economy of-pakistan

ECONOMY OF PAKISTAN: 2012-13

Presentation byProf. Dr. Khawaja Amjad SaeedFounder 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 for eight years (1958-65).

Main Focus1. Economy of Pakistan2. Federal Budget: 2012-20133. Economic Challenges: 20134. Fiscal Policy 5. Suggested Charter of Economy

1

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

3

S. No. Components

1. Agriculture

2. Manufacturing

3. Services

Components

1-1: AGRICULTURE

4

S. No. Components

1. Livestock

2. Crops: 1. Major 2. Minor

3. Fishing

4. Forestry

Components

1-2: MANUFACTURING

5

S. No. Components

1. Industry: High Tech

LSMSME

Cottage 2. Minerals

3. Electricity

4. Construction

Components

1-3: SERVICES

6

S. No. Components

1. Physical

2. Social

3. Financial

4. Intellectual

Components

2: CONSTITUTION OF PAKISTAN 1973:ECONOMIC MATTERS

7

Article 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

8

MASTER CHART (FEDERAL BUDGET 2012-2013)

Particulars Rs. b %NEEDED

1. Current Expenditure 2,612 812. ADP: 2012-2013 591 19

AVAILABLE 3,203 100Net Federal Revenue 1,775 51

SHORTFALL 1,428* 493,203 100

FINANCING PATTERN

1.Capital Receipts (Net) 484 342. Bank Borrowings 478 343.External Receipts 386 274.Estimated Provincial Surplus

80 05

1,428*

100

3-1: FEDERAL REVENUE BUDGET: 2012-13

9

FEDERAL REVENUE BUDGET 2012-13Particulars Rs. b %

CURRENT REVENUE1. Indirect Taxes 1,572* 49

Composition Rs.b %Sales Tax 1,077 69Custom Duties 248 15Federal Excise 125 08Others (Plus Petroleum Levy)

122 08

1,572* 1002. Direct Taxes 932 29

2,504 783. Non-Tax Revenue 730 22

3,234 100

3-1: FEDERAL REVENUE BUDGET: 2012-13

10

Rs. B %4. Less: Transfer to Provinces 1,459Net Federal Revenue 1,775

CURRENT EXPENDITURE

1. Debt Servicing 1,142 442. Defence Affairs & Services 545 213. Cost of Running Govt 404 154. Grants & Transfer to Provinces

312 12

5. Subsidies 209 082,612 100

Less: Deficit in Revenue Budget

837

1,775

3-2: FEDERAL ANNUAL DEVELOPMENT PLAN 2012-2013

11

ANNUAL DEVELOPMENT PLAN 2012-2013Particulars Rs. b %

DEVELOPMENT EXPENDITURE

1. Federal Govt: 2012-13 Departments (rs. 207b), Corporations (Rs. 80b) Special Programs (Rs. 27b) Special Areas (Rs. 36b) and ERRA* Rs. (10b)

360 61

2. Other Developments Expenditure

154 26

3. Provincial Governments

77 13

591 100

*Earthquake Rehabilitation & Reconstruction Authority


12

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)* (61)

591 100


13

BREAK UP OF INTERNAL RESOURCES

Rs. b

1. Deficit in Revenue Budget for 2012-2013

837

2. Less: Net Capital Receipts

(478)

(359)*

3-3: PROVINCIAL ALLOCATION: 7TH NATIONAL FINANCIAL AWARD

14

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.

4: PAKISTAN: ECONOMIC CHALLENGES: 2013

15

A: Economy Challenges 2012

1. Business Environment: Deteriorating 2. Foreign Investment: Declining3. Exchange Rate: Depreciating 4. Inflationary Pressure: Building Up5. Foreign Exchange Reserves: Depleting 6. Industrialists relocating their Industries Abroad 7. Electricity and Gas Shortages: Aggravating 8. Relations with International Financial Institutions Including

IMF: Deteriorating9. Exports Growth: Turning Negative 10. Mysterious Growth in Remittances: Continuing 11. Economy Remaining the off radar Screen of the

Government


16

B: Measures with Question Mark7th 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 Paymentb. Security Related Expenditure c. Bailing out of PEs with lossesd. Paying WAPDA/PEPCO to Finance their

Inefficiencies2. Tax System:

Failure to Reform Taxation System and Broadening Tax Base to Generate more Tax Revenues.


17

B: Measures with Question Mark

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.

4: PAKISTAN: ECONOMIC CHALLENGES 2013

18

C: 2013 Outlook Outlook for 2013 is Likely to Further Deteriorate. 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. 8. Politics is likely to dominate economics.


19

D: Expected Trends 20131. GDP Trend : 3-4%2. Domestic Investment : Not expected to Pick up3. Unemployment and Poverty are likely to rise further4. 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 IMFc. 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.


20

E: Consequences

1. National Security at Stake

2. Miss-Governance to Continue

3. In Search of a Direction

5: ECONOMIC MANAGEMENT MATRIX

21

Economic Dimension

ManagementDimension

Consumption Production Exchange Distribution Public Finance

Planning

Organizing

Staffing

Leading

Controlling

6: FISCAL POLICY

22

1. Objectives a. Full Employment b. Resource Mobilization c. Resource Allocation d. Maintenance of Economic Stabilitye. Income Re-Distribution

2. Canons of Taxation: Adam Smitha. Equityb. Certainty c. Convenience d. Economy

3. Other Canonsa. Flexibility b. Situation

6: FISCAL POLICY

23

4. Income Tax Rates 20131. 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 8%

7: SUGGESTED CHARTER OF ECONOMY 1. Domestic Resource Mobilization 2. Income Tax by All3. Self Reliance for Financing4. ADP Financing5. Provincial Govt Budgets 6. Public Enterprises Losses 7. Good Governance & Corporate Governance8. Inflationary Impact: Salary increase 9. CBA----PSA10. NPLs11. Professionals Role 12. Holistic approach to Economic Development with equitable

distribution of wealth and income across the board

24

economy of-pakistan

Economy & Finance