDP in the fiscal year 2007-08 against 22.9 per cent for 2006-07 thus the contribution of the investment to the current year’s GDP growth declined from 45 per cent to almost 12 per cent for the outgoing year. Fixed investment also declined to 20 per cent of GDP from 21.3 per cent. The public sector investment remained at last year level of 5.7 per cent, private sector investment declined to 14.2 per cent for 2007-08.
The Economic Survey 2007-08 states the current fiscal year has been a difficult year for Pakistan’s economy.
“Several political and economic events, both on domestic and external front, occurred unexpectedly. These events include: disturbed political conditions; an unstable law and order situation; supply shocks; soaring oil, food and other commodity prices; softening of external demand; and turmoil in the international financial market.”
The most important aspect, however, has been the non-responsive stance on account of political expediency in addressing domestic and external challenges during most part of the fiscal year, further accentuating macroeconomic difficulties” the Economic Survey 2007-08 added.
“We will also reconstitute the NFC body and its maiden session is expected to meet in July 2008,” the finance minister said and added that two provinces have so far nominated its members while the centre is waiting nomination from the remaining two federating units.
He said the GDP growth of 5.8 per cent was mainly led by services and consumption as the performance of agriculture and manufacturing sector was unable to achieve its envisaged targets.
The agriculture sector grew by 1.5 per cent in the outgoing fiscal against target of 4.8 per cent for 2007-08. Major crops witnessed negative growth of 3 per cent and livestock rescued the agriculture growth by achieving 3.8 per cent in 2007-08.
Real private consumption expenditure grew by 8.5 per cent in 2007-08 against 4.8 per cent last year. The contribution of net exports is negative 21 per cent. It is therefore safe to suggest that this year’s growth is service/consumption led growth.
National Savings at 13.9 per cent of the GDP has financed 65 percent fixed investment in 2007-08 against 77.7 per cent last year. National Savings as percentage of GDP stood at 13.9 percent in 2007-08 — far lower than last year’s level of 17.8 per cent. The decline in National Savings rate simply indicates that the reliance on foreign savings increase to finance domestic debt.
The overall fiscal deficit is estimated at Rs 737.8 billion or 7 per cent of the GDP for 2007-08 against the target of Rs 399 billion or 4 per cent of the GDP. Some shortfall in revenues and massive slippages in expenditure side on account of interest payments and subsidies are responsible for the rise in fiscal deficit. An adjustment of Rs 100 billion was made in development expenditures in the outgoing fiscal year.
Inflation at all-time high of 19%
*By Tanveer Ahmed *
KARACHI: Inflation reached all-time high of 19.27 percent in May, mainly because of growing prices of food items.
The coalition government has already hinted at missing of inflation target of 6.5 percent in the Economic Survey released Tuesday and believed the average inflation settling over 11 percent by the end of financial year 2007-08.
Analysts, however predict the average inflation will be closing at 12 percent or slightly above that in the fiscal year, which will end June 30, 2008.
Data released by the Federal Bureau of Statistics Wednesday showed that food inflation, measured through the Consumer Price Index (CPI), swelled to record 28.48 percent in May, highest in over three decades.
In the food basket, price of non-perishable food items witnessed an increase of 33.13 percent and perishable items 1.09 percent in the month under review.
The food items including rice, onions, potatoes, besan, pulse gram, pulse masoor, maida, sugar, gur, wheat flour, pulse moong, beverages, gram whole, fresh fruits, cereals, wheat, readymade food, spices, mustard oil, sweetmeat and nimco, milk fresh, vegetable ghee, pulse mash, milk products, milk powder etc saw major increase in their prices during the month under review.
The figures shows CPI inflation surged by 11.11 percent during July-May period of current financial over the corresponding period whereas on month on month basis, it also increased by 2.69 percent in May over the preceding month of April.
The economic survey cited the high global prices of food, fuel and other commodities driven by a weaker rupee, import costs and gradual removal of fuel, food and power subsidies and monetary overhang on account of excessive borrowing from the SBP to finance the fiscal deficit have been major factors in pushing the prices to new highest during the current fiscal.
These factors will continue to exert pressure on overall prices in the next two to three years. The longer the high inflationary pressure persists, the greater is the chance for wage-price spiral to gain firm hold, it added.
The other components of CPI basket also posted substantial increase in the month of May. House rent surged by 12.05 percent, transport and communication by 19.14 percent, medicare by 14.06 percent etc.
Sensitive Price Index (SPI) also increased to 29.92 percent in May 2008 whereas the Whole Price Index (WPI) surged to 28.24 percent in the month under review.
This year’s inflation started with 6.4 percent in July 2007, but kept increasing by reaching the all time high of 19.27 percent in May 2008. Similarly, food inflation, having 40 percent weightage in CPI basket also began the year at 8.5 percent but it also shoot up unprecedently to 28.48 percent, which was highest increase since 1974-75 when it touched 27.8 percent.
Exactly when inflation has risen to an all-time high of 19%. This is like offering them peanuts.
When you're hungry even peanuts taste delicious. BTW, I agree. After reading through the article it sounds like last years budget with nothing new in it.
SLAMABAD: Federal Government has decided in principle to **withdraw subsidy being provided for electricity.
** It has been proposed to raise general sales tax on electricity bills from present 15 percent to 16 percent and collect the same from the consumers.
Besides, NEPRA has been allowed to undertake fuel re-adjustment of distribution companies on monthly basis instead of every six months. The step may further increase the monthly electricity bills.