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FEDERAL BUDGET 2017-18


Graph Source: Business Recorder

Lawmakers had gathered on Friday in the National Assembly in Islamabad ahead of the government's announcement of the Federal Budget 2017-18.

Key features of the budget

The total outlay of the budget is Rs4.75 trillion. The tax revenue target has been set at Rs 4.33tr, of which the Federal Board of Revenue (FBR) will collect Rs 4.01tr. Provincial share to increase to Rs 2,384bn compared to Rs 2,121bn in 2016-17. The development expenditure for next year will be Rs 1.001tr, 40pc higher than the Rs 715bn allocation last year. The defense budget has been set at Rs 920.2bn . The minimum wage has been set at Rs 15,000 . By summer 2018, nearly 10,000 MW of electricity will be added to the national grid, eliminating load-shedding completing. The Benazir Income Support Programme will be allocated Rs 121b for 5.5 million beneficiaries. ---------------------------------

BUDGET TARGETS

Increase real GDP growth to 6pc. Take investment to 17pc of GDP. Contain inflation below 6pc. Contain budget deficit to 4.1pc of GDP. Increase the tax to GDP ratio to 13.7pc. Enhance FBR revenues by 14pc, and increase federal expenditures by 11pc. Increase non-tax receipts by 7pc. Current expenditure to be kept under tight control. Maintain foreign exchange reserves at a level that can cover a minimum of 4 months of imports. Limit the net public debt to GDP ratio to below 60pc of GDP. Continue targeted social interventions.

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AGRICULTURE

Nearly Rs 1.001tr will be given out in agricultural loans next year. Agricultural credit will be extended at 9.9pc on two million 'small loans' of Rs 50,000 for farmers who hold up to 12.5 acres of land. Imported fertilizer will be subsidized and sold for Rs 1,000 per bag. DAP fertilizer will be subject to a fixed sales tax. Urea will continue to be sold at Rs 1,400 per bag by reducing taxes and subsidies. Other fertilizers' prices will be kept constant through tax adjustments. Hybrid seeds for canola and sunflower crops will be exempted from duty. The State Bank will help link the banking system to the Land Record Management Information System to facilitate farmers in securing loans. Agricultural tube wells will be provided subsidized electricity. Certain imported machinery for poultry farming will be charged a lower sales tax rate of 7pc, compared to 17pc previously. ----------

TEXTILES

Mark-up rate on Long Term Financing Facility will be reduced from 11.4pc to 5pc. Duty-free import of textile machinery will be allowed. Zero-rated sales tax regime for textiles, leather, sports goods, surgical goods and carpets will be continued. To stabilise cotton prices, cotton hedge trading will be introduced. A Brand Development fund will also be created. 1,000 stitching units will be established. An online business-to-business and business-to-consumer portal for textile trading will be introduced. ----------

HOUSING

A Risk Sharing Guarantee Scheme for low-income housing will be launched. Under this scheme, the Government will provide 40pc credit guarantee cover to banks and DFIs for home financing for up to Rs 1m. ----------

INFRASTRUCTURE

Pakistan Development Fund will be established to provide long-term infrastructure financing for commercially viable public sector and public-private partnership projects. Pakistan Infrastructure Bank will be established to provide loans to private infrastructure projects. ----------

FINANCIAL SECTOR

Microfinance institutions will provide loans to low-income individuals worth Rs 8bn in total. Withholding tax on cash withdrawals by branchless banking agents will be eliminated. Small and medium enterprises SMEs will be provided easy-to-access loans through a risk mitigation facility secured with Rs 3.5bn from the State Bank. ----------

INFORMATION TECHNOLOGY

An IT park is being established with the help of South Korea in Islamabad at a cost of Rs 6bn. Startup software houses will be exempted from income tax for the first three years. IT exports from Islamabad and other federal territories will be exempted from sales tax. IT companies shall be allowed to open foreign exchange accounts in Pakistan on the condition that deposits in these accounts shall only be allowed through remittances from abroad in respect of their export earnings. They will be allowed to use these accounts for meeting business related payments outside Pakistan. Withholding tax on mobile phone calls to be reduced from 14pc to 12.5pc, while the sales tax will also be reduced to 17pc from the current 18.5pc. The customs duty on smartphone sets will be cut to Rs 650 per set from Rs1,000 per set. Import duty on mobile telecom products will be reduced. ----------

DEVELOPMENT EXPENDITURES

Federal development expenditures have been increased 37pc. Infrastructure will get 67pc of the PSDP budget. Rs411bn will be allocated for transportation and