ECONOMY OF PAKISTAN: 2012-13
Main Focus
1.
2.
3.
4.
5.
Economy of Pakistan
Federal Budget: 2012-2013
Economic Challenges: 2013
Fiscal Policy
Suggested Charter of Economy
Presentation by
Prof. Dr. Khawaja Amjad Saeed
Founder Principal, Hailey College of Banking & Finance, University of the Punjab, Lahore Pakistan
(2003----), Member Governing Council, International Federation of Accountants (IFAC), New York
(1997-2000), President, South Asian Federation of Accountants (SAFA) (1997), President, Institute of
Cost and Management Accountants of Pakistan (1997-2000), President, Association of Management
Development Institutions of South Asia (AMDISA) (1993-96), Pro Vice-Chancellor University of the
Punjab, Lahore (1994-1996), Founder Director, Institute of Business Administration (IBA), University
of the Punjab, Lahore (1973-1996) & Senior Faculty Member of Hailey College of Commerce,
University of the Punjab, Lahore (1965-73). Earlier he served in Corporate Sector in Pakistan for1
eight years (1958-65).
WELCOME TO OUR PROGRAM
PRESENTATION FRAME
1. Economy of Pakistan
2. Constitution of Pakistan 1973: Economic Matters
3. Federal Budget: 2012-13
4. Pakistan: Economic Challenges: 2013
5. Economic Management Matrix
6. Fiscal Policy
7. Suggested Charter of Economy
2
1: ECONOMY OF PAKISTAN
Components
S. No.
Components
1.
Agriculture
2.
Manufacturing
3.
Services
3
1-1: AGRICULTURE
Components
S. No.
Components
1.
Livestock
2.
Crops:
1. Major
2. Minor
3.
Fishing
4.
Forestry
4
1-2: MANUFACTURING
Components
S. No.
Components
1.
Industry:
High Tech
LSM
SME
Cottage
2.
Minerals
3.
Electricity
4.
Construction
5
1-3: SERVICES
Components
S. No.
Components
1.
Physical
2.
Social
3.
Financial
4.
Intellectual
6
2: CONSTITUTION OF PAKISTAN 1973:
ECONOMIC MATTERS
Article
Emphasis
03
Exploitation: Eliminate
18
Freedom: Trade, Business or
Profession
37
Promotion: Social Justice and
Elimination of Social Evils
38
Well Being: Social and Economic of
People
7
3: FEDERAL BUDGET: 2012-13
MASTER CHART
(FEDERAL BUDGET 2012-2013)
Particulars
Rs. b
%
2,612
591
3,203
1,775
1,428*
3,203
81
19
100
51
49
100
NEEDED
1. Current Expenditure
2. ADP: 2012-2013
AVAILABLE
Net Federal Revenue
SHORTFALL
FINANCING PATTERN
1.Capital Receipts (Net)
2. Bank Borrowings
3.External Receipts
4.Estimated Provincial Surplus
484
478
386
80
1,428*
34
34
27
05
100
8
3-1: FEDERAL REVENUE BUDGET: 2012-13
FEDERAL REVENUE BUDGET 2012-13
Particulars
CURRENT REVENUE
Composition
Sales Tax
Custom Duties
Federal Excise
Others (Plus Petroleum Levy)
Rs. b
%
1. Indirect Taxes
1,572*
49
Rs.b
1,077
248
125
122
1,572*
2. Direct Taxes
%
69
15
08
08
100
932
2,504
29
78
3. Non-Tax Revenue
730
3,234
22
100
9
3-1: FEDERAL REVENUE BUDGET: 2012-13
Rs. B
%
4. Less: Transfer to Provinces
1,459
Net Federal Revenue
1,775
1. Debt Servicing
1,142
44
2. Defence Affairs & Services
545
21
3. Cost of Running Govt
404
15
4. Grants & Transfer to Provinces
312
12
5. Subsidies
209
08
2,612
100
CURRENT EXPENDITURE
Less: Deficit in Revenue Budget
837
1,775
10
3-2: FEDERAL ANNUAL DEVELOPMENT PLAN 2012-2013
Particulars
ANNUAL DEVELOPMENT PLAN 2012-2013
Rs. b
%
DEVELOPMENT
EXPENDITURE
1. Federal Govt: 2012-13
Departments (rs. 207b),
Corporations (Rs. 80b)
Special Programs (Rs. 27b)
Special Areas (Rs. 36b) and
ERRA* Rs. (10b)
2. Other Developments
Expenditure
360
61
154
26
3. Provincial Governments
77
13
591
100
*Earthquake Rehabilitation & Reconstruction Authority
11
3-2: FEDERAL ANNUAL DEVELOPMENT PLAN 2012-2013
FINANCING PATTERN
Rs.b
%
1. Bank Borrowings
484
82
2. External Receipts
386
65
3. Estimated Provincial
surplus
80
14
4. Net Internal Resources
(359)*
591
(61)
100
12
3-2: FEDERAL ANNUAL DEVELOPMENT PLAN 2012-2013
BREAK UP OF INTERNAL
RESOURCES
Rs. b
1. Deficit in Revenue Budget
for 2012-2013
837
2. Less: Net Capital Receipts
(478)
(359)*
13
3-3: PROVINCIAL ALLOCATION: 7TH NATIONAL
FINANCIAL AWARD
Province
Allocated
%
Population*
%
Punjab
48
57.36
Sindh
27
23.71
KPK
16
13.82
Balochistan
09
5.11
100
100
*Based on Population Census of 1997.
