ISLAMABAD - Finance Minister Senator Ishaq Dar Friday presented a growth oriented deficit budget of Rs4.3 trillion for the year 2015-2016 to achieve annual growth target of 5.5 %, presenting it as an achievement of the government in the face of pressing financial constraints in lieu of Pakistan’s counter terrorism efforts and slow growth.

With its third budget since coming into power in 2013, the ruling Pakistan Muslim League-Nawaz also unveiled a three year medium term macro-economic framework spanning over financial year 2015-16 to 2017-18 with the aim at gradually increasing the GDP growth to 7% by FY 2017-18 whereas inflation would be contained to a single digit.

Investment to GDP ratio is projected to rise to 20% at the end of medium term, and fiscal deficit would be brought down to 3.5% of GDP. Similarly, the tax to GDP ratio would be increased to 13% and foreign exchange reserves would be maintained above $20 billion by the end of year 2017-18.

In his budget speech for Fiscal 2015-16 in National Assembly, Ishaq Dar said in order to achieve targeted growth rate of 5.5 %, the sectoral contributions are agriculture 3.9%, industry 6.4% and services 5.7%.

The budgetary proposals laid down in the Lower House include Rs4089 billion total expenditure for the year 2015-16 as compared to the revised estimates of Rs3902billion for 2014-15, exhibiting 4.8 % increase.

The government has earmarked Rs781 billion for the Defence Affairs and Services with 11% increase over the last year because of the ongoing military operation Zarb-e-Azb under counter terrorism programme.

Rs700 billion allocation has been made for federal Public Sector Development Program (PSDP) with 29% increase over last year, Rs1280 billion for interest payment, Rs231 billion for pensions, Rs138 billion for subsidies, Rs326billion running expenditure of civil government and Rs410 billion for grants and transfer.

As part of government’s popular measures, a phenomenal increase up to 100% in the pay of senior private secretaries, private secretaries and assistant private secretaries has been announced. 7.5% Ad-hoc Relief Allowance on running basic pay will be allowed to federal government employees from next month, July 1, against the recommendation of 5% increase by the committee. Ad-hoc increase of 2011 and 2012 will be merged in the pay scales as recommended by the committees, whereas, 25% increase in the medical allowance of the all government employees has been announced.

The pensioners will get relief of 7.5% increase in net pension and 25% increase in medical allowance. Also, the finance minister announced extension in family pension for widow/divorced daughter for lifetime or till her new marriage. For pensioners and senior citizens, upper limit of investment in Bahbood Saving Schemes has been increased from Rs3 million to Rs4 million.

In special measures unveiled in the budget for the welfare of the labour class, the minimum wage rate has been increased from Rs12,000 to Rs13,000 per month. Dar also announced special measures including premature increment for Grade-5 employees, Rs10,000 uniform allowance for PhD/DSc degree holders.

For the widows of victims of suicide attacks, the minister said government would provide a relief to bear any outstanding bank loans up to Rs1 million, including mark-up obtained by deceased husband. Likewise, he said that both the federal and Balochistan governments would jointly compensate the affected persons of Mirani Dam site with an amount of Rs3.5 billion.

The Finance Minister also announced Public Sector Development Programme (PSDP) amounting to over 1513 billion rupees. Out of this, 700 billion rupees have been earmarked for the development projects to be carried by the federal government while 814 billion rupees will be disbursed amongst the federating units for their development programs.

Ishaq Dar said Rs184 billion are being allocated for the construction of highways while Rs248 billion are being earmarked for the power related projects. He said this amount has been earmarked with an objective to generate additional cheap electricity and overcome loadshedding by 2017. He said the government has prioritised the energy sector and has launched several projects in this regard. Dar said work on ongoing projects will be expedited during the current fiscal year and a huge amount has been allocated for this purpose.

The minister said work is in progress to add 7,000 megawatts to the national grid besides another 3,600 megawatts through LNG based power plants by December 2017. Moreover, he said, projects like Dasu, Diamer Bhasha Dam and Karachi nuclear power plants are also being executed to address the energy crisis.

He said work on various projects for the small dams and link canals will not only continue during the next fiscal year but it will be expedited in all the four provinces. Similarly, he said the projects to overcome wastage of floodwater will also be continued with focus to complete them in the shortest possible time.

On the infrastructure projects, Ishaq Dar said Lahore-Karachi motorway is the priority of the government which will change the destiny of the nation. He said this project will generate many job opportunities. He said hefty amount is also being allocated for the construction of Abdul Hakeem Multan section, Sukkur-Multan and Karachi- Hyderabad sections of the motorway. The minister said Rs185 billion have been allocated for the construction of bridges.

He said China-Pakistan Economic Corridor (CPEC) project which will prove to be a game changer is also a top priority of the government and for this purpose work on Thakot-Islamabad road will be launched during the next fiscal year. For this purpose Rs29 billion are being allocated. Similarly, Rs10 billion is being allocated for construction of Islamabad-DI Khan Road.

About the revival of Pakistan Railways, the minister said a comprehensive plan has been devised which include dualisation of railway track from Raiwind to Khanewal and Shaddra to Lala Musa. He said rehabilitation of Karachi-Khanpur track will be completed during the next fiscal year. He said 159 weak railway bridges will be rehabilitated by 2017. Dar said 170 new locomotives will be inducted into the system besides repairing 100 locomotives and purchasing of 1,500 new passenger coaches. He said a program is also being launched to renovate railway stations throughout the country besides improving signaling system between Lodhran and Kotri.

