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

1-1: AGRICULTURE
Components
S. No.

Components

1.

Livestock

2.

Crops:
1. Major
2. Minor

3.

Fishing

4.

Forestry

1-2: MANUFACTURING
Components
S. No.

Components

1.

Industry:
High Tech
LSM
SME
Cottage

2.

Minerals

3.

Electricity

4.

Construction

1-3: SERVICES
Components
S. No.

Components

1.

Physical

2.

Social

3.

Financial

4.

Intellectual

2: CONSTITUTION OF PAKISTAN
1973:
ECONOMIC
Article

MATTERS
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

3: FEDERAL BUDGET: 2012-13

MASTER CHART
(FEDERAL BUDGET 2012-2013)
Particulars
NEEDED
1. Current Expenditure
2. ADP: 2012-2013
AVAILABLE
Net Federal Revenue
SHORTFALL

Rs. b

2,612
591
3,203
1,775
1,428*
3,203

81
19
100
51
49
100

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

3-1: FEDERAL REVENUE BUDGET:

FEDERAL2012-13
REVENUE BUDGET 2012-13
Particulars
CURRENT REVENUE
1. Indirect Taxes

Rs. b

1,572*

49

Composition

Rs.b

Sales Tax

1,077

69

Custom Duties

248

15

Federal Excise

125

08

Others (Plus Petroleum Levy)

122

08

1,572*
2. Direct Taxes
3. Non-Tax Revenue

100
932
2,504
730
3,234

29
78
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
DEVELOPMENT
EXPENDITURE

ANNUAL DEVELOPMENT PLAN 2012-2013

Rs. b

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
Rs. b
INTERNAL
RESOURCES
1. Deficit in Revenue Budget
for 2012-2013
2. Less: Net Capital Receipts

837
(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
B: CHALLENGES:
Measures with Question
Mark
2013

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
B: CHALLENGES:
Measures with Question
Mark
2012
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

C: 2013 Outlook
4: PAKISTAN:
ECONOMIC
Outlook
for 2013 is Likely
to Further
Deteriorate.
CHALLENGES 2013

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.
18

4: PAKISTAN:
ECONOMIC
D: Expected Trends
2013
1. GDP Trend
:
3-4%2013
CHALLENGES:

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
Dimension

Consumpti
Exchang Distribut
on
Productio e
ion
n

Public
Financ
e

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

POLICY
4. Income6:
TaxFISCAL
Rates 2013
1. Individuals
- Non-Salaried - 5 brackets (10% -----25%)
- Salaried 5 brackets (5.0% -----20%)
- Exempt upto Rs. 4 Lac
2. Companies
- Public, Private& Banking Companies 35%
- Small companies
25%
3. Dividend received by all tax payers 10% and 20%
on banking company from its assets management
company
4. Property income
- Rs. 150,000 exempt
- Rates 5% -----10%
5. Capital gains
- With holding period less than six months
10%
- More than six month but less than 12 months
23
8%

7: SUGGESTED CHARTER OF
1. Domestic Resource Mobilization
ECONOMY
2. Income Tax by
All
3. Self Reliance for Financing
4. ADP Financing
5. Provincial Govt Budgets
6. Public Enterprises Losses
7. Good Governance & Corporate Governance
8. Inflationary Impact: Salary increase
9. CBA----PSA
10.NPLs
11.Professionals Role
12.Holistic approach to Economic Development with
equitable distribution of wealth and income
across the board

24