budget of major relief to public and other populist measures;
budget of Rs. 1.874 trillion, envisaging a revenue target of Rs. 1.025
trillion, with defence spending of Rs. 275 billion and a fiscal deficit of
Rs. 398 billion;
increase in PSDP budget;
major chunk of subsidies to WAPDA, KESC, textiles, petroleum companies and
increases in minimum wages, pensions of government employees, EOBI pensions
and salaries of government employees;
to 87,500 federal employees;
scheme for low-paid government employees in Islamabad;
rupee subsidy package to ensure the availability of essentials such as
lintels, daal chana, moong, mash, rice, cooking oil, ghee, tea, sugar, etc.
at utility stores at cheaper rates;
of construction of several irrigation and water projects;
of construction of several highway projects;
relief to industrial sector;
on electricity charges on agricultural tube-wells;
in private equity bonds has been tax exempt till 2014 and reduction of
capital gain tax on sale of asset share of private companies to private
equity and venture capital;
of Real Estate Investment Trust (REIT);
of education is 4% of GDP;
of property exempted from tax up to 2010;
relieving tax measures in manufacturing, agriculture, horticulture, medical
sciences, computers, automobile industry, etc.
SALIENT FEATURES OF THE FEDERAL
the following text, the ‘budgeted year’ should be taken as Year 2007-08, and
the ‘previous year’ as the Year 2006-07:
outlay of the Federal Budget 2007-08 is
Rs. 1.875 trillion, which is almost 25% higher than the previous budget.
deficit is estimated to be Rs. 398 billion
to be about 6.5% higher than the previous budget.
As ratio of GDP, the budget deficit falls slightly to 4% from 4.2%
during the previous year. This
would be met through external resources, Rs. 258 billion; bank borrowing,
Rs. 131 billion and remaining through national savings.
size of the economy (GDP) has been
estimated at almost Rs. 10 trillion ($166 billion);
expenditure for the budgeted year is Rs.
1.353 trillion which is 54% higher than the previous budget estimate of Rs.
Sector Development Programme (PSDP) is
Rs.520 billion against Rs. 415 billion of the previous year, with an
increase of 25%.
- The share
of current expenditure in total budgetary outlay is 66 % as compared
with 72.4 % in revised estimates for 2006-07.
expenditure is Rs. 275 billion against Rs.
250.2 billion of the previous year, showing an increase of almost 10%.
sector (including higher education) has
been allocated Rs. 24.5 billion, which is about 22% higher than the previous
year’s Rs. 20.1 billion.
Sector has been allocated Rs. 14.3 billion
which is about 29.7% higher than the previous year’s Rs. 11 billion.
- The overall
revenue collection target increased by 22.37% to Rs. 1.025 trillion
for the year 2007-08, as compared to Rs. 837.61 billion for 2006-07.
taxes projected at Rs. 405 billion for the
budgeted year as compared to revised target Rs. 320.61 billion for Rs.
2006-07, indicating an increase of 27.3%
taxes projections increased by 19.9% to
Rs. 620 billion for the budgeted year as against the revised target of Rs.
517 billion for previous year.
- The income
tax collection has been revised upwards to Rs. 305 billion.
With this upward revision, the Government has projected an increase
of 27.2% over the revised target set for previous year.
- The customs
duty collection target was cut by 1.91% to Rs. 154 billion for the
fiscal year 2007-08 as against the target of Rs. 157.1 billion for 2006-07.
The customs duty collection for previous year has been revised
downwards to Rs. 134 billion.
collection under the head of sales tax was increased by 9.97%
to Rs. 375 billion for budget year as against Rs. 341.6 billion set for
previous year. The sales tax
was revised to Rs. 311 billion because of a shortfall.
- The federal
excise collection has been projected at Rs. 91 billion as compared
to Rs. 68.1 billion previous year, showing an increase of 33.6%.
administration has been made more
efficient. More friendly tax
reforms are introduced in the CBR. The
future strategy is to co-locate all the domestic taxes under one roof, for
which Regional Tax Offices (RTO) are being established in the major cities
of the country.
the international taxes are to be handled through the Model
Customs Collectorates (MCC) which is being established by adopting best
large taxpayers, three large taxpayers units have been established equipped
with modern resources.
