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Budget 2004-05 and Economic Analysis of Pakistan

Extracts from this document...

Introduction

TABLE OF CONTENTS * Preface * Acknowledgements * Introduction to Budget ............................................ .......1 * Budget 1 * Purpose of Budget 1 * Role of The Budget 1 * Objectives of Budget Preparation 1 * Budget 2004 - 2005 ......................................................2 * Challenges 2 * Salient Features 3 * Comparative Budgetary Position 2003-04 & 2004-05 5 * Resource Position 2004-05 6 * Internal Resources 7 * External Resources 11 * Provincial Share In Federal Receipts 12 * Province-Wise Share 13 * Current Expenditure 14 * Budget At A Glance ........... ........................................21 * Receipts 21 * Expenditure 22 * Provincial Budget 2004-05 ........................................... 23 * Punjab Budget - Highlights 23 * Economic Analysis 2003 - 2004.........................................24 * The Economic Survey - Highlights 24 * Economy - Summary 30 * Conclusions........... .................................................. 34 * Bibliography ..............................................................35 PREFACE Macro-Economics is the study of the behavior of the economy as a whole. It it examines the forces that effect many firms, consumers, and workers at the same time. Macro-Economics deals with many challenges and to meet those challenges certain policies are to be made. Governments use budgets to plan and control their fiscal affairs. The Budget is an important policy document through which the government establishes its economic and social priorities and sets the direction of the economy. It reflects the fundamental values underlying the government's economic policies and objectives. This report is assigned to me by Mr. Mohammad Ali Wallana, the course instructor of Macro-Economics. This report is benificial in the sense that it will help in understanding the fiscal problems of our country and will help us in finding the ways to disolve those problems. I have put my best efforts to make this report. In this report I have discussed the economic conditions for the fiscal year 2003-04, the targets, the acheivements. The Challenges that Fedral Budget 2004-05 will have to meet, its major features have been discussed briefly. ...read more.

Middle

* The annual development programme will be financed to the extent of Rs.34.7 billion from provincial resources and Rs.8.78 billion from foreign assistance. * The development outlay is more than double preceding year's allocation. * Social sector and infrastructure development to receive priority. * Of the total ADP, Rs.34.44 billion has been allocated for provincial programme and Rs.9 billion for the district programme. * Punjab government has finalized its Poverty Reduction Strategy Paper, aiming to reduce the incidence of poverty from 33% to 28% by 2005-06. * The provincial government has been able to swap its expensive cash development loan with low priced loans. This policy would help save at least Rs.10 billion within the next 3 years. * Property tax exemption given to one house of five marlas used for residential purposes of Companies. * Stamp duty reduced on conveyance, exchange and gift of urban property. * Stamp duty on agricultural land and rural property reduced. * The base of professional tax has been broadened to include contractors, suppliers. * Professional tax on lawyers and doctors has been streamlined. * Lifetime token tax for motorcycles/scooters has been enhanced. ECONOMIC SURVEY OF PAKISTAN 2003-04 HIGHLIGHTS GDP GROWTH: Real GDP growth, once again, surpassed the target (5.3 percent) by a wide margin and grew by 6.4 percent in 2003-04 compared to last year's 5.1 percent. When compared with other developing countries in general and East and Southeast Asian countries in particular, Pakistan's growth performance has been quite impressive. Developing countries grew, on average, by 6.1 percent, while East and Southeast Asian countries registered growth rates ranging from 1.1 percent to 5.5 percent in 2003-04. Only China, India and Thailand grew faster than Pakistan during this period. The growth is supported by 2.6 percent, 13.4 percent, and 5.2 percent growth rates in agriculture, manufacturing and services respectively for fiscal year 2003-04. The target was 5.3 percent, with agriculture and manufacturing growing by 4.2 percent and 6.8 percent. ...read more.

Conclusion

However, given the low growth in agriculture, where over 40 percent of the country's labour force resides, increased unemployment, and the rise in inter-personal as well as inter-regional inequality, the reported decline in poverty is counter-intuitive. An examination of the methodology by which the estimate has been made shows that it is conceptually and statistically flawed on a number of points. By the same token, the results on living conditions and selected social indicators, based on HCES 2004, are equally open to question. The Budget 2004-05 deserves to be commended on several points. The inhibition regarding allowing the budget deficit to rise appears to have been shed. However, the most outstanding feature is the projected Rs. 13.2 billion or 2 percent decrease in current expenditure over the revised expenditure of FY2004. On the down side, the combined share of the two power utilities in total subsidies amounts to 68 percent in FY2004 and increases to 73.7 percent in FY2005 It appears that WAPDA and KESC, which have received significant write-offs of accumulated deficits over the last 2-3 years, are continuing to hemorrhage the public treasury. Further, the continuing decline in the share of direct taxes has distributional implications. Moreover, the Budget does not appear to make meaningful allocations for direct efforts to generate employment or reduce poverty. Budgets and budget evaluations are annual phenomena. However, a longer term 30 year view of budgets shows that the basic structure of revenues and expenditures has remained more or less constant. At the same time, unemployment and poverty has continued to rise, income and asset distribution have become more unequal - inter-personally and inter-regionally -, and access to basic opportunities and services for the poor has tended to stagnate. It may, therefore, be necessary to consider a parametric shift in the manner allocations of tax burdens and expenditures are made. At the very minimum, at least 5 percent of GDP needs to be allocated for development expenditures; implying a minimum allocation of Rs. 255 billion in FY2004 prices; with employment generation, housing, health and education being treated as priority sectors for allocation of development funds. ...read more.

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