ECONOMY OF PAKISTAN

1. Main Topics Economy Federal Budget 2011-2012 Economic Challenges 2012 Fiscal Policy Federal Budget 2012-13 Charter of Economy: 2012-13 ECONOMY OF PAKISTAN Presentation by Prof. Dr. KhawajaAmjadSaeed Founder Principal, Hailey College of Banking & Finance, University of the Punjab, Lahore Pakistan (2003----), Member Governing Council, International Federation of Accountants (IFAC), New York (1997-2000), President, South Asian Federation of Accountants (SAFA) (1997), President, Institute of Cost and Management Accountants of Pakistan (1997-2000), President, Association of Management Development Institutions of South Asia (AMDISA) (1993-96), Pro Vice-Chancellor University of the Punjab, Lahore (1994-1996), Founder Director, Institute of Business Administration (IBA), University of the Punjab, Lahore (1973-1996) & Senior Faculty Member of Hailey College of Commerce, University of the Punjab, Lahore (1965-73). Earlier he served in Corporate Sector in Pakistan for eight years (1958-65).

2. WELCOME TO OUR PROGRAM • PRESENTATION FRAME • Economy of Pakistan • Constitution of 1973: Economic Matters • Federal Budget 2011-12 • Pakistan: Economic Challenges 2012 • Economic Management Matrix • Fiscal Policy • Federal Revenue Budget 2012-13 • Suggested Charter of Economy

3. 1. ECONOMY OF PAKISTAN

4. 1-1: AGRICULTURE

5. 1-2: MANUFACTURING

6. 1-3: SERVICES

7. 2: Constitution of Pakistan 1973: Economic Matters

8. 3: Federal Budget: 2011-12

9. 3-1: FEDERAL REVENUE BUDGET 2011-12

10. 3-1: FEDERAL REVENUE BUDGET 2011-12

11. 3-2: Federal Annual Development Plan 2011-2012 *Earthquake Rehabilitation & Reconstruction Authority

12. 3-2: Federal Annual Development Plan 2011-2012

13. 3-2: Federal Annual Development Plan 2011-2012 *Earthquake Rehabilitation & Reconstruction Authority

14. 3-3: Provincial Allocation: 7th National Financial Award

15. 4: PAKISTAN: ECONOMIC CHALLENGES 2012 • A: Economy Failures 2011 • 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 2012 • B: Measures with Question Mark • (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 Rotten PEs. • 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 • (NFC Award) • 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 2012 • C: 2012 Outlook • Outlook for 2012 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 with a vengeance.

19. 4: PAKISTAN: ECONOMIC CHALLENGES 2012 • D: Expected Trends 2012 • 1. GDP Trend : 3% • 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. Strained Relations with IMF • d. Declining debt and non-debt creating inflows • e. FDI to witness a sharp decline • f. Sharp depreciation of exchange rate • g. Public debt is likely to worsen on account of large fiscal deficit.

20. 4: PAKISTAN: ECONOMIC CHALLENGES 2012 • E: Consequences • National Security at Stake • Miss-Governance to Continue

21. 5: ECONOMIC MANAGEMENT MATRIX

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

23. 6: FISCAL POLICY • 3. Income Tax Rates 2011 • Individuals • - Non-Salaried - 6 brackets (7.5% -----25%) • - Salaried – 17 brackets (1.50% -----20%) • Companies • - Public, Private& Banking Companies 35% • - Small companies 25% • 3. Dividend 10% • 4. Property Income • - Rs. 150,000 exempt • - Rates 5% -----10% • 5. Capital Gains • - With holding period 1 Year. nil • - Differentiated 10%--------17.5% • 7.5%-------10.0%

24. 7: FEDERAL REVENUE BUDGET 2012-13: SUGGESTED

25. SUGGESTED CHARTER OF ECONOMY • Domestic Resource Mobilization • ADP Financing • Income Tax by All • Reliance of Financing • Public Enterprises Losses • Good Governance • Provincial Govt Budgets • Inflationary Impact: Salary increase • CBA----PSA • NPLs • Professional Accountants Role • Holistic approach to Economic Development THANK YOU FOR ATTENTIVE LISTENING. ASK ANY QUESTIONS.