Federal Budget

BUDGET IN BRIEF 201112

GOVERNMENTOFPAKISTAN FINANCEDIVISION ISLAMABAD

PREFACE
The Budget in Brief is a summary of the Federal Budget 2011-12. It is designed to provide essential budgetary information about the revenues and expenditure at a glance. Detailed information is available in other budgetary documents. The federal budget is being prepared in accordance with the budgeting and accounting classification system that has been approved by the Government of Pakistan as an integral part of the New Accounting Model. The three years medium-term indicative budget ceilings for the current and development budgets were issued to all Principal Accounting Officers of the Federal Government. A new budget preparation method, called the 'Output Based Budgeting' has been introduced, which presents the federal budget by services and effects of services on target population and links these with performance indicators and targets over the 3 year period. Medium Term Macroeconomic Indicators have been included in this document. For the convenience of readers, some additional information regarding subsidies, loans and advances has been shown separately. Another facility is that after approval by the Parliament, all budgetary books including Budget in Brief will be placed on the Ministry of Finance website www.finance.gov.pk for un-restricted access by all. I hope that this document will prove to be useful and easily accessible.

Waqar Masood Khan Secretary to the Government of Pakistan Finance Division Islamabad, the 3rd June, 2011

CONTENTS

Page Chapter 1: Review of the Budget 2010-11 Salient Features Comparison - Budget and Revised Estimates Resources - Internal Resources - Net Capital Receipts - External Resources Expenditure Chapter 2: The Budget 2011-12 Salient Features Comparative Budgetary Position Chapter 3: Resource Position 2011-12 Internal Resources - Revenue Receipts - Tax Revenue - Non Tax Revenue - Capital Receipts (Net) - Estimated Provincial Surplus External Resources Chapter 4: Provincial Share in Federal Revenue Receipts - NFC Award - President's Order No. 5 of 2010 - Transfer to the Provincial Grants 1 1 2 3 3 4 5 6 7 7 8 9 10 10 11 12 13 14 15 16 16 17 21

_______________________________________________________________ Contd.........

CONTENTS
Chapter 5: Current Expenditure 2011-12 Current Expenditure (Summary) Comparative Position General Public Service Defence Affairs and Services Public Order and Safety Affairs Economic Affairs Environment Protection Housing and Community Amenities Health Affairs and Services Recreational, Culture and Religion Education Affairs and Services Social Protection Chapter 6: Subsidies & Grants Details of Subsidies Details of Grants Chapter 7: Loans and Investments Current Loans & Advances Development Loans and Advances Current Investment Chapter 8: Public Sector Development Programme (PSDP) 2011-12 Salient Features of PSDP Size of PSDP Outside PSDP Chapter 9: Medium Term Budgetary Framework Macroeconomic Indicators Budget at a Glance 2011-12 22 22 23 24 25 26 27 28 28 29 30 31 32 33 33 35 37 37 38 39 40 40 41
43 44 45

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Working of Fiscal Deficit and Financing 49 Budget 2011-12 _______________________________________________________________

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CHAPTER - 1 REVIEW OF BUDGET 2010-11

SALIENT FEATURES
1.1 a) The budget 2010-11 had the following salient features: The total outlay of budget 2010-11 was estimated at Rs 2,423 billion. However, this size increased to Rs 2,559 billion in revised estimates 2010-11 or by 5.6%. The resource availability during 2010-11 had been estimated at Rs 2,256 billion which declined to Rs 2,107 billion in revised estimates or by 6.6%. Net revenue receipts for 2010-11 had been estimated at Rs 1,377 billion indicating a decrease of 10% in revised estimates 2010-11. The provincial share in federal revenue receipts was estimated at Rs 1,034 billion during 2010-11 which was decreased to Rs 998 billion in the revised estimates for 2010-11. The capital receipts (net) for 2010-11 had been estimated at Rs 325 billion which increased to Rs 459 billion in revised estimates 2010-11 i.e. an increase of 41.2%. The external receipts in 2010-11 were estimated at Rs 387 billion. This showed a decrease of 25% over the revised estimates for 2010-11. The overall expenditure during 2010-11 had been estimated at Rs 2,423 billion of which the current expenditure was Rs 1,998 billion and development expenditure at Rs 425 billion. Current expenditure showed an increase of 14.9% over the revised estimates of 2010-11, while development expenditure had been decreased by 38.0% in the revised estimates of 2010-11. The share of current expenditure in total budgetary outlay for 2010-11 was 82.5% as compared to 89.7% in revised estimates for 2010-11. The expenditure on General Public Service (inclusive of debt servicing transfer payments and superannuation allowance) was estimated at Rs 1,388 billion which was 69.5% of the current expenditure.

