Pak defence spending cut by Rs 10 bn

ISLAMABAD, JUNE 17: Pakistan's military regime has widened the tax net and cut defence spending to overcome growing poverty and a balance ...

ISLAMABAD, JUNE 17: Pakistan8217;s military regime has widened the tax net and cut defence spending to overcome growing poverty and a balance of payments crisis, according to official figures obtained by AFP today.

The regime8217;s first budget shows a deficit of Rs 162.1 billion 3.1 bn 8211; or 4.6 per cent of Gross Domestic Product 8211; sharply lower than revised deficit estimates for 1999-2000 of 6.1 per cent of GDP.

It has capped defence spending next financial year at Rs 133.5 bn against 143.4 bn revised estimates for the year to June 30.

The healthier deficit has also come at a cost to tax payers with revenue receipts up 9.3 per cent to 412.1 billion Rupees thanks mainly to sharp rises in direct and indirect taxes. The cabinet under military ruler Gen Pervez Musharraf met earlier today and approved the budget for the year starting July 1, officials said.

The regime which toppled former premier Nawaz Sharif in a coup in October has said the budget would map out a three-year plan to revive the flagging economy after a decade of neglect by corrupt civilian governments.

It has set itself the gigantic task of taxing the massive black economy to increase the government8217;s revenue base, help service more than 32 bn in foreign debt and reduce its reliance on offshore loans.

The tax drive is essential to unlocking some three billion in credit from the International Monetary Fund and the Asian Development Bank which has been on ice since Pakistan8217;s nuclear tests in May 1998.

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The budget documents project a rise in direct tax revenues of some Rs 28 bn from 109.8 bn in 1999-2000 to 137.5 bn next financial year. The government had hoped to raise Rs 100 bn through a bitterly opposed tax survey launched last month designed to document the informal economy and rope in millions of tax avoiders.

Indirect taxes are expected to net Rs 298 bn in the year ahead against 241.8 bn last year, with sales taxes bringing in Rs 172.6 bn or some 44 per cent more.

The government is also considering taxing the key agriculture sector for the first time.

Interest payments on government debt will amount to Rs 305.6 bn, down 2.6 per cent from the current year but still more than half current expenditure of Rs 577.6 bn.

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The government has said the fight against poverty is one of its main priorities, with the latest official figures showing the number of people unable to meet their nutritional needs rising from 17.6 million in 1987-88 to 44 million in 1998-99, out of a population of 140 million.

quot;Taking care of the poor is the foremost responsibility of the state 8230; It must see to it that public investment is not being hijacked by the rich and the powerful,quot; the government said in its Development Plan released today.

It said the 2000-2001 budget allocation to poverty reduction programmes would rise to Rs 21.2 bn from Rs 3.5 bn in the current year.

The government said GDP growth would rise 0.5 per cent to 5.0 per cent in the year ahead.