PIPS Research Digest May 2016

Parliamentary Research Digest M A Y , 2 0 1 6 V O L U M E 3 , I S S U E 0 5

I N SI DE THI S

I SSU E:

CONCEPT

Economic

Indicators-Facts

and Figures of

Pakistan

Page 17

Editorial Pakistan Institute for Parliamentary Services (PIPS) takes pride in the fact that it commenced the tradi-tion of setting up a Budget Desk in 2012, whereby the Institute provides research and capacity building in pre, during and post budget stages. This year the tradition was only strengthened as the Institute held earlier this year PSDP orientations in National Parliament and provincial assemblies as well as sharing of anticipated paper and a module reader on Budget and Committee work with Committee Chairs of Na-tional Parliament. PIPS legislation wing held a pre-budget public hearing for Senate Finance Committee while on May 26th, Economy and Budget Desk in Research wing held an absorbing Pre Budget Seminar. The recommendations of these events are also shared in this Issue of the Digest. This issue of PIPS Parliamentary Research Digest Comprises articles related to Budget documents and analysis in addition to absorbing write ups on related themes. It is matter of great satisfaction of Parlia-ment of Pakistan, PIPS BoG and its team that 7th Secretary General of Commonwealth Parliamentary Association Mr Akbar Khan visited the Institute on May 6th, 2016 and expressed that “he is delighted to see the excellent work PIPS is doing to strengthen Parliamentary democracy and good governance in Pakistan.” PIPS team also warmly welcomed its new Executive Director and well- known figure of country’s civil society Mr Zafarullah Khan, on May 20th, 2016. (detailed reports within Research Digest) We are confident that the digest would assist honorable MPs to develop insights regarding the issues at hand and help them seek solutions and make informed decisions. For any specific areas of importance that you want PIPS to send you research or briefing papers, don’t hesitate to contact us at [email protected]. Happy Reading and a blissful Ramadan for all of us, ameen!

Muhammad Rashid Mafzool Zaka

Director (Research and I.T)

CONCEPT

Expenditure side

of the Budget

Page 01

Secretary General

CPA recognizes

PIPS Excellent

Work

Page 09

PIPS Team

Welcomes its new

Team Leader

Page 11

PIPS Pre-Budget

Seminar

Budget Proposals

Page 13

ISSN# 2414-8040

mailto:[email protected]

Pakistan Institute for Parliamentary Services 2016

PIPS Parliamentary Research Digest- Volume: 3, Issue: 5 Page 1

CONCEPT

Expenditure Side of the Budget

Mr. Haider Abbas

Additional Director Finance, PIPS and Member PIPS Budget Desk

The estimated expenditure is the one of the two dimensions of Annual Budget Statement. There are

various concepts and categories of expenditure i.e. Charged and Voted Expenditure, Current and

Development Expenditure, Expenditure on Revenue Account, Expenditure on Capital Account,

Capital Expenditure and Public Account Expenditure. This paper aims to briefly describe these

terms along with analysis of budgetary allocations to meet the said expenditures in multiple angles so

that the reader may comprehend the budgetary jargons, understand and analyze the expenditure side

of the budget.

CHARGED AND VOTED EXPENDITURE:

Article 80(2) of the Constitution of Islamic Republic of Pakistan stipulates that the Annual Budget

Statement (ABS), a Constitutional document under Article 80(1), shall show separately-

(a) the sums required to meet expenditure described by the Constitution as expenditure

charged upon the Federal Consolidated Fund; and

(b) the sums required to meet other expenditure proposed to be made from the Federal

Consolidated Fund; and shall distinguish expenditure on revenue account from other

expenditure.

The above mentioned expenditures are commonly referred to as Charged Expenditure and Voted

Expenditure respectively. The Charged Expenditure under Article 82 is submitted in the National

Assembly for discussion and does not require vote of the National Assembly whereas for the other

expenditure (voted), submitted in the form of demands for grants, the Assembly has the power to

assent to, or to refuse to assent to, any demand, or to assent to any demand subject to a reduction of

the amount specified therein. The Article 81 of the Constitution specifies following expenditure as

charged upon Federal Consolidated Fund (FCF):

(a) the remuneration payable to the President and other expenditure relating to his office, and

the remuneration payable to-

i. the Judges of the Supreme Court [and the Islamabad High Court];

ii. the Chief Election Commissioner;

iii. the Chairman and the Deputy Chairman;

iv. the Speaker and the Deputy Speaker of the National Assembly;

v. the Auditor-General;

(b) the administrative expenses, including the remuneration payable to officers and servants, of

the Supreme Court, the Islamabad High Court, the department of the Auditor-General, the

Office of the Chief Election Commissioner and of the Election Commission and the

Secretariats of the Senate and the National Assembly;

(c) all debt charges for which the Federal Government is liable, including interest, sinking fund

charges, the repayment or amortization of capital, and other expenditure in connection



with the raising of loans, and the service and redemption of debt on the security of the

Federal Consolidated Fund;

(d) any sums required to satisfy any judgment, decree or award against Pakistan by any court or

tribunal; and

(e) any other sums declared by the Constitution or by Act of Majlis-e-Shoora (Parliament) to be

so charged.

CURRENT AND DEVELOPMENT EXPENDITURE:

The expenditure on goods and services consumed within the current financial year is called current

expenditure and this is recurring in nature. The administrative cost of the government in terms of

pay and allowance, utility bills, rent & rates, telecommunication expenses, repair & maintenance etc.

fall under this category. The Development Expenditures refer to those expenditures which are

proposed to be incurred on various development projects i.e. construction of new schools, hospitals,

roads, bridges, dams etc. The current as well as development expenditure are met both from

Revenue Account and the Capital Account. Revenue Account refers to the part of Federal

Consolidated Fund (FCF) showing revenue receipts (tax & non-tax revenue) whereas the Capital

Account consisting of recoveries of loans and advances, debt and Loans receipts.