b)

c)

d)

e)

f)

g)

h)

i)

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j)

The size of Public Sector Development Programme (PSDP) for 2010-11 was Rs 663 billion. Out of which Rs 168 billion was allocated to Federal Ministries/Divisions, Rs 57 billion for Corporations and Rs 30 billion for Special Programme. The provinces had been allocated an amount of Rs 373 billion for budget estimates 2010-11 in their PSDP. An amount of Rs 10 billion had been allocated to Earthquake Reconstruction and Rehabilitation Authority (ERRA) in the PSDP 2010-11, which increased to Rs 16 billion in revised estimates. While for Other Development Expenditure was budgeted at Rs 124 billion in 2010-11.

k)

l)

1.2 In the light of features outlined above, a comparison has been drawn between budget estimates and revised estimates 2010-11 in the following Table:

TABLE - 1 SUMMARY 2010-11

(Rs in Million) Classification RESOURCES Internal Resources - Revenue Receipts (Net) - Capital Receipts (Net) - Estimated Provincial Surplus External Resources Current Expenditure Federal PSDP Development Loans & Grants to Provinces Other Development Expenditure Est. Operational Shortfall in PSDP Budget 2010-11 2,256,278 1,869,659 1,377,350 325,384 166,925 386,620 2,422,823 1,997,892 290,000 31,385 123,545 (20,000) 166,544 Revised 2010-11 2,107,150 1,817,325 1,238,188 459,332 119,805 289,824 2,559,367 2,295,921 196,000 21,929 45,517 0 452,217

EXPENDITURE

BANK BORROWING

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RESOURCES: INTERNAL RESOURCES

1.3 The internal resources come though revenue receipts (tax & non-tax) and net capital receipts. Table-2 provides the budget and revised estimates for 2010-11 in respect of tax and non-tax revenue, while Table-3 provides the details of net capital receipts.

TABLE - 2 REVENUE RECEIPTS ( 2010-11 )

(Rs in Million) Classification A. TAX REVENUE Direct Taxes Indirect Taxes Budget 2010-11 1,778,715 657,700 1,121,015 632,279 169,985 332,250 130,044 2,410,994 1,033,644 1,377,350 Revised 2010-11 1,679,363 626,900 1,052,463 556,526 103,625 302,640 150,261 2,235,889 997,701 1,238,188

B. NON - TAX REVENUE - Income from Property and Enterprise - Receipts from Civil Administration and Other Functions - Miscellaneous Receipts Revenue Receipts (Gross) Less Provincial Share Revenue Receipts (Net)

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1.4 The tax revenue in revised estimates 2010-11 recorded a decrease of 5.6% over budget estimates 2010-11 while the non-tax revenue decreased from Rs 632,279 million to Rs 556,526 million or by 12.0%. 1.5 After deducting the provincial share, the net revenue receipts were estimated at Rs 1,377,350 million in the budget 2010-11. These are now estimated at Rs 1,238,188 million in the revised estimates 2010-11 i.e. a decline of 10.1%.

