1. ECONOMY OF PAKISTAN: 2012-13 Main Focus Presentation by
Federal Budget:
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 ( ), Member Governing Council, International Federation of Accountants (IFAC), New York ( ), President, South Asian Federation of Accountants (SAFA) (1997), President, Institute of Cost and Management Accountants of Pakistan ( ), President, Association of Management Development Institutions of South Asia (AMDISA) ( ), Pro Vice-Chancellor University of the Punjab, Lahore ( ), Founder Director, Institute of Business Administration (IBA), University of the Punjab, Lahore ( ) & Senior Faculty Member of Hailey College of Commerce, University of the Punjab, Lahore ( ). Earlier he served in Corporate Sector in Pakistan for eight years ( ).

2. WELCOME TO OUR PROGRAM PRESENTATION FRAME Economy of Pakistan
Constitution of Pakistan 1973: Economic Matters
Federal Budget:
Pakistan: Economic Challenges: 2013
Economic Management Matrix
Fiscal Policy
Suggested Charter of Economy

3. 1: ECONOMY OF PAKISTAN Components S. No. Components 1. Agriculture 2.
Manufacturing 3.
Services

4. 1-1: AGRICULTURE Components S. No. Components 1. Livestock 2. Crops:
1. Major
2. Minor 3.
Fishing 4.
Forestry

5. 1-2: MANUFACTURING Components S. No. Components 1. Industry: High Tech
LSM
SME
Cottage 2.
Minerals 3.
Electricity 4.
Construction

6. 1-3: SERVICES Components S. No. Components 1. Physical 2. Social 3.
Financial 4.
Intellectual

7. 2: Constitution of Pakistan 1973:
Economic Matters
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

8. 3: Federal Budget: 2012-13 MASTER CHART (Federal Budget 2012-2013)
Particulars
Rs. b %
Needed
1. Current Expenditure
2,612 81
2. ADP:
591 19
Available
3,203
100
Net Federal Revenue
1,775 51
Shortfall
1,428* 49
Financing Pattern
1.Capital Receipts (Net)
484 34
2. Bank Borrowings
478
3.External Receipts
386 27
4.Estimated Provincial Surplus 80 05

9. 3-1: FEDERAL REVENUE BUDGET: 2012-13 Federal Revenue Budget 2012-13
Particulars
Rs. b %
Current Revenue
1. Indirect Taxes
1,572* 49
Composition
Rs.b
Sales Tax
1,077 69
Custom Duties
248 15
Federal Excise
125 08
Others (Plus Petroleum Levy)
122
100
2. Direct Taxes
932 29
2,504 78
3. Non-Tax Revenue
730 22
3,234

10. 3-1: FEDERAL REVENUE BUDGET: 2012-13
Rs. B %
4. Less: Transfer to Provinces
1,459
Net Federal Revenue
1,775
Current Expenditure
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
Less: Deficit in Revenue Budget
837

11. 3-2: Federal Annual Development Plan 2012-2013
Particulars
Rs. b %
Development Expenditure
1. Federal Govt: 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. 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)*
(61)
591
100

13. 3-2: Federal Annual Development Plan 2012-2013
Break up of Internal Resources
Rs. b
1. Deficit in Revenue Budget for
837
2. Less: Net Capital Receipts
(478)
(359)*

14. 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
*Based on Population Census of 1997.

15. 4: PAKISTAN: ECONOMIC CHALLENGES: 2013
A: Economy Challenges 2012
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
Exports Growth: Turning Negative
Mysterious Growth in Remittances: Continuing
Economy Remaining the off radar Screen of the Government

16. 4: PAKISTAN: ECONOMIC CHALLENGES: 2013 B: Measures with Question Mark
7th NFC Award
1. New NFC Award diverted bulk of Federal Government Resources to Provinces at a time when they were needed more:
To Finance Growing Interest Payment
Security Related Expenditure
Bailing out of PEs with losses
Paying WAPDA/PEPCO to Finance their Inefficiencies
Tax System:
Failure to Reform Taxation System and Broadening Tax Base to Generate more Tax Revenues.

17. 4: PAKISTAN: ECONOMIC CHALLENGES: 2012 B: Measures with Question Mark
3. Petroleum Products
These are doubly taxed:
Exchange rate depreciation has increased the landed cost of oil.
Petroleum Development Levy (PDL) is levied on Inflated basis to mobilize more resources.

18. 4: PAKISTAN: ECONOMIC CHALLENGES 2013
C: 2013 Outlook
Outlook for 2013 is Likely to Further Deteriorate.
Political uncertainty with adverse consequences on the economy.
Fiscal indiscipline hallmark of the Government during election year.
Mobilization through taxation will take the back seat.
Reliance on Non-Tax Revenues would increase further.
Expenditure is expected to rise further with budget deficit likely to be in the range of 6% 6.5% of GDP.
Economy will remain out of focus of the political leadership.
Energy shortage (electricity and gas) to aggravate further.
Politics is likely to dominate economics.

19. 4: PAKISTAN: ECONOMIC CHALLENGES: 2013
D: Expected Trends 2013
1. GDP Trend : 3-4%
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.

20. 4: PAKISTAN: ECONOMIC CHALLENGES: 2013
E: Consequences
National Security at Stake
Miss-Governance to Continue
In Search of a Direction

21. 5: ECONOMIC MANAGEMENT MATRIX
Dimension
Management
Consumption
Production
Exchange
Distribution
Public Finance
Planning
Organizing
Staffing
Leading
Controlling

22. 6: FISCAL POLICY Objectives Full Employment Resource Mobilization
Resource Allocation
Maintenance of Economic Stability
Income Re-Distribution
Canons of Taxation: Adam Smith
Equity
Certainty
Convenience
Economy
Other Canons
Flexibility
Situation

23. 6: FISCAL POLICY 4. Income Tax Rates 2013 Individuals
- Non-Salaried - 5 brackets (10% %)
- Salaried – 5 brackets (5.0% %)
- Exempt upto Rs. 4 Lac
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% %
5. Capital gains
With holding period less than six months 10%
More than six month but less than 12 months 8%

24. 7: SUGGESTED CHARTER OF ECONOMY
Domestic Resource Mobilization
Income Tax by All
Self Reliance for Financing
ADP Financing
Provincial Govt Budgets
Public Enterprises Losses
Good Governance & Corporate Governance
Inflationary Impact: Salary increase
CBA----PSA
NPLs
Professionals Role
Holistic approach to Economic Development with equitable distribution of wealth and income across the board
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