CAPITAL AND PUBLIC ACCOUNT EXPENITURE:

Capital Expenditure refers to payment to be made against long-term debt i.e. Pakistan Investment

Bond (PIB), Foreign Exchange Bearer Certificates, Prize Bonds, and Treasury Bills etc. Public

Account Expenditure, on the other hand, consisting of payment to be made against various savings

schemes, pensionary benefits, provident fund, benevolent fund and group insurance fund of Federal

Government Employees etc.

BUDGETARY ALLOCATIONS:

The budgetary allocations presented in Table-1 shows function classification wise summary of

current and development expenditure for the Financial Years 2013-14 to 2015-16 along with 5 years‟

(FY 2011-12 to FY 2015-16) average to be used for commentary purposes. Whereas the Table-2

shows the object classification wise summary of the current expenditure.

Table 1: EXPENDITURE SUMMARY : FY 2013-14 to FY 2015-16

Rs. in million

Functi

on

Code

Description 2013-14 2014-15 2015-16

Average

Expenditure

(FY 2011-12 to 15-

16)

Amount %age

01 General Public Services 2,364,879 2,530,386 2,446,604 2,276,750 56.47

%

02 Defence Affairs & Services 629,752 720,002 781,162 642,292 15.93



%

03 Public Order & Safety

Affairs

77,039 87,597 94,899 78,680 1.95%

04 Economic Affairs 42,988 55,264 60,195 56,086 1.39%

05 Environment Protection 899 936 1,055 845 0.02%

06 Housing and Community

Amenities

1,558 2,012 2,256 1,865 0.05%

07 Health 9,437 10,124 11,010 9,023 0.22%

08 Recreation, Culture and

Religion

6,633 7,242 7,637 6,703 0.17%

09 Education Affairs and

Services

63,442 64,519 75,580 60,225 1.49%

10 Social Protection 1,959 2,709 1,840 7,646 0.19%

a. Current Expenditure on Revenue

Account

3,198,586 3,480,791 3,482,238 3,140,116 77.89

%

b. Current Expenditure on Capital

Account

205,216 77,536 133,035 165,307 4.10%

1. Total Current Expenditure 3,403,802 3,558,327 3,615,273 3,305,423 81.99

%

c. Dev. Expenditure on Revenue

Account

488,726 378,863 505,976 393,153 9.75%

i. Dev. Exp. on Revenue

Account (PSDP)

208,253 248,295 343,876 235,954 5.85%

ii. Other Dev. Exp. on

Revenue Account

280,473 130,568 162,100 157,199 3.90%

d. Development Expenditure on

Capital Account

369,982 375,459 463,063 333,086 8.26%

i. Dev. Exp on Capital

Account (PSDP)

361,099 373,735 460,763 327,246 8.12%

ii. Other Dev. Exp. on

Capital Account

8,883 1,724 2,300 5,840 0.14%

Total PSDP (ci+di) 569,352 622,030 804,639 563,200 13.97

%

2.Total Development Expenditure 858,708 754,322 969,039 726,239 18.01

%

Total Expenditure (1+2) 4,262,510 4,312,649 4,584,312 4,031,662 100 %

Source: Annual Budget Statements for FY 2011-12 to FY 2015-16

* 5 years' average (FY 2011-12 to FY 2015-16)



From the table above, it is evident that the around 80% of the Federal Budget caters for the current

expenditure i.e. the administrative cost of the government. After meeting the current expenditure,

the kitty is left with a small portion to be allocated for the development projects. The development

allocation is the main tool to bring structural changes in socio-economic life of the country men.

Greater the development budget, bigger would be the number of projects. The share of current and

development expenditure in the national budget is given in the following pie-chart.

Current Vs Development Expenditure

A: ALLOCATIONS TO MEET CURRENT EXPENDITURE

As mentioned above, current expenditures are incurred to run the administrative affairs of the

government. These include payment of interest and principal amount borrowed by the government,

salaries and pension, various operating expenditure, purchase of assets, repair and maintenance etc.

These expenditures are spent by various ministries, divisions, departments, Public Sector Enterprises

and autonomous bodies. There are multiple angles to view and analyze current expenditure. The

generic presentation of summarized current expenditure as given in the table 1 show that among ten

(10) functions of current expenditure, around 93% goes to two (2) functions namely (i) General

Public Services, and (ii) Defence Affairs & Services.

3,305,423 82%

726,239 18%

Total Current Expenditure

Total Development Expenditure



The expenditure of Rs.2446.6 billion (FY 2015-16) under General Public Services include Rs.1,596.3

billion against debt servicing (foreign and local) which is 65% of total expenditure under General

Public Services and 44.15 % of total current expenditure. Summaries of Expenditure under General

Public Service Expenditure and Defence Affairs & Services are given in Table-4 and Table-5 as

follows:

Table-1.1: GENERAL PUBLIC SERVICE

Rs. in Million

Classification Revised

Estimates

2014-15

Budget

Estimates

2015-16

PC of

Total

2015-

16

Executive & Legislative Organs, Financial,

Fiscal Affairs & External Affairs

2,071,824

2,003,903

81.91

%

Superannuation Allowances & Pensions

219,958

231,000 9.44%

Servicing of Foreign Debt

100,492

111,219 4.55%

Foreign Loans Repayment

295,586

316,373

12.93

%

Servicing of Domestic Debt

1,169,545 1,168,676

47.77

%

Others

286,243

176,635 7.22%

Foreign Economic Aid

1,328

100 0.00%

Transfers

418,665

409,875

16.75

%

General Services 0.26%

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

2013-14 2014-15 2015-16

General Public Services

Defence Affairs & Services

Public Order & Safety Affairs

Economic Affairs

Environment Protection

Housing and Community Amenities

Health

Recreation, Culture and Religion

Education Affairs and Services

Social Protection



6,147 6,415

Basic Research

3,041

3,559 0.15%

Research and Development General Public

Services

9,670

10,683 0.44%

Administration of General Public Services

General Public Services not elsewhere

2,450

2,150 0.09%

defined

17,260

9,920 0.41%

GENERAL PUBLIC SERVICE

2,530,385

2,446,605 100 %

Table-1.2: DEFENCE AFFAIRS & SERVICES

Rs. in Million

Classification

RE

2014-15

BE

2015-16

PC of

BE

2015-16

DEFENCE AFFAIRS AND SERVICES 720,002 781,163 100.00%

- Defence Administration 2,131 2,022 0.26%

- Defence Services 717,871 779,141 99.74%

- Employees Related Expenses 300,766 326,048 41.74%

- Operating Expenses 180,515 200,625 25.68%

- Physical Assets 163,588 169,648 21.72%

- Civil Works 74,743 84,680 10.84%

- Less Recoveries (1,741)