Public Sector Development Programme (PSDP):
- Rs. 520
billion has been earmarked for Public Sector Development Programme (PSDP),
showing an overall increase of 24% over the last year’s allocation and a
30% jump in the provincial development programmes’ amount.
- 86% of
the PSDP allocated to on-going projects, leaving only 14% for new
- The real
PSDP amount reduces to Rs. 427 billion when foreign loans totalling
Rs. 58.6 billion and Rs. 35 billion earmarked for earthquake reconstruction
- The PSDP/GDP
ratio is 4.8% for the budgeted year as compared to 4.3% for previous
- The federal
share in the PSDP is Rs. 335 billion while the provincial
governments are expected to receive 15 billion.
sector corporations will invest Rs. 204
billion beside the budget increasing the volume of the overall PSDP to Rs.
and power sector will receive Rs. 84
billion, power sector Rs. 26 billion, agriculture 15.8 billion, Kashmir
affairs and Northern Areas 13.72 billion, petroleum and natural resources
Rs. 72.81 billion, communications Rs. 6 billion, ports and shipping Rs.
17.39 billion, interior division Rs. 15 billion, industries and production
Rs. 1.42 billion and defence division Rs. 19.1 billion.
- No funds
have been allocated for Kalabagh Dam.
Federal Budget 2007-08 envisages Rs. 491.7 billion net transfers to
provinces, including Rs. 403 billion in net proceeds from the federal
divisible pool under the interim National Finance Commission (NFC)
budgeted year’s provincial share out of net proceeds from the divisible
pool and straight transfers has been estimated to total Rs. 465.9
billion, up by 19.5% against previous year’s Rs. 390 billion.
This does not include project aid and subventions.
would get a total of Rs. 236.3 billion on account of net proceeds, up by 25%
when compared to previous year’s Rs. 188.9 billion.
would get a total of Rs. 144.15 billion increased by 11.57% as compared to
previous year’s Rs. 129.2 billion.
would get a total of Rs. 55.9 billion increased by 24.77% as against Rs.
would get a total of Rs. 29.6 billion increased by 5.8% as compared to Rs.
28 billion previous year.
special grants and subventions to the provinces
have been projected at Rs. 31.27 billion as against Rs. 29.25 billion during
the fiscal year 2006-07, thus showing an increase of 6.9%.
aid to the provinces has been projected at
Rs. 26 billion increased by 55% as against previous year’s Rs. 16.8
transfers to provinces for the budgeted
year have been projected at Rs. 62.8 billion as compared to 70.3 billion
during the year 2006-07 showing a decline of 11%.
provinces will get 1/6th of sales tax revenue,
which would subsequently be transferred to district government and
cantonment board. Under this
head, Punjab will get 50%, Sindh 34.85%, NWFP 9.93% and Balochistan 5.22%.
- The remainder
of the divisible pool would be distributed among the provinces on
population basis. Under this
head, Punjab will get 57.36%, Sindh 23.71%, NWFP 13.82% and Balochistan
transfers to provinces during the budgeted
year 2007-08 would be Rs. 524.5 billion against Rs. 439.6 billion of the
year 2006-07, increased by 19.3%. However,
the federal government will deduct Rs. 32.8 billion as interest payments and
debt servicing of federal loans, leaving total transfers of Rs. 491.75
Relief for Employees and Retired
- In the
Federal Budget 2007-08, the minimum wage for unskilled labour
has been increased to Rs. 4,600 per month from Rs. 4,000 per month, showing
an increase of 15%. But critics
argued that it is still impossible for a poor man to survive in a monthly
income of Rs. 4,600.
in the salaries of government employees by 15%.
retired before 1997 will get 20% increased pension and pensioners retired
after 1997 will get 15% increased pension.
employees in the grades BPS-5, BPS-7 and
BPS-11 are being promoted to BPS-7, BPS-9 and BPS-14 respectively.
87,500 federal employees will be benefited from this measure.
announced a housing scheme for low-paid employees in
Islamabad. 37,000 new houses
would be constructed for such employees on ownership basis.
