Pakistan's budget promotes austerity for new gov't

Finance Minister Ishaq Dar presented Wednesday the first budget of the new Pakistani government for fiscal year 2013-14 envisioning spending of 3.59 trillion rupees ($35.9 billion), a nominal increase from last year's outlay of 3.58 trillion rupees.

"This nominal increase in the size of the budget is the first signal that we are promoting austerity," Dar said in his budget speech.

He also announced abolishing all secret funds for all ministries, departments and entities except the Inter Service Intelligence and Intelligence Bureau spy agencies.

A secret fund operated by the Ministry of Information was regarded as "abominable" by journalists and they had campaigned against it.

As part of the austerity drive, the number of ministries in the federal government will be reduced to 40 from around 48.

The expenditure on Prime Minister House and Prime Minister Office is to be slashed by 45 percent and Prime Minister Nawaz Sharif has decided to do away with Prime Minister Discretionary Fund that was estimated at $440 million during the 2012-13 fiscal year.

The budget is the first under Sharif, who came to power after the May 11, 2013 elections.

Dar became minister of finance on June 7.

Elaborating the government's economic "vision," Dar said the private sector would be "the focal point" of economic activity and the government should invest only in projects requiring large investments beyond those likely to be met by private investors.

He also said the "accelerated and transparent" privatization of state enterprises, financial restructuring and appointment of professional management in these enterprises would be carried out.

Dar added the goal is to reduce the budget deficit to 4 percent in the next three years.

The Public Sector Development Program has been allocated 1.16 trillion rupees for infrastructure development and Dar said a network of motorways from Peshawar to Karachi would be completed in the next five years and Gwadar Port in Baluchistan will be linked with Pakistan's northern areas bordering China.

And as part of efforts to overcome the energy shortfall, thermal power plants at Jamshoro and Muzaffargarh will be converted from oil-gas to coal.

The import of hybrid vehicles up to 1200cc are to be exempted from all taxes and duties and tax rates on 1201-1,800cc and 1801-2500cc hybrids have been slashed by 50 percent and 25 percent, respectively.

Dar said Pakistan will also extend the income tax holiday in special economic zones from five to 10 years to attract more foreign investment and cut the highest corporate tax from 35 to 30 percent.

But the general sales tax will go from 16 to 17 percent.