(1,860) -0.24%

Table-2: OBJECT CLASSIFICATION WISE SUMMARY OF CURRENT

EXPENDITURE

Rs. in Million

Object

Code

Description Budget

Estimates

2014-15

Revised

Estimates

2014-15

Budget

Estimates

2015-16

PC of

BE

2015-16

A01 Total Employees Related

Expenses 504,092 510,941 556,957 4.27%

A011 Pay 86,600 85,162 91,564 0.70%

A011-1 Pay of Officers 23,305 22,963 25,653 0.20%



A011-2 Pay of Other Staff 63,295 62,199 65,912 0.51%

A012 Allowances 417,492 425,779 465,393 3.57%

A012-1 Regular Allowances 408,390 416,494 455,197 3.49%

A012-2 Other Allowances (Excluding

TA) 9,102 9,286 10,196 0.08%

A02 Project Pre-investment

Analysis 144 286.00 107.00 0.00%

A03 Operating Expenses 561,353 521,979 652,595 5.01%

A04 Employees Retirement

Benefits 234,881 240,764 252,891 1.94%

A05 Grants, Subsidies & Write off

Loans 802,565 865,019 752,904 5.78%

A06 Transfers 7,940 14,846 5,928 0.05%

A07 Interest Payment 1,326,178 1,270,979 1,280,245 9.83%

A08 Loans and Advances 343,164 344,672 400,757 3.08%

A09 Physical Assets 163,800 176,320 180,141 1.38%

A10 Principal Repayments of

loans 14,593,104 9,162,389 8,764,035 67.26%

A11 Investments 44,747 44,483 53,573 0.41%

A12 Civil Works 88,733 94,643 115,718 0.89%

A13 Repairs and Maintenance 12,029 14,132 13,850 0.11%

TOTAL EXPENDITURE 18,682,730 13,261,453 13,029,701 100.00%

B: ALLOCATIONS UNDER DEVELOPMENT EXPENDITURE

The Development Expenditure which includes Public Sector Development Program (PSDP) is

the main instrument available with the government to achieve macroeconomic and development

objectives and eventually to bring improvement in the socio-economic conditions of the

people. The budgetary allocation under development expenditure are made for construction

of schools, hospitals, roads, bridges, dams etc. so as to yield maximum benefits in the shortest

possible time for the society. Salient Features of Development Expenditure for the FY 2015 -

16 are as follows:

Total size of national PSDP of Rs.1513.7 billion allocated for the FY 2015-16, showing an

increase of 27.4% as against the revised estimates 2014-15, includes Federal PSDP of Rs

700 billion and provincial PSDP of Rs.813.7 billion.

Under Federal PSDP, the share of Federal Ministries / Divisions is Rs 252.6 billion

indicating a decline of 16.9% over revised estimates 2014-15. Whereas that of the

Corporations was Rs 271.9 billion indicating an increase of 71.3% over revised estimates

2014-15.



An amount of Rs 20 billion was allocated to Millennium Development Goals and

Community Development Programme. Whereas an amount of Rs 28.5 billion was

provided for Special Federal Development Programme.

Earthquake Rehabilitation and Reconstruction Authority (ERRA) ha s been allocated Rs 7

billion, which is higher by 40% than revised estimates 2014-15.

An amount of Rs 100 billion was budgeted for Special Development Programme for

Temporarily Displaced Persons (TDPs) and Security Enhancement. Whereas Prime

Minister's Youth Programme was projected at Rs 20 billion, showing an increase of 185.7%

over revised estimates 2014-15.

Further project wise detail may be seen in the budget book titled “Federal Budget Details of

Demands for Grants and Appropriations 2015-16 Development Expenditure” available at website

of Ministry of Finance.

http://www.finance.gov.pk/budget/Development_Expenditures_2015_16.zip

http://www.finance.gov.pk/budget/Development_Expenditures_2015_16.zip



Secretary General Commonwealth Parliamentary Association Recognizes

PIPS’ Excellent Work to Support Parliamentary Tradition in Pakistan

(May 6th, 2016 – Islamabad PIPS) - The 7th

(CPA) Commonwealth Parliamentarians

Association Secretary-General His Excellency

Mr. Akbar Khan visited (PIPS) the Pakistan

Institute for Parliamentary Services in relation

with the Parliamentary Staff Development

Workshop for the Asia/ South- East Asia

Regions being held at PIPS Campus Islamabad.

During his visit he held a meeting with the

Acting Executive Director PIPS Mr.

Muhammad Rashid Mafzool Zaka and other

staff members to discuss issues of mutual

cooperation and interest. The Executive

Director apprised the General Secretary about

the working of Institute and new initiative being

taken by PIPS to support the Parliamentarians

and Parliamentary Functionaries in performance

of their duties.

Mr. Akbar Khan appreciated the good work done by PIPS with reference to the broader scope it has

and desired that a longer relationship may be established between CPA and PIPS for mutual benefit.

