March 22, 2012
IslamabadFederal Secretary Finance on Thursday said that the agriculture growth is estimated to show 3.8% growth against the downward revised target of 2.5% helpful to achieve GDP growth target of 4% during the ongoing fiscal year 2011-12. Wajid Rana disclosed this in the National Assembly Standing Committee on Finance which met in the Parliament House with Fauzia Wahab MNA in the chair.
He informed that his ministry has notified a five-member committee to review and determine the actual budget needs of the each ministry and division. Each year needs of the ministries and divisions change with their priorities and targets assigned to them and there is a need to ascertain these needs again, he maintained. All ministries increase their demands on incremental basis despite the fact that some needs are irrational and do not require more financial allocations.
There would be no irrationale increase in the budget of the federal ministries and divisions in the federal budget 2012-13 against the ongoing fiscal year 2011-12 as the Ministry of Finance (MoF) has constituted a five-member Budget Review Committee under the chairmanship of the Deputy Chairman Planning Commission (DCPC) to review and determine the actual budget needs of the federal ministries and divisions for budget 2012-13.
Mr. Nadeem-ul-Haq to head the committee and two members from government and two from private sector have been included in the committee that would prepare budget needs of the ministries and divisions well before the budget 2012-13. Committee to soon start its work to complete the task early, he added.
Secretary Finance informed that during the first seven months July-January period total expenditure was supposed to be at 58% of the total budget, however, due to the austerity measures adopted by the government the expenditure have remained at 53% of the total budget with a saving of 5% in the expenditures.
Explaining the utilization of Public Sector Development Programme (PSDP) 2011-12, Secretary Finance informed the committee that it has been decided not to apply any cut to the PSDP development budget and so far government has released Rs.221 billion for the development projects in this fiscal year.
Explaining the demand of IMF and other IFIs for imposition of RGST, Secretary Finance informed that its not only the demand of IFIs but development partners of Pakistan like FoDP and others are also demanding us to expand the revenue base and bring into tax net rich of the country. RGST is essential for documentation of economy and for improved collection in the years to come. He said that a handsome increase in revenues was mainly due to the withdrawal of GST exemptions which were announced on March 15, 2011.
Real Sector: Secretary informed the meeting that the GDP growth for FY 12 was projected to 4.2 percent on the back of 3.4 percent growth in Agriculture, 2 percent growth in LSM and 5 percent in Services sectors. Torrential rains in Sindh province during August 2011 compelled the government to revise its GDP growth target to 3.6 percent from 4.2 percent on the basis of 2.5 percent growth in agriculture, 1.5 percent in LSM, and 4.4 percent growth in Services sector.
The recent data of crop arrivals suggest cotton production to 13 million bales as the cotton arrival have already reached 12.5 million bales and positive growth in LSM sector indicates that the better crops production in Punjab particularly cotton has compensated losses in Sindh resultantly agriculture growth as well as LSM and services sector would be adjusted upward and GDP would be close to 4 percent. The LSM data for the period July to December FY12 suggests that its output is increased by 0.83 percent as compared to -1.8 percent in the comparable period of the last year and increased by 18.2 percent if compared to November 2011.
Inflation: The inflation recorded in January 2011 increased to 10.1 percent. This was primarily on account of adjustment of energy and gas prices; however, the food inflation remained at single digit 9.2 percent. The table below presents the inflation rate of January 2012 in comparison to January 2011.
Fiscal Development: The fiscal deficit was projected 4 percent of GDP. This was estimated to be financed through net external borrowing of Rs.135 billion, non bank borrowing Rs.412 billion and bank borrowing Rs.304 billion. However, during the course of the period the projection for fiscal deficit has been revised to 4.7 percent. For the period July-December FY 12, overall fiscal deficit was Rs.533 billion ie 2.5 percent of GDP, while total expenditure in first half of the current fiscal year was only 45 percent of total planned expenditure. The government is working on expenditure management strategy, austerity measures, reforms in public sector enterprises etc. which will bring a positive impact on the fiscal consolidation efforts of the government.
Tax Collection: Total FBR collection reached Rs 970.8 billion during July-January, FY 12 against the total collection of Rs.770.1 billion in the same period last year, showing an increase of 26.1 percent.
External Sector: The trade deficit witnessed a deterioration of 38.7 percent as it increased from $6.5 billion in Jul-Jan FY11 to $9.05 billion in FY12. Substantial increase of 17.7 percent in imports surpassed a healthy growth of 7.2 percent in exports during the period under review. The current account deficit has increased to $2.633 billion during first seven months of FY12 against the deficit of $96 million in the comparable period of last year. FDI: The foreign direct investment during July-Jan. FY12 fell 41 percent to $597 million as compared to $1 billion in the comparable period of the last year. The portfolio investment also witnessed the negative trend of $147 million against inflow of $235 million in the comparable period of the last year. The economic group-wise data indicates that the major recipients of the FDI were oil and gas exploration ($361.7 million), communications ($115.5 million) and financial business ($44.9 million).