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June 7, 2015

With orientation towards growth


June 7, 2015

The federal budget 2015-2016 unveiled by the finance minister on Friday appears to be an attempt to accelerate growth, especially in sectors like industry, agriculture and construction, as these are the areas in which employment generation would take place. The numerous incentives for these sectors are intended to achieve the objective.
An attempt has also been made to boost stock market, investment and provide encouragement to energy sector, exports and communication. The finance minister made it quite clear that the new fiscal policy is intended to create an environment in which the economy is put on the path of growth, moving on from the stabilization process.
The thrust of the fiscal policy is to reduce subsidies and withdraw unnecessary exemptions. This step suggests that the process of taxation reforms has been strengthened. The budget also tries to broaden the tax base and a number of incentives have been linked with the filing of tax returns.
According to the finance minister credit to the private sector would be given a boost. There are also incentives for the growth of stock market. Export sector, especially textiles, have been offered fiscal incentives. Incentive package has also been announced for KPK.
The finance minister dealt at length with the state of the economy in the last two years and went on to add that the government has envisioned the fiscal policy over the medium term period. The new financial year seems to initiate that process in full measure. The control over current expenditure is a step in the right direction. But the usual practice of presenting supplementary budgets to regularise over-expenditure needs to be strictly avoided.
While presenting the budget, the finance minister also announced economic targets set for the next financial year. Among them the acceleration of economic growth to 5.5 percent and curtailment of fiscal deficit are important. At the same time the government has announced the federal development

programme of Rs700 billion. The development programme of the provinces has been put at Rs800 billion. Fuller implementation of these programmes assumes critical importance if the objectives given out in the budget are to be realised in maximum measure.
It seems that much effort has gone into putting together the budget, which encompasses a wide area of national economic activity. The budget will undergo great debate both within the parliament and outside. At this point it must be said that the government must remain open to such practical suggestions as might emerge from these debates.
Now a word about some structural problems which the economy has been facing for a considerably long period of time. In terms of the budget, the gap between the government’s income and its expenditure ought to be going down on a sustained basis. It is also necessary to reduce dependence on borrowings. Some heavy borrowing in the past from the banking system crowded out the credit to private sector. Debt-servicing has assumed large proportion in the current expenditure.
As for social sector development a lot more needs to be done. Though allocations have been made in the budget, the provinces would share greater responsibility in this regard. This is an area which impacts the common man directly. Efforts are overdue to maintain the facilities in these areas but also expand them in sync with the demand of the rising population.
Inflation this year has remained low. People would be justified in expecting that the new financial year does not bring any escalation in cost of essential items. The international oil prices have been keeping low providing a rare opportunity to boost economy and bring relief to the people. In view of the recovery made by the economy, as claimed by the finance minister, the budget could have afforded to be more magnanimous for the under-privileged sections of the society.

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