He specifically emphasized the availability of the CPA forum to circulate the PIPS relevant courses

to get the nominations from the Common Wealth Parliaments for their Parliamentarians and the

Parliamentary staff. The Executive Director PIPS informed him that PIPS is now member of

Parliamentary Research Centres of 12 countries of Middle East, Asia and North Africa and it is

already providing guidance to Sri Lankan Parliament to set up their PRC. Mr Zaka also suggested to

sign a Memorandum of Understanding (MoU) between both the esteemed organizations to

systematically identify the areas of mutual cooperation including but not limited to provision of

offering PIPS courses to CPA member parliaments and their provinces on rules of procedures,

committee system, parliamentary research and development; the Secretary General endorsed the

idea.

Mr. Akbar Khan further highlighted the need for PIPS to engage with the regional Parliaments in

more robust way and offered his help to kick start the process from the Maldivian Parliament. The

Executive Director assured the Secretary General CPA of all out support of his Institute in this

regard. Secretary General CPA also wrote in the visitor‟s book and expressed his delight to see the

excellent work being done by Pakistan Institute for Parliamentary Services (PIPS) to strengthen

good governance and democracy in Pakistan. The meeting ended with a vote of thanks to the

Honourable Guest and presentation of a set of PIPS publications to Secretary General Mr. Akbar



Khan by the PIPS Acting Executive Director Mr Muhammad Rashid Mafzool Zaka. Ms Samer

Awais, Director Training PIPS and Mr Arshad Jan Pathan, Joint Secretary, Senate was also present

on the occasion.



PIPS Team Warmly Welcomes its New Team Leader

Mr. Zafarullah Khan joined as the Executive

Director of Pakistan Institute for Parliamentary

Services on Friday, May 20th, 2016. He

possesses a rich experience spread over three

decades in the fields of journalism,

parliamentary democracy, civic education,

Constitutionalism, and human rights. The

PIPS‟ pioneering Director Research and IT Mr

Muhammad Rashid Mafzool Zaka, Director

Training Ms Samer Awais and senior officers

received the Executive Director and presented

him flower bouquet. Later in the day the

Executive Director met with all officials of the

Institute and also attended the welcome lunch

hosted in his honours. Speaking at the

occasion, Mr Zaka warmly welcomed the new

Executive Director and reiterated PIPS‟ team full support to him in consolidating the Institute as a

quality-oriented non-partisan parliamentary seat of learning. Mr Zafarullah Khan thanked the team

for kind words of appreciation and welcome and expressed his hope that with hard work and team

efforts, Pakistan Institute for Parliamentary Services will reach to new horizons of excellence in its

mission to support informed-decision making by the Members of Parliament.

Mr Zafarullah Khan has a diverse professional background and served as Executive Director, Centre

for Civic Education, Pakistan, (2004-2016); Correspondent Pakistan, Civil Society Yearbook

prepared by the Centre for Civil Society, London School of Economics (2000-2006); Lead trainer

Political Party Development Program, National Democratic Institute (NDI) (2004-2009);

Moderator, International Academy for Leadership, Germany (October 2004- 2006) and Project

Coordinator, Friedrich-Naumann-Stiftung Pakistan (2000-2004) where he worked in areas of civic

education, democratic training, communication skills and human rights. He has worked as

Communication consultant with (LEAD-Pakistan). Rockefeller Foundation funded project (1998-

99); Editor, State of Media and Press Freedom Report, Pakistan 1995- 2001. He has also been

Bureau Chief of daily The Frontier Post (1991-96).

Mr Zafarullah Khan was awarded M.Sc. Media and Communications from London School of

Economics & Political Science, the United Kingdom (1999-2000) where his areas of specialization

included political communication, media for effective citizenship and cyber sociology. He also did

M.Phil. in 1989-91 and M Sc in Pakistan Studies in 1987-89 from Pakistan‟s leading social sciences

seat - Quaid-e-Azam University, Islamabad (1989-91). He has done his Graduation from the

Government College, Lahore (1984-1986) with Political Science and History.



He also served as Editor (Honorary), Citizens Wire (www.citizenswire.com): a web-based features

agency on democracy, constitution and public policy issues. He is also Commentator,

analyst/freelance contributor for the broadcast and leading print media. He has been an

Anchorperson, with Pakistan Television's live current affairs breakfast show from December 2000-

August 2002. He also reported the activities/policies of the Prime Minister and Parliament.

He has authored numerous publications on federalism, civic education, parliamentary democracy

and Constitution. The Senate of Pakistan recently published his book, “Consistent Parliamentary

Cord – Fundamental Rights of Citizens of Pakistan,” and a special publication on the Constitution

Day on April 12, 2016. Mr Zarafullah Khan has also contributed chapters in various books, which

include the following:

i. Future of Pakistani Federation: A case study of the Council of Common Interests, in Faiz, A. (2015),

Making Federation Work, Karachi, Oxford

ii. Cyberia: A new war zone, in Yusuf, M. (2014), Pakistan's Counter Terrorism Challenge,

Washington DC, George Town University Press

iii. Constitutional Reforms in Pakistan: federalism after the 18th Amendment, in Hegemer, C. &

Buhler, H (ed). (2013), Federalism in Asia and Beyond: Models, Best Practices and New

Challenges, Munich, Hanns-Seidel-Stiftung

Mr Zafarullah Khan is a distinguished figure in the civil society of the country who has won

important Awards & Honors that include a Roll of Honor (Debating), Government College Lahore

(1986); Best Debater, Quaid-i-Azam University, Islamabad (1988), British Chevening Scholarship

(1999-2000), International Visitors Program (USA) (1996) to cover the Presidential Election-1996

and Green Journalist Award-2001, Ministry of Environment, Government of Pakistan.