In the first phase, construction of 5,000 units would begin
immediately and the land would be provided by Capital Development Authority
250,000 housing units would be constructed in five years under the ‘low-cost
housing scheme’ to be launched in collaboration with the
provincial and district governments, for which the loan from the House
Building Finance Corporation (HBFC) would be available.
of basic salary of railway employees by one step for the
remaining 62,482 workers, excluding secretarial staff.
The long-standing demand of railway employees regarding upgrading of
posts had already been accepted with an increase in their allowances and
12,510 employees had benefited from the increase.
In this way, the government has provided relief to 74,992 railway
employees and their long awaiting demand has been met.
pension has been increased by 15% and the
minimum pension has been increased from Rs. 1,300 per month to Rs. 1,500 per
if a husband and wife both contributed to old-age benefit, the surviving one
did not get the pension of the deceased spouse.
Now the surviving partner shall get the pension of the deceased
- All the
workers, regardless of their wage level, will be entitled to compensation on
account of disability caused during the course or as a result of performance
of duty. Earlier, the Workmen
Compensation Act, 1923 did not allowed the compensation for workers
receiving more than Rs. 6,000 per month.
- The Workers
Welfare Fund Ordinance, 1971, is being amended to allow industrial
workers to get medical, education, housing and death grant from the fund for
units having an annual income in excess of Rs. 500,000.
The Ordinance has been amended to increase the limit of death grant
from Rs. 200,000 to Rs. 300,000.
Technology (including Defence):
- The defence
budget for the year 2007-08 has been increased to Rs. 275 billion
from Rs. 250.2 billion of the year 2006-07, showing an increase of 10%.
allocations may be made for the purchase of JF-17 Thunder aircraft
from China and F-16 multi-role fighter jets from US.
amount of Rs. 1.789 billion has been earmarked for 32 ongoing projects,
including 10 of the Space and Upper Atmosphere Research Commission (SUPARCO).
are 36 new projects. An amount
of Rs. 500,000 has been allocated for reconstruction of an observatory in
- Rs. 1.8
billion for Pakistan Communication Satellite System (PakSat IR).
7.171 million for metrological training facilities for
13.719 million for capacity building of the meteorological department.
9.935 million for establishment of the aeronautical met office at
Sialkot International Airport.
103.71 million for the remote sensing data transmission facility.
37.392 million for the satellite bus development facility (Phase I).
26.161 million for development of satellite dynamic system test
- Rs. 41
million for establishment of the atmospheric data receiving and
245.79 million for the PakSat project (Phase I extended).
million for upgradation of the precision machine shop.
the ongoing projects Rs. 7.175 million has been allocated for networking
in the offices of the defence ministry.
17.587 million for National Centre for Drought and Early Warning
- Rs. 750
million for construction of Gwadar International Airport.
- Rs. 100
million for development of a satellite environmental validation and
testing facility in Lahore.
- Rs. 14.3
billion has been earmarked for health sector development in
the year 2007-08, showing an increase of 29.7% over the last year’s Rs. 11
12.68 billion will be met from domestic resources and Rs. 1.52
billion through foreign assistance.
Initiative for Urban Clinics envisages 815
medical clinics at the union council level in cities like Karachi,
Rawalpindi, Lahore, Islamabad, Peshawar and Quetta.
A doctor, lady health worker and a dispenser would work at each
clinic. Staff would be
recruited from local union councils to generate 4,917 jobs.
are total 100 different ongoing and new projects under health sector.
among the new projects is construction of a medical tower at Jinnah
Postgraduate Medical College (JPMC) in Karachi at a cost of Rs. 400
million, which will be met by the Government through its own resources.
The total cost of the project is Rs. 3.3 billion.
- Rs. 200
million has been allocated for construction of a medical tower at the Pakistan
Institute of Medical Sciences (PIMS), Islamabad.
The total cost of the project is Rs. 2.2 billion.
of a burns centre in Faisalabad at a cost of Rs. 240 million
is also included. An amount of
Rs. 140 million has been earmarked for upgrading the paediatric cardiac unit
at the National Institute for Handicapped in Rawalpindi, from a total of Rs.
321 million allocated for the project.
is also planning to construct two trauma centres in Lahore and
- Rs. 60
million has been earmarked for providing 64 Slice Helical CT Scan
angiography equipment at the Karachi Institute of Heart Diseases.
