Development budget cut by Rs100 bn: Hafeez

[niazikhan2]

KARACHI: Finance Minister Dr Abdul Hafeez Sheikh said on Saturday that the expenditure on the Public Sector Development Programme (PSDP) had been cut to Rs180 billion from Rs280 billion for the FY11.
In order to curtail the fiscal deficit, the PSDP could be further reduced to Rs140 billion, Dr Sheikh said.
In a meeting at the State Bank of Pakistan (SBP) with journalists, the finance minister said that most of the expenditure was incurred on providing subsidies. “Rs256 billion alone was spent on subsidies,” he said.
Regarding the recovery of power bills from government bodies, he said two provinces had given approval for disconnection of electricity in case of non-payment.
“The Punjab and Sindh have allowed the utilities to disconnect power on non-payment,” he said.
Meanwhile, speaking at the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), the minister said interest groups had bribed politicians to oppose the Reformed General Sales Tax (RGST), which is vital for the country’s economy.
“Some elements used politicians and financed them to oppose the tax in the lower and upper houses,” Sheikh said. “In fact, those people are afraid of documentation that would bring them into the tax net.”
Reiterating his argument that the RGST would reduce the tax rate, Sheikh said that the issue would be resolved in the ongoing consultations between the government and major political parties. “The economy is in a difficult situation, but it should not be portrayed as a doom-and-gloom scenario,” he said.
The finance minister said there had been some recent positive developments on the economic front. Exports are likely to exceed $22 billion mark and remittances $10 billion during the current fiscal year, he said.
Sheikh said the government started the current fiscal year on a positive note, expecting a moderate economic growth and lower budget deficit. But the sharp increase in petroleum prices and floods hit the economy hard, creating a crisis-like situation, he said. The floods changed the entire economic scenario and projections for the current fiscal year had been revised. “The economic growth would be around 2.5 percent against the earlier estimated 4.5 percent,” he said.
On the other hand, the government was forced to withdraw an increase in fuel prices on the pressure of opposition parties, increasing the economic burden, Sheikh said.
The minister said that higher share of provinces under the new NFC Award had constrained the resources of the federal government. The fiscal deficit would increase beyond the target of four percent, he added.
Regarding the agriculture income tax demanded by the business community, the minister said that the issue was being discussed with the provinces. The minister said that several measures were taken on the fiscal front such as implementing the capital gains tax, which the influential people had been opposing for several years.
Online adds: Abdul Hafiz Sheikh warned if we continue to meet deficit and expenses by printing currency notes through the State Bank, it will put the national economy at stake.
Chairman FBR Suleman Siddique, Chairman SECP Tariq Saeed, Chairman Saarc Chamber of Commerce SM Munir and others were also present on the occasion.
He said inflation continued to rise since 2005 and the present government had contained it from 25 percent to 10 to 12 percent.


Development budget cut by Rs100 bn: Hafeez