PIPS Pre Budget Seminar, May 26th, 2016

BUDGET PROPOSALS

Pakistan Institute for Parliamentary Services (PIPS) held its 5th annual Pre Budget Seminar on May

26th, 2016, which was attended by over 130 Participants including Members of Parliament,

Associations, academia and students of economics. Some of the key recommendations for the

National Budget 2016-17 put forth by key note speakers and representatives of various associations

are presented as under:

1. Dr Aliya H Khan, Dean, Social Sciences,

Quaid e Azam University, Islamabad:

Dr. Aliya pointed out that a cursory glance at the

budgetary allocations in 2015-16 is enough to reveal the

skewed government priorities viz a viz social sector

allocations;

She said that

i. Tertiary education sector gets the Lion‟s share

of the already meagre education budget while

universal literacy and primary education as

promised viz a viz SDGs Goal seems to be overlooked.

ii. There is very little attention paid to preventive healthcare.

iii. Given the scale of urbanization, the state must divert resources to public urban housing.

iv. Allocation of Rs 20 billion for MDGs in 2015-16 was inadequate and there needs to be

well-thought out coordinated effort to invest more in social sectors. Defence spending

needs to be audited

2. Mr. Ali Salman, Executive Director, PRIME Institute:

Mr. Ali Salman, executive Director, PRIME Institute, while speaking on the tax reforms said that

there is a need to move away from complex and progressive taxes towards flat, low-rate, broad and

predictable taxes. He was of the opinion that:

i. “Government must Do-away with patch work, overhaul both policy and administration.

ii. Through Flat, low-rate, predictable and broad-based taxes, administered through

efficient tax apparatus, Pakistan can achieve fairness in taxation system.”

3. Muhammad Din Tahir, Additional Secretary General, Faisalabad Chambers of

Commerce and Industry:

i. Pakistan Hosiery Manufacturers Association (PHMA): Zero rating of exports as before

and no duty on raw material imports for re-exports. 5% exports incentives for non-

traditional markets.



ii. Gas tariff should be regionally competitive; i.e. India $ 4.66/mmbtu, Bangladesh

$2.46/mmbtu as against $6.72/mmbtu for Pakistan is not favourable and it increases

cost of doing business.

iii. Sales Tax exemption of 7% on agricultural machinery and equipment may be allowed.

Similarly sales tax exemption be allowed on Pakistan Steel Mills products used to

manufacture agricultural machinery and equipment.

iv. Dyes and Chemicals Association suggests fixed 5% duty on import of all sorts of dyes

may be allowed and there should not be any discrimination on industrial and commercial

importers to import dyes and chemicals. No additional income tax on commercial

importers be charged.

v. Sales Tax Registration limit that remained unchanged to Rs 5 million; should be

increased to Rs 50 million for 2016-17 as it will encourage more people to utilize the

banking channel and become part of documented economy.

vi. 10% Withholding Tax on services may be abolished.

vii. Rate of Value added Tax may be gradually reduced to originally to 12.5 and subsequently

to 10% as it will encourage documentation/ registration of economy and in turn enhance

revenue.

viii. Resolution of disputes through Alternate Dispute Resolution Committees should be

encouraged by making these committees functional.

4. Mr Abdullah Malik, All Pakistan Computer Association:

i. PCA has suggested a Fixed Import Duty of Pk Rs 3,000 per laptop computer,

which are brought in the number of six lac per annum in the country. Presently only

25% of them are imported legally while no less than 75% enter market through illegal

channels. The PCA views sprawling trend of smuggling of IT products responsible for

low income generation to the FBR. Therefore, PCA strongly believes that its fixed duty

formula, if implemented, will yield, an expansive net amount of Rs 1.8 billion annually to

the Government.

5. Mr Zulfiqar Ahmad Kahout, President, Rawalpindi Chamber of Small Traders and

Industries:

i. Relaxation desired for Retail and Agriculture: Agriclutural Machinery be rated from

0 to 5% for imports.

ii. Incentives for Cottage Industry like marble, shoe, furniture and handicrafts for growth

into medium Industry.

iii. Loans on business growth be simplified and should remain within 6% markup.

6. Mr. Khalid Saleem Malik, Central Chairman, Pakistan Poultry Association

1. Continuation of Sales Tax Exemption on Poultry Feed, Sunflower Seed Meal,

RapeSeed Meal and Canola Seed Meal Falling under Serial No. 21, Table 2 of the



Sixth Schedule of The Sales Tax Act, 1990: Poultry feed should remain exempted from

the levy of sales tax.

2. Withdrawal of Sales Tax on Poultry Feed Ingredients Falling Under Serial No. 15,

Table 1 of Eighth Schedule of The Sales Tax Act, 1990 & Exemption of 8% Sales Tax

on Import of Poultry Feed Additives

3. Harmonization of Custom Duty & Sales Tax on Poultry Machinery & Equipment

with Agriculture Machinery: It is proposed that the import of attached poultry machinery

and equipment be given the same treatment as agriculture plant & machinery and be taxed

@ 2% import duty and 7% sales tax.

4. Adverse Impact of Increase in Custom Duty and Sales Tax on Soybean Meal on the

National Economy: It is recommended to do away with the import duty and the sales tax

on Soybean meal, enabling lower input cost of chicken, eggs, milk, meat etc.

5. Exemption from Regulatory Duty on Import Of Grand Parent Chicks Falling under

PCT Heading 0105-1100: it is proposed that an amendment be made in SRO

568(I)/2014 dated 26.06.2014 wherein under the description against Serial No. 1 i.e. „Live

poultry, that is to say, fowls of the species Gallus domesticus, ducks, geese, turkeys and guinea fowls’, the

words „excluding Grandparent Chicks‟ be added. Thus, by virtue of the amendment the two

categories, which are produced locally i.e. Parent Stock Day Old Chicks and Broiler Day Old

Chicks will be subject to a Regulatory Import Duty of 10%.

6. Restoration of Zero Rating Status for Value Added, Processed, Frozen, Packed

Poultry Products at Parity to Dairy Sector

7. Chicken Processing should be Treated at par with Milk Processing

8. Proposed Sales Tax on Processed Chicken Products: Sales Tax on poultry feed and its

ingredients may not be imposed.