The finance minister said under the Benazir Income Support Program (BISP) allocations are being enhanced up 102 billion rupees which will cater to 31 million people of 5.3 million deserving families. He said budget of Bait-ul Mal is being doubled from two to four billion rupees.

Under Universal Telecenters program, Dar said, 12 billion rupees are being allocated to set up 217 telecenters all over the country in the first phase. Work is underway to connect 128 tehsils of the country especially under developed areas with fibre optic. Another program in telecommunication sector is being launched at a cost of 3.6 billion rupees which will connect rural areas with the rest of the country.

Coming to the education sector, the finance minister said Rs20 billion are being allocated for 143 projects of higher education commission besides allocating Rs51 billion for the higher education commission for current expenditures. He said federal government stands by its commitment to increase expenditures on education sector and bring it to 4% of GDP during its tenure, but this had to be done by centre and provinces jointly as major portion of the education has gone to the provinces after the 18th amendment.

Dar said 100 billion rupees are being allocated in the next budget for future security arrangements and return of IDPs of North Waziristan. He proposed one-time tax on rich persons and companies which have the income of more than Rs500 million per annum at a rate of 4% to ensure raising of funds for IDPs which is estimated up to Rs80 billion.

The finance minister said that to discourage undocumented economy, it has been decided that 0.6% withholding tax may be imposed on the fund transfers and banking instruments. However, the tax payers who file their returns will be exempted from this it. He said tax rate on dividend is being increased from 10 to 12.5%. However, the tax rate on mutual funds will remain 10%. He said that 10% advance income tax which was being received on the bills of more than Rs100,000 will now be imposed on the bills up to Rs75,000 due to decrease in power tariff.

The finance minister also announced several tax relief measures to promote corporate culture and documentation of the economy. Under the policy, the rate of tax on companies which was 33 % this year is being brought down to 32 % for the next financial year.

Profit on transmission line projects is being exempted from income tax for 10 years to incentivise the private sector to invest in electricity transmission projects. The facility would be available to all those projects that would be launched by June 2018.

He said 5% tax on salaried taxpayers with taxable income between Rs400,000 and 500,000 pay is being reduced to 2%. The rate for non-salaried individuals and association of persons of the same category would be 7% as against 10% during current financial year.

Ishaq Dar also announced various incentives to give boost to the construction sector. He said incentives will also be given to the industrialists for creation of more job opportunities. He said under the green field industrial package of the prime minister, tax exemption is being extended up to June 30, 2017.

Similarly, he said exemption in sales tax and custom duty on the import of solar panels is being extended up to June 30, 2016.He said exemption in income tax on the equipment being used for the production of solar and wind energy plants are also being extended for the next five years. Ishaq Dar said the companies in the business of Halal meat will be exempted from income tax for four years.

The finance minister said various tax rebates and exemptions are being announced in the budget for the promotion of fish business, import of agriculture machinery and equipments and production of these equipments besides installation of solar tube wells. He said exemption of federal excise duty and withholding tax is also being given in the civil aviation sector.

The finance minister said the government has decided to provide various incentives and tax exemptions in Khyber Pakhtunkhwa to flourish business and industries to overcome the losses incurred due to terrorism and extremism.

He announced various steps to give incentives to the exporters for giving a boost to the exports in the coming years. He said special incentives will be given in various sectors of exports, including product diversification, value addition, trade facilitation, enhanced market access and institutional strengthening. For this purpose, six billion rupees are being allocated in the budget besides taking steps for reconstitution of export development fund.

He said significant measures will be taken to enhance textile exports of the country. He said it has been decided to issue interest free loans for the installation of solar tubewells and convert the existing tubewells to solar ones for promotion of agriculture sector.

The minister said the government is focusing on expanding the volume of small agriculture loans for the benefit of growers and loans worth Rs600 billion will be disbursed during the next financial year. He said the rate of federal excise duty on cigarettes is proposed to be increased from the existing 58% to 63% to discourage smoking. Sales tax on import of different varieties of mobile phones is proposed to be increased by 100%.

He said exemptions worth Rs120 billion given under different SROs in the realms of customs, sales tax and income tax are being withdrawn. He announced that power of FBR to issue SROs is being withdrawn and now this power would be used by the federal government in special circumstances. He announced a package of incentives for construction sector. Bricks and crush is being exempted from sales tax for three years up to June 30, 2018 so as to bring down the cost of construction.

Ishaq Dar announced to launch Prime Minister’s Health Insurance Scheme at a cost of Rs9 billion to provide insurance to the patients suffering from serious and contagious diseases. He said initially the scheme is being launched in 23 districts, which will be expanded during the next three years to facilitate 60% poorest segments of the society. He said under this scheme, secondary medical coverage will also be provided in the tribal areas, Islamabad, Gilgit Baltistan and Azad Kashmir.

Under PM Youth Business Loan Scheme, 15,000 loan applications have been approved while 20,000 applications are under consideration. He said under this scheme, rate of markup is being reduced from 8 to 6%. Ishaq Dar announced to provide internship to 50,000 unemployed graduates having education of 16 years during the next fiscal year. He said under this scheme, Rs 12,000 will be given as stipend to the internees. Under the PM laptop scheme, 70,000 laptops have been disbursed among the outstanding students, which will continue in the next fiscal year. He said for all these schemes, Rs20,000 billion are being allocated.

The government targets 4.3 percent fiscal deficit from 5percent in 2015-16.