Fiscal deficit, increasing inflation, energy crisis and debt servicing will remain the key challenges in forthcoming budget 2012-13.
Speakers at a pre-budget seminar on Monday suggested government to increase revenues by widening of tax base, applying minimum tax regime, reduce corporate tax rate, taxation on remittances, targeted subsidies, ensuring energy sustainability, macroeconomic reforms, reduction in circular debt and ensuring budgetary safeguards for industry after opening up of trade with India.
Dr Abid Qaiyum Suleri, Executive Director, Sustainable Development Policy Institute (SDPI) at ‘pre-budget seminar 2012-13’ said coming budget should cater the long term and short term energy needs as current energy mix in Pakistan was not sustainable which relies mostly on oil consumption. ‘Costly energy increases the cost of production which subsequently makes it hard to compete with regional economies based on cheaper fuels like coal,’ he added.
Sakib Sherani, former Principle Economic Advisor, Ministry of Finance said, government did not have the fiscal space available for coming budget after the sharp compression of resources after NFC.
He said centre has left with only 30-35 percents of divisible pool that also has to cater debt servicing, defence, federal PSDP and many other expenses. He said, onus should be placed on provinces arguing that, centre could only service NFC if provinces increase revenues and implement integrated Value Added Tax.
Forthcoming budget will become irrelevant in absence of obligation for reforms by international financial institutions, overestimation of revenues and underestimation of expenditures in budget 2011-12 and failure to implement agreed macroeconomic reforms.
Dr Vaqar Ahmed, Research Fellow/head, Economic Growth Unit, SDPI demanded to reconfigure budget from fiscal to human capital declaring that, ‘budget making process has become mere an accounting exercise for government officials instead of a planning framework for socio economic development in the country. He said Pakistan has no debt sustainability strategy and over 30 percent of current account expenditure was spent on interest payment. Time has come to move toward targeted subsidies that benefit poor adding that only 5 percent of subsidies are actually targeted at poor.
He proposed various recommendations for forthcoming budget such as practising minimum tax regime, reduction in corporate tax, budgetary safeguards for industry after opening up of trade with India, reforms in water and energy sector and taxation on remittances.
Mian Ramzan from Islamabad Chamber of Commerce and Industry stressed on the need for consistency in economic policies and putting focus on promoting entrepreneurship in coming budget. He said there was undue burden on existing taxpayers and urged to increase tax base by giving incentives to people.