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In the back-drop of upcoming election, the Federal Budget FY13 is prepared keeping populous measure in mind with overall expansionary theme which may fuel inflation, analysts said. "As expected it was an election budget with no major taxes and with a few relief measures", Muhammad Sohail, a leading analyst and CEO of Topline Securities said.
The government has promised to resolve energy crisis as the finance minister promised to allocate unlimited funds. However million dollar question that remained unanswered was how the government will fund the mounting deficit, he added. He said that the Capital Gain Tax Ordinance (Finance (Amendment) Ordinance, 2012) is now a part of Finance Bill. Nauman Khan, senior analyst at the same brokerage house said few relief measures have been announced while the onus of increasing the tax revenue relies mainly on nominal GDP growth.
He said the budget has not done anything especial to control energy crisis and to find ways to maintain mounting fiscal deficit. He said the subsidy is targeted at Rs 209 billion in FY13 as against actual subsidy estimated at Rs 512 billion in FY12. "Given 20-25 percent differential in the electricity tariff and generation, we estimate subsidy to overshoot this", he added.
The government has earmarked Rs 873 billion, up 20 percent for PSDP programme of which Rs 360 billion is of federal while the rest is for provinces. He said total revenue is set at Rs 3.2 trillion, up 27 percent from revised, of which Rs 2.5 trillion (up 24pc) from tax while Rs 730 billion (up 42 percent) non-tax revenue. The FBR revenue is estimated at Rs 2.4 trillion (up 22 percent) for FY13 but realisation of this target lies on the effectiveness of administrative measures. "We estimate a shortfall of 5-7 percent in tax revenue in the absence of any major taxation steps", he said.
The consolidated deficit is estimated at Rs 1185 billion (4.9 percent of GDP) for FY13. "Given the election year, higher development and subsidy expenses coupled with shortfall in revenue, we foresee this target is not realistic as government in FY12 is expected to post a deficit of close to Rs 1.3 trillion", he added. He said some relief measures were also announced that include increase the basic exemption limit on income tax to Rs 400,000, while reducing tax slab from existing 17 to 5 and increase in government employee salary by 20 percent which will cost Rs 20-30 billion.

Copyright Business Recorder, 2012

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