14
4: PAKISTAN: ECONOMIC CHALLENGES: 2013
A: Economy Challenges 2012
1.
2.
3.
4.
5.
6.
7.
8.
Business Environment: Deteriorating
Foreign Investment: Declining
Exchange Rate: Depreciating
Inflationary Pressure: Building Up
Foreign Exchange Reserves: Depleting
Industrialists relocating their Industries Abroad
Electricity and Gas Shortages: Aggravating
Relations with International Financial Institutions Including
IMF: Deteriorating
9. Exports Growth: Turning Negative
10. Mysterious Growth in Remittances: Continuing
11. Economy Remaining the off radar Screen of the
Government
15
4: PAKISTAN: ECONOMIC CHALLENGES: 2013
B: Measures with Question Mark
7th NFC Award
1. New NFC Award diverted bulk of Federal Government
Resources to Provinces at a time when they were
needed more:
a. To Finance Growing Interest Payment
b. Security Related Expenditure
c. Bailing out of PEs with losses
d. Paying WAPDA/PEPCO to Finance their
Inefficiencies
2. Tax System:
Failure to Reform Taxation System and Broadening Tax
Base to Generate more Tax Revenues.
16
4: PAKISTAN: ECONOMIC CHALLENGES: 2012
B: Measures with Question Mark
3. Petroleum Products
These are doubly taxed:
a. Exchange rate depreciation has increased the
landed cost of oil.
b. Petroleum Development Levy (PDL) is levied on
Inflated basis to mobilize more resources.
17
4: PAKISTAN: ECONOMIC CHALLENGES 2013
C: 2013 Outlook
Outlook for 2013 is Likely to Further Deteriorate.
1. Political uncertainty with adverse consequences on the
economy.
2. Fiscal indiscipline hallmark of the Government during
election year.
3. Mobilization through taxation will take the back seat.
4. Reliance on Non-Tax Revenues would increase further.
5. Expenditure is expected to rise further with budget deficit
likely to be in the range of 6% 6.5% of GDP.
6. Economy will remain out of focus of the political
leadership.
7. Energy shortage (electricity and gas) to aggravate further.
8. Politics is likely to dominate economics.
18
4: PAKISTAN: ECONOMIC CHALLENGES: 2013
D: Expected Trends 2013
1. GDP Trend
:
3-4%
2. Domestic Investment :
Not expected to Pick up
3. Unemployment and Poverty are likely to rise further
4. Inflationary pressure to rise on account of senseless increase
in government administered prices
5. External balance of payments to come under pressure due
to following:
a. Flat, even negative export growth
b. Search in payment to the IMF
c. FDI to witness a sharp decline
d Sharp depreciation of exchange rate
e. Public debt is likely to worsen on account of large fiscal
deficit.
19
4: PAKISTAN: ECONOMIC CHALLENGES: 2013
E: Consequences
1. National Security at Stake
2. Miss-Governance to Continue
3. In Search of a Direction
20
5: ECONOMIC MANAGEMENT MATRIX
Economic
Consumption
Dimension
Production
Exchange
Distribution
Public
Finance
Management
Dimension
Planning
Organizing
Staffing
Leading
Controlling
21
6: FISCAL POLICY
1. Objectives
a. Full Employment
b. Resource Mobilization
c. Resource Allocation
d. Maintenance of Economic Stability
e. Income Re-Distribution
2. Canons of Taxation: Adam Smith
a. Equity
b. Certainty
c. Convenience
d. Economy
3. Other Canons
a. Flexibility
b. Situation
22
6: FISCAL POLICY
4. Income Tax Rates 2013
1.
2.
3.
4.
5.
Individuals
- Non-Salaried - 5 brackets (10% -----25%)
- Salaried – 5 brackets (5.0% -----20%)
- Exempt upto Rs. 4 Lac
Companies
- Public, Private& Banking Companies 35%
- Small companies
25%
Dividend received by all tax payers 10% and 20% on banking
company from its assets management company
Property income
- Rs. 150,000 exempt
- Rates 5% -----10%
Capital gains
With holding period less than six months
10%
More than six month but less than 12 months
8%
23
7: SUGGESTED CHARTER OF ECONOMY
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
Domestic Resource Mobilization
Income Tax by All
Self Reliance for Financing
ADP Financing
Provincial Govt Budgets
Public Enterprises Losses
Good Governance & Corporate Governance
Inflationary Impact: Salary increase
CBA----PSA
NPLs
Professionals Role
Holistic approach to Economic Development with equitable
distribution of wealth and income across the board
24