7. Dr Asad Zaman, Vice Chancellor, PIDE

i. He was of the opinion that Pakistan should focus on attaining full employment and self-

sufficiency rather than comparative advantage. He said increasing taxes, FDIs and

exports is a vicious non-starter.

ii. We need to make a paradigm shift to focus development of local market, enhance

indigenous productivity and to create millions of engines of growth. It should not be an

issue that low quality local mass production and market is encouraged as it will

consequently give way to increased productivity and growth.

iii. Zero Based Budgeting must be done in massive departments.

iv. Universal Mass Education must be done on war-footing to complete 100% literacy and

enrollment.

v. We need to shift towards health insurance.

8. Mr Sakib Sherani, Economist

i. Fix the tax system: He emphasized need for greater transparency and accountability in

Policy-setting; tax administration as well as public expenditures. He suggested that

government must:



a. Broaden the direct tax net

b. Introduce equity and fairness

c. Simplify tax system, and

d. Reform FBR

ii. Reduce burden on Industry/export sector through Restoration of zero-rating, Timely

refunds (+ clear backlog), Removal of GIDC, Reduce corporate tax rate and Reduce sales

tax on inputs.

iii. Re-prioritize expenditure through a Finance Strategic Trade Policy, greater support for

Agriculture, enhanced Education and Skills development for human resource development;

Civil service and FBR reform; in addition to last but not the least need to Re-orient PSDP.



CONCEPT

Economic Indicators – an Introduction with Facts and Figures of Pakistan

Compiled by

Muhammad Faisal Israr,

Vice President Saudi Pak Bank

Economic Policy

A government policy for maintaining economic growth and tax revenues is the Economic Policy. It

covers the systems for setting levels of taxation, government budgets, the money supply and interest

rates as well as the labor market, national ownership, and many other areas of government

interventions into the economy.

Gross Domestic Product (GDP) (nominal and real)

The value at current market prices, of the total final output produced inside a country during a given

year is Nominal GDP. Whereas Real GDP is nominal GDP corrected for inflation i.e. real

GDP=nominal GDP divided by GDP deflator.

Billion Rs.

Year 2009-10 2010-11 2011-12 2012-13 2013-14 31-03-

2015

GDP at Current

Factor

14,867 18,276 20,047 22,489 25,402 27,384

Source: State Bank of Pakistan (Annual Report FY14 and NDSP)

Gross National Product (GNP) (nominal and real)

The value at current market prices, of all final goods and services produced during a year by the

factors owned by a nation is Nominal GNP. Whereas Real GNP is nominal GNP corrected for

inflation i.e. real GNP=nominal GNP divided by GNP deflator

Billion Rs.

Year 2009-10 2010-11 2011-12 2012-13 2013-14

GNI at Current

Factor

15,433 19,096 21,082 23,650 26,776


Inflation (or Inflation rate)

The inflation rate is the percentage of annual increase in general price level.

Year FY10 FY11 FY12 FY13 FY14

Inflation

(%)

10.1 13.7 11.0 7.4 8.0

Source: Pakistan Economic Survey 2013-14 (Chapter 7: Inflation)

http://en.wikipedia.org/wiki/Taxation

http://en.wikipedia.org/wiki/Government_budgets

http://en.wikipedia.org/wiki/Money_supply

http://en.wikipedia.org/wiki/Interest_rates

http://en.wikipedia.org/wiki/Interest_rates

http://en.wikipedia.org/wiki/Labor_market

http://en.wikipedia.org/wiki/Nationalization



Consumer Price Index (CPI)

A price index that measures the cost of a fixed basket of consumer goods in which the weight

assigned to each commodity is the share of expenditures on that commodity in a base year.

Wholesale Price Index SBP

Wholesale Price Index (WPI) is designed to measure the directional movements of prices for a set of

selected items in the primary and wholesale markets. Items covered in the series are those, which

could be precisely defined and are offered in lots by producers/manufacturers. Prices used are

generally those, which conform to the primary sellers realization at ex-mandi (market), ex-factory or

at an organized wholesale level.

Sensitive Price Indicator SBP

The Sensitive Price Indicator (SPI) is computed on weekly basis to assess the price movements of

essential commodities at short intervals so as to review the price situation in the country.

Year (Base 2007-

08=100)

Jun 11 Jun 12 Jun 13 Jun 14 May 15

Consumer Price Index 152.78 169.99 179.94 194.74 199.66

Wholesale Price Index 177.98 189.37 199.21 214.60 207.92

Sensitive Price Index 168.09 188.14 196.75 212.40 211.48

Source: Pakistan Bureau of Statistics Monthly Review on Price Indices Jun 2011 to May 2015

Labour Force

As per Article 11(3) no one under the age of 14 shall be engaged in labour, therefore, group of

people of 14 years of age and older who are either employed or unemployed fall under labour force.

Unemployment

In economic terms, involuntary unemployment occurs if there are qualified workers who would be

willing to work to prevailing wages but cannot find jobs.

Employment

The total number of people gainfully employed or working.

Employed

To hire or engage the services of (a person or persons); provideemployment for; have or keep in one

's service.

Civilian Labour Force, Employed and Unemployed in Pakistan (in millions)

Year 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

Labour Force 53.22 55.91 56.92 57.84 59.33 60.34 60.09

Employed 50.45 52.86 53.76 54.40 55.80 56.58 56.52

Unemployed 2.77 3.05 3.16 3.44 3.53 3.76 3.58

Unemployment Rate

(%)

5.20 5.46 5.55 5.95 5.95 6.24 6.00

Source: Pakistan Economic Survey 2014-15

http://dictionary.reference.com/browse/employ

http://dictionary.reference.com/browse/employment



Poverty Line

A minimum income level used as an official standard for determining the proportion of a population

living in poverty. Poverty lines are the thresholds which separate the poor from non- poor. The

official poverty line in Pakistan is calorie based, and consumption based absolute poverty is

estimated after converting the household consumption level to adult equivalent based on

recommended nutritional requirements of 2350 calories per person per day and providing almost

equivalent amount for other basic needs.