CAPITAL RECEIPTS (NET)

1.6 The net capital receipts expected to register an increase of Rs 133,948 million or by 41.2% in the revised estimates 2010-11. The following Table provides the details:

TABLE - 3 CAPITAL RECEIPTS (NET) ( 2010-11 )

(Rs in Million) Budget 2010-11 380,034 163,890 47,460 61,430 55,000 216,144 54,650 325,384 Revised 2010-11 520,299 319,061 57,752 148,809 112,500 201,238 60,966 459,332

Classification I. RECEIPTS ( A + B ) A. Federal Consolidated Fund - Recovery of Loans - Permanent Debt - Floating Debt B. Public Account II. DISBURSEMENTS NET CAPITAL RECEIPTS (I-II)

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EXTERNAL RESOURCES
1.7 The Government obtains foreign loans and grants to use for capital and development expenditure. The external resources for 2010-11 were budgeted at Rs 386,620 million which are now projected at Rs 289,824 million in revised estimates or decline of 25%. This decline is mainly due to receipts from Programme Loans and Tokyo Pledges. The following Table gives the details:

TABLE - 4 EXTERNAL RESOURCES ( 2010-11 ) (Rs in Million)

Classification I. EXTERNAL LOANS ( a to e ) a. Project Loans b. Programme Loans c. Euro Bonds d. Tokyo Pledges e. Other Aid II. EXTERNAL GRANTS TOTAL EXTERNAL RESOURCES ( I + II ) Budget 2010-11 286,934 64,794 80,341 43,250 55,299 43,250 99,686 386,620 Revised 2010-11 254,720 94,050 39,019 42,850 10,070 68,731 35,104 289,824

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EXPENDITURE
1.8 The budget estimates of current and development expenditure for the year 2010-11 have been compared with the revised estimates 2010-11 in Table-5.

TABLE - 5 CURRENT AND DEVELOPMENT EXPENDITURE ( 2010-11 ) (Rs in Million)

Budget 2010-11 1,997,892 1,387,664 442,173 51,263 66,897 448 1,842 7,283 4,359 34,500 1,463 424,930 290,000 123,545 31,385 (20,000) 2,422,823 Revised 2010-11 2,295,921 1,655,566 444,640 58,735 79,960 448 1,657 7,455 4,197 40,324 2,940 263,446 196,000 45,517 21,929 0 2,559,367

Classification A. CURRENT General Public Service Defence Affairs & Services Public Order and Safety Affairs Economic Affairs Environment Protection Housing and Community Amenities Health Affairs & Services Recreational, Culture and Religion Education Affairs and Services Social Protection

B. DEVELOPMENT Federal PSDP Other Development Expenditure Development Loans & Grants to Provinces Estimated Operational Shortfall in PSDP

Total Expenditure ( A + B )

1.9 The overall expenditure at Rs 2,559,367 million in revised estimates 2010-11 shows an increase of 5.6% over budget estimates 2010-11.

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CHAPTER - 2 THE BUDGET 2011-12

SALIENT FEATURES
2.1 The budget 2011-12 has the following main salient features: a) The total outlay of budget 2011-12 is Rs 2,767 billion. This size is 14.2% higher than the size of budget estimates 2010-11. b) The resource availability during 2011-12 has been estimated at Rs 2,463 billion against Rs 2,256 billion in the budget estimates of 2010-11. c) Net revenue receipts for 2011-12 have been estimated at Rs 1,529 billion indicating an increase of 11% over the budget estimates of 2010-11. d) The provincial share in federal revenue receipts is estimated at Rs 1,203 billion during 2011-12 which is 16.4% higher than the budget estimates for 2010-11. e) The capital receipts (net) for 2011-12 have been estimated at Rs 396 billion against the budget estimates of Rs 325 billion in 2010-11 i.e. an increase of 11%. f) The external receipts in 2011-12 are estimated at Rs 414 billion. This shows an increase of 7.1% over the budget estimates for 2010-11. g) The overall expenditure during 2011-12 has been estimated at Rs 2,767 billion of which the current expenditure is Rs 2,315 billion and development expenditure at Rs 452 billion. Current expenditure shows an increase of less than 1% over the revised estimates of 2010-11, while development expenditure will increase by 64.4% in 2011-12 over the revised estimates of 2010-11. h) The share of current expenditure in total budgetary outlay for 2011-12 is 83.7% as compared to 89.7% in revised estimates for 2010-11. i) The expenditure on General Public Services (inclusive of debt servicing transfer payments and superannuation allowance) is estimated at Rs 1,660 billion which is 71.1% of the current expenditure.