- A cancer
hospital in Lahore will also be constructed for which Rs. 46.340
million has been reserved. A
sum of Rs. 50 million has been fixed for strengthening the National Control
Authority for Biology, Islamabad, and its independent laboratory.
The project’s total cost is Rs. 231 million.
- Rs. 4.89
billion has been allocated for National Programme for Family Planning
and Primary Healthcare, of which Rs. 4.5 billion will be
Government’s own contribution and Rs. 360 million foreign loan.
- Rs. 360
million has been earmarked for Enhanced HIV/AIDS Control Programme.
Pakistan, two big companies are working in the private sector producing dairy
products. Under Prime
Minister Special Cell livestock produce and allied services will be spread
to 1,963 union councils all over the country benefiting 3 million poor
farmers. As a result of these
measures, 12 million litres additional milk will be produced and 200,000
tons additional meat will be produced.
- As a
result of this Government policy, a multinational company, i.e., Nestle, has
set up the largest milk processing plant in Asia in Pakistan.
Similarly, other companies are also bringing investment from within
as well as outside the country.
- With the
use of better seeds agriculture production can potentially
improve by 20% to 30%. The
government has allocated Rs. 336 million for production of better seeds.
15 new seed testing laboratories will be set up.
For better production of cotton, BT Cotton seeds and Bio-Safety
arrangements will be introduced.
- The general
lifestyle of poor farmers living in rural areas has been improved
during the last 5 – 6 years. They
are now spending their incomes on their children’s education; renovation
of houses; set up of tube-wells; purchase of tractors, harvesters, cycles,
motorcycles, mobile / WLL telephone sets, TV, DVD/VCD player, furniture,
- The long
awaited Bhasha-Diamir Dam’s designing is going to complete
in 2008. Rs. 500 million has
been reserved for this project.
- The work
on upraising of Mangla Dam started by WAPDA is close to
completion. As a result, 2.09
million acres feet additional water will be available for storage and 644 MW
electricity will be generated. By
construction of these dams, 2.6 million acres land will be irrigated.
Underdeveloped areas will be transformed into prosperous pieces of
- The work
is also started on expansion of Kara Kurram Highway.
- The work
on expansion of Hasanabad-Mansehra Section will be started in
the next few months.
- The N-5
Highway will be linked with the National Trade Corridor.
Rs. 29 billion has been allocated for this purpose.
The total length of this highway is 1,585 km, which will be
constructed at a cost of Rs. 147 billion.
Real Estate Investment Trust (REIT):
REIT a new form of investment tool is being introduced for investment in capital
markets which will enable small investors to reap profits from investments in
real estate, which, so far, was open only to large investors.
In order to increase the use of REIT their use has been given tax
concession. For example, the profit of REIT, will be exempted from
taxation up to 90%., upon distribution. The
most important tax concession for REIT is that under this scheme sellers of
property will be exempted from tax up to 2010.
Amendment in Companies Ordinance, 1984:
the benefits of shareholders, the shareholder who has 12.5% shares of any
company call for an election of new Board of Directors in the next AGM.
In order to provide protection to minority shareholders, any person or
persons with 20% or more shares of any company, can request SECP for special
- A Special
Economic Zone (SEZ) near Lahore is being set up for Chinese
products, with Chinese assistance. Chinese
companies would exclusively invest there.
Apart from that, companies intending to set up SEZs would be given
various tax breaks and different incentives.
These measures would boost up our industry.
laws are being framed for setting up of SEZs.
time ago R&D facility was provided to textile sector.
Now the DTRE system is being revamped whereby the import of PSF will
be allowed through DTRE. R&D
facility will also be available to fibre manufacturers @ 3.5%, which will be
availed through SBP.
facility of debt/swap to spinning sector is granted.
Similarly, for exporter the existing withholding tax rate of 0.75% to
1% is being rationalised and 1% of withholding tax is being proposed.
The textile exporters will also be beneficiaries.
duty on more than 400 tariff lines of raw materials and machinery used in
textile industry has been reduced.
of raw material and components for local production of CNG
processors, the non-conventional energy sources equipment from sales tax and
reduced to 0 on sports football bladder raw materials.
reduced to 5%-10% from 10%-20% on components on electrical