Poverty Indices by Region (% of population living below national poverty line)

Year 2000-01 2004-05 2005-06 2007-08 2010-11

Poverty Line

(Rs.)

723.40 878.64 944.47 1,141.53 1,745.00

Overall 34.4 23.9 22.3 17.2* 12.4*

Urban 22.6 14.9 13.1 10.0 7.1

Rural 39.2 28.1 27.0 20.6 15.1

Source: Pakistan Economic Survey 2013-14

Domestic Debt SBP

Domestic Debt Domestic debt refers to the debt owed to creditors resident in the same country as

the debtor. It can be of sovereign nature, i.e., borrowed by a government or non-sovereign, i.e.,

borrowed by the corporate.

External Debt SBP

External Debt External debt, at any given time, is the outstanding amount of those liabilities that

require payment(s) of principal and interest by the debtor at some point(s) in the future and that are

owed to nonresidents by the residents of an economy.

Billion Rs.

Debt & Liabilities/

Year

2010 2011 2012 2013R 2014R Mar-15

Domestic 5,440 6,823 8,357 10,403 11,887 12,914

External 5,262 5,707 6,196 6,036 6,459 6,385

Total 10,702 12,530 14,553 16,439 18,346 19,299


Monetary Policy

The objectives of central bank (State Bank of Pakistan) in exercising its control over money, interest

rates and credit conditions. The instruments of monetary policy are primarily open-market

operations, reserve requirements, and the discount rate.

Discount Rate

The interest rate charged by State Bank of Pakistan (the central bank) on a loan that it makes to

commercial bank. It is also referred as the rate used to calculate the present value of some asset.



Year 10-

Oct-

11

13-

Aug-

12

8-

Oct-

12

17-

Dec-

12

11-

Feb-

13

24-

Jun-

13

16-

Sep-

13

18-

Nov-

13

17-

Nov-

14

26-

Jan-

15

24-

Mar-

15

23-

May-

15

Discount

Rate (%)

12.0 10.5 10.0 9.5 9.5 9.0 9.5 10.0 9.5 8.5 8.0 7.00

Source: State Bank of Pakistan: Structure of Interest Rates I http://www.sbp.org.pk/ecodata/sir.pdf

Interest Rate

The price paid for borrowing money for a period of time, usually expressed as a percentage of the

principal per year. Thus if the interest rate is 10 percent per year, then Rs.100 would be paid for loan

of Rs.1,000 for 1 year.

KIBOR (Karachi Interbank Offer Rate) SBP

Interbank clean (without collateral) lending/borrowing rates quoted by the banks on Reuters are

called Kibor Rates. The banks under this arrangement quote these rates at specified time i.e. 11.30

AM at Reuters. Currently 20 banks are member of Kibor club and by excluding 4 upper and 4 lower

extremes, rates are averaged out that are quoted for both ends viz: offer as well bid. The tenors

available in Kibor are one week to 3 years. KIBOR is used as a benchmark for corporate lending

rates.

KIBOR/Ye

ar

30-Jun-10 30-Jun-11 29-Jun-12 28-Jun-13 30-Jun-14 23-Jun-15

Tenor Bid Offer Bid Offe

r

Bid Offe

r

Bid Offe

r

Bid Offe

r

Bid Offe

r

1-Week 11.9

9

12.49 13.18 13.68 11.65 12.15 8.82 9.32 9.54 10.04 6.24 6.74

2-Week 11.9

7

12.47 13.13 13.63 11.63 12.13 8.81 9.31 9.63 10.13 6.29 6.79

1-Month 1.95 12.45 12.12 13.62 11.64 12.14 8.83 9.33 9.73 10.23 6.31 6.81

3-Month 12.0

4

12.29 13.28 13.53 11.74 11.99 8.83 9.08 9.92 10.17 6.65 6.90

6-Month 12.1

2

12.37 13.53 13.78 11.81 12.06 8.84 9.09 9.92 10.17 6.71 6.96

9-Month 12.1

4

12.64 13.64 14.14 11.85 12.35 8.87 9.37 9.92 10.42 6.74 7.24

1-Year 12.2

2

12.72 13.74 14.24 11.90 12.40 8.91 9.41 9.94 10.44 6.83 7.33

2-Year 12.3

0

12.80 13.84 14.34 12.00 12.50 9.18 9.68 11.58 12.08 7.30 7.80

3-Year 12.4

0

12.90 13.94 14.44 12.11 12.61 9.44 9.94 11.88 12.38 7.61 8.11

Source: State Bank of Pakistan



Balance of Payment

Balance of Payments The balance of payments (BOP) is a statistical statement that systematically

summarizes, for a specific time period, the economic transactions of an economy with the rest of

the world.

Million US Dollars

Year FY10 FY11 FY12 FY13 FY14 Jul-May FY15

Balance of

Payment

-3,771 384 -4,475 -2,232 -1,138 -1,627

Source: State Bank of Pakistan (Annual Reports FY11& FY14 and NDSP)

Balance of Trade

The balance of trade is the difference between the monetary value of exports and imports for an

economy over a certain period of time.

Trade Deficit

An economic measure of a negative balance of trade in which a country's imports exceeds its

exports. A trade deficit represents an outflow of domestic currency to foreign markets.

Million US Dollars


Balance of Trade -13,226 12,398 -18,957 -16,919 -19,164 -17,509


Exports

Goods and Services that are produced in the home country and sold to another country. These

include merchandise trade (like cars), services (like transportation), and interest on loans and

investments.

Million US Dollars

Year FY10 FY11 FY12 FY13 FY14 Jul-May 2015

Export of Goods &

Services

24,902 31,124 29,731 31,526 30,423 27,406


Imports

It is opposite of exports i.e. Goods and services brought into home country from another country.