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j)

The size of Public Sector Development Programme (PSDP) for 2011-12 is Rs 730 billion. While for Other Development Expenditure an amount of Rs 97 billion has been allocated. The PSDP shows an increase of 58% over the revised estimates 2010-11. The provinces have been allocated an amount of Rs 430 billion for budget estimates 2011-12 in their PSDP as against Rs 373 billion in 2010-11. An amount of Rs 10 billion has been allocated to Earthquake Reconstruction and Rehabilitation Authority (ERRA) in the PSDP 2011-12.

k)

l)

2.2 The comparative position of 2010-11 (budget & revised ) and 2011-12 (budget) is given in Table-6 below:

TABLE - 6 COMPARATIVE BUDGETARY POSITION 2010-11 AND 2011-12

(Rs in Million) Classification i) RESOURCES ( a + b) a. Internal Resources - Revenue Receipts (Net) - Capital Receipts (Net) - Estimated Provincial Surplus b. External Resources ii) EXPENDITURE - Current Expenditure - Development Expenditure (PSDP) - Development Loans & Grants to Provinces - Other Development Expenditure - Estimated Operational Shortfall BANK BORROWING Budget 2010-11 2,256,278 1,869,659 1,377,350 325,384 166,925 386,620 2,422,823 1,997,892 290,000 31,385 123,545 (20,000) 166,544 Revised 2010-11 2,107,150 1,817,325 1,238,188 459,332 119,805 289,824 2,559,367 2,295,921 196,000 21,929 45,517 0 452,217 Budget 2011-12 2,463,292 2,049,363 1,528,829 395,652 124,882 413,929 2,766,816 2,314,859 300,000 54,871 97,085 0 303,524

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CHAPTER - 3 RESOURCE POSITION (2011-12)

3.1 There are two resources i.e. internal and external. The internal resources comprise of revenue receipts, capital receipts and estimated provincial surplus. The external resources come from foreign loans and grants. The overall comparative resource position for the year 2010-11 (budget and revised) and 2011-12 (budget) is given in Table -7 below:

TABLE - 7 RESOURCE POSITION

(Rs in Million) Classification A. INTERNAL RESOURCES Revenue Receipts (Net) Capital Receipts (Net) Estimated Provincial Surplus B. EXTERNAL RESOURCES TOTAL RESOURCES ( A + B ) Budget 2010-11 1,869,659 1,377,350 325,384 166,925 386,620 2,256,278 Revised 2010-11 1,817,325 1,238,188 459,332 119,805 289,824 2,107,150 Budget 2011-12 2,049,363 1,528,829 395,652 124,882 413,929 2,463,292

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INTERNAL RESOURCES REVENUE RECEIPTS

3.2 The revenue receipts in budget 2011-12, on gross basis, are Rs 2,732,150 million showing an increase of 13.3% over estimates 2010-11. The provincial share in taxes for 2011-12 is Rs 1,203,321 million which is 16.4% higher than the budget 2010-11. estimated at the budget estimated at estimates of

3.3 The tax revenue at Rs 2,074,182 million for 2011-12 shows an increase of 23.5% over revised estimates 2010-11. Non-tax revenue has been projected at Rs 657,968 million in 2011-12 as compared with Rs 632,279 million in budget estimates 2010-11. At this level the non-tax revenue is higher by 4.1% when compared with the budget estimates 2010-11. 3.4 Detailed information on various components of tax revenue and non-tax revenue is given in the following Table 8 to 10:

