ISLAMABAD, 16 June — Pakistan’s Finance Minister Shaukat Aziz yesterday unveiled the national budget projecting a hike in defense spending and a GDP growth of 4.5 percent.
The 2002/03 budget allocates 146 billion rupees ($2.43 billion) for military spending compared with 131.6 billion rupees in the original 2001/02 spending plan and 151.7 billion in the revised budget. The revised defense spending figure reflected emergency outlays after the US-led war on Afghanistan and a military standoff with India.
The finance minister, however, made it clear that the defense budget could be raised further if the need was felt during the year.
The budget levies a number of taxes on consumption and consumer items without indicating how much will he raised during the new fiscal 2003 that starts July 1. A number of taxes and increase in utility prices like those on natural gas and electricity had already been announced before the budget announcement. However, he said, the overall tax collection during 2003 is projected at 460 billion rupees up from 414 billion rupees in the 2002 fiscal.
The budget carries incentives for overseas Pakistanis remitting money through banking channels.
Overseas Pakistanis remitting up to $ 2,500 annually will be able to bring in duty-free goods worth up to $800.
Those remitting $10,000 or more per year will be allowed duty-free imports of up to $1500. This facility will also be allowed to those returning home for good, he said. The finance minister also announced concessions for the corporate sector.
Aziz said the overall spending is budgeted at 742 billion rupees in 2002/03.
The finance minister announced the budget in a speech broadcast and telecast nationally in which he said the current expenditure will be raised from 621 billion rupees in 2002 to 648 billion rupees.
The actual development spending that was 124 billion rupees in 2002, will be raised to 134 billion rupees in 2003 providing for increased allocation for poverty alleviation, health, education, safe drinking water and several other sectors. Another 10 billion rupees will be spent on development projects currently on the planners’ drawing board, which means that development spending can rise to a record 144 billion rupees.
The budget deficit that was 186 billion rupees or 4.9 percent of GDP in 2002 will be reduced to 4 percent of GDP in 2003. The GDP growth in 2002 was 3.6 percent, which was better than many other countries in the region, Aziz said. He said the GDP target for 2003 is 4.5 percent.
Aziz said the continuing domestic drought and stagnation, global recession and the events of Sept. 11 hit the economy during fiscal 2002. Externally it meant a loss of $3 billion as Western importers canceled export orders, Pakistani imports were hit, revenues from customs duties declined and the overall tax collection fell short of the budgeted target. As such, “ fiscal 2002 was a challenging year which the nation faced with determination and fortitude.” It was, he said, in such circumstances that “the most significant support came from the expatriate Pakistanis,” working in Saudi Arabia, Gulf, and North America. “The expatriates,” he said, “doubled their home remittances from $ 1.1 billion in fiscal 2001 to $ 2.2 billion in fiscal 2002.” “This showed their confidence in the future of Pakistan and its economy. They reduced the use of ‘hawala’ and started sending more remittances through normal banking channels. They also started investment in the country.” The confidence of expatriates and foreign investors helped stabilize Pak rupee. “In fact the exchange rate was so stable and the rupee became so strong that it had to be checked from rising further because a continuous rise in the value of the rupee against the dollar could have made Pakistani goods more costly to foreign buyers and our exports could have been hurt,” he said.
The finance minister assured expatriate Pakistanis and other investors that the economy would rebound. He said Pakistan is an investor-friendly country in which investor confidence is growing. In order to encourage investment taxes have been reduced, cost of financing reduced, rate of inflation brought down and prospects for larger employment in a number of industries particularly information technology (IT) have increased. He said the government has averted “all the dangers that the economy was threatened with, and proved that it can withstand all shocks.”