Million US Dollars

Year FY10 FY11 FY12 FY13 FY14 Jul-May 2015

Import of Goods &

Services

38,128 43,522 48,688 48,445 49,587 44,915


Current Account Deficit

A measurement of a country‟s trade in which the value of goods and services it imports exceeds the

value of goods and services it exports. The current account also includes net income, such as interest

and dividends, as well as transfers, such as foreign aid, though these components tend to make up a

smaller percentage of the current account than exports and imports. The current account is a



calculation of a country‟s foreign transactions, and along with the capital account is a component of

a country‟s balance of payment.

Million US Dollars


Current Account -3,946 268 -4,658 -2,496 -2,971 -1,985


Foreign Exchange Reserves (Reserves Assets)

Foreign-exchange reserves are called Reserve Assets are those external assets that are readily

available to and controlled by monetary authorities for meeting balance of payments financing

needs, for intervention in exchange markets to affect the currency exchange rate, and for other

related purposes (such as maintaining confidence in the currency and the economy, and serving as a

basis for foreign borrowing)

Million US Dollars

Year FY10 FY11 FY12 FY13 FY14 31-05-2015

SBP Liquid Reserves 13,112 15,662 10,856 6,047 9,171 11,409

Source: State Bank of Pakistan (Annual Reports FY14 and NDSP)

Foreign Exchange Rate

The rate, or price at which one country‟s currency is exchanged for the currency of another country.

Year FY10 FY11 FY12 FY13 FY14 18-06-2015

Exchange Rate (Yearly

Average, Rs. per US Dollar)

83.8017 85.5017 89.2359 96.7272 102.8591 101.8589

Source: State Bank of Pakistan (Annual Reports FY14 and NDSP *Selling)

Workers’ Remittances

Workers‟ remittances are current transfers for family maintenance by migrants who are employed

and residents in new economies. (A resident is a person who stays, or is expected to stay for a year

or more in an economy.)

Year FY10 FY11 FY12 FY13 FY14 Jul-Mar FY15

Workers’

Remittances

(US$ million)

8,904.88 11,200.90 13,186.58 13,921.56 15,832.25 16,633


Market Index

An aggregate value produced by combining several stocks or other investment vehicles together and

expressing their total values against a base value from a specific date. Market indexes are intended to

represent an entire stock market and thus track the market's changes over time.

Index Number

Stock market index is a used for measuring changes in the prices of stock market securities in

respect of the base year prices. The index is used as an indicator of the overall performance of the

economy.



Index Name/ Year 2010 2011 2012 2013 2014 23-Jun-15

KSE 100 Index 9,721.91 12,496.03 13,801.41 21,005.69 29,652.53 34,133.84

KSE All Shares Index 6,809.60 8,663.10 9,708.31 14,987.53 21,973.16 23,958.50

Source: State Bank of Pakistan (Annual Reports FY14 and NDSP)

Fiscal Policy

A government‟s program with respect to (1) the purchase of goods and services and spending on

transfer payments, and (2) the amount and type of taxes.

Fiscal Balance

When a government's total expenditures exceed the revenue that it generates (excluding money from

borrowings). Deficit differs from debt, which is an accumulation of yearly deficits.

Revenue

In the case of government, revenue is the money received from taxation, fees, fines, inter-

governmental grants or transfers, securities sales, mineral rights and resource rights, as well as any

sales that are made.

Expenditure

This includes current and development expenditure on Revenue Account and current and

development expenditure on Capital Account. The term 'Expenditure' as used in Annual Budget

Statement and related documents usually covers Budget Estimates, Revised Estimates and Actual

Expenditure.

Billion Rs.

Year FY10 FY11 FY12 FY13 FY14 P FY15 (Mar15)

Total Revenue 2,078.2 2,252.9 2,566.5 2,982.4 3637.3 2,682.6

Total Expenditure 3,007.2 3,447.3 4,327.2 4,816.3 5241.1 3,731.6

Deficit -929.1 -1,194.4 -1,760.7 -1,833.9 1388.7* 1,049.0

Source: Annual Reports of State Bank of Pakistan FY10 to FY14 and NDSP

P=Provisional

* deficit reduced by 215.1 due to statistical discrepancy

Direct Taxes

Those levied directly on individuals or firms, including taxes on income, labour earnings and profits.

Million Rs.

Year FY10 FY11 FY12 FY13 FY14 FY15

(Feb15)

Direct Taxes 528,649 602,451 738,424 743,409 877,274 599,298

Source: State Bank of Pakistan and Federal Board of Revenue Year Books

Indirect Taxes

These are contrast to Direct Taxes, which those levied on goods and services and thus only

indirectly on people, and which include sales taxes and taxes and taxes on property, imports and oil.



Million Rs.

Year FY10 FY11 FY12 FY13 FY14 FY15

(Feb15)

Sales Tax 517,302 633,357 804,899 842,528 996,100 669,263

Excise Duty 121,182 137,353 122,464 120,964 138,064 88,735

Customs 161,489 184,853 216,906 239,459 242,799 180,766

Total Indirect Tax 799,973 955,563 1,144,269 1,202,951 1,376,963 938,764

Source: State Bank of Pakistan and Federal Board of Revenue Year Books

References

1. Samuelson, Paul Antony, Nordhaus, William D., “Economics 16th Edition”, USA:Irwin McGraw

Hill, 1998.

2. State Bank of Pakistan, www.sbp.org.pk

3. Pakistan Bureau of Statistics, www.pbs.gov.pk

4. Federal Board of Revenue, www.fbr.gov.pk

5. Investopedia - Educating the world about finance. www.investopedia.com/

6. Dictionary.com - http://dictionary.reference.com/

http://www.investopedia.com/

For feedback feel free to contact Editor at: Ataturk Avenue (Service Road), F-5/2, Islamabad Email: [email protected] Web: www.pips.gov.pk

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through an act of the Parliament to promote research, provide training and to

provide facility of information to the Parliamentarians in performance of their

duties and for matters connected therewith and ancillary thereto.

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