TABLE - 8 REVENUE RECEIPTS

(Rs in Million) Classification Tax Revenue - Direct Taxes - Indirect Taxes Non - Tax Revenue - Property and Enterprise - Civil Administration and Other Functions - Miscellaneous Receipts Revenue Receipts (Gross) Less: Provincial Share Revenue Receipts (Net) Budget 2010-11 1,778,715 657,700 1,121,015 632,279 169,985 332,250 130,044 2,410,994 1,033,644 1,377,350 Revised 2010-11 1,679,363 626,900 1,052,463 556,526 103,625 302,640 150,261 2,235,889 997,701 1,238,188 Budget 2011-12 2,074,182 743,600 1,330,582 657,968 195,330 321,383 141,255 2,732,150 1,203,321 1,528,829

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TABLE - 9 TAX REVENUE

(Rs in Million) Classification *TAX REVENUE ( I + II) I. Direct Taxes - Income Tax - Workers Welfare Fund - Capital Value Tax II. Indirect Taxes - Customs - Sales Tax - Federal Excise - Petroleum Levy - Other Taxes (ICT) - Airport Tax * Out of which F.B.R tax collection: Budget 2010-11 1,778,715 657,700 633,000 20,000 4,700 1,121,015 180,800 674,900 153,600 110,000 1,640 75 1,667,000 Revised 2010-11 1,679,363 626,900 602,500 20,000 4,400 1,052,463 173,300 654,600 132,900 90,000 1,592 71 1,587,700 Budget 2011-12 2,074,182 743,600 718,600 25,000 0 1,330,582 206,400 836,700 165,600 120,000 1,807 75 1,952,300

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TABLE - 10 NON - TAX REVENUE

(Rs in Million) Classification NON - TAX REVENUE Income From Property and Enterprise - Profits Pakistan Post Office - Profits Pak. Telecom. Authority - Interest (Provinces) - Interest (PSEs & Others) - Dividends Receipts from Civil Admn and Other Functions - General Administration - Surplus Profit of the SBP - Defence - Law and Order - Community Services - Social Services Miscellaneous Receipts - Economic Services - Gas Development Surcharge - Discount Retained on Local Crude Oil - Royalty on Oil - Royalty on Gas - Passport and Citizenship Fees - Others Budget 2010-11 632,279 169,985 1,100 50,000 16,638 38,032 64,215 332,250 788 185,000 133,463 1,733 811 10,455 130,044 2,402 29,995 12,000 15,500 32,000 10,850 27,297 Revised 2010-11 556,526 103,625 (140) 0 18,508 41,776 43,481 302,640 702 185,000 115,296 761 497 384 150,261 2,213 31,706 25,189 19,605 35,143 10,700 25,704 Budget 2011-12 657,968 195,330 (2,195) 75,000 15,638 42,503 64,384 321,383 801 200,000 118,739 866 530 447 141,255 2,388 24,925 25,100 15,183 32,796 13,750 27,112

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CAPITAL RECEIPTS (NET)

3.5 Capital receipts in the budget 2011-12 have been estimated at Rs 395,652 million against Rs 325,384 million in the budget estimates 2010-11 and Rs 459,332 million in the revised estimates 2010-11. The details of capital receipts and disbursements are reflected in Table-11.

TABLE - 11 CAPITAL RECEIPTS (NET)

Budget 2010-11 380,034 163,890 47,460 25,863 21,598 61,430 (6,495) 30,000 (50) (10) (15) 40,000 (2,000) 55,000 35,000 20,000 216,144 213,014 2,000 1,130 54,650 28,190 26,460 325,384 6,592 (Rs in Million) Revised Budget 2010-11 2011-12 520,299 319,061 57,752 32,429 25,322 148,809 (6,495) (25,000) (25) (10) (15) 182,354 (2,000) 112,500 36,500 76,000 201,238 186,600 2,000 12,638 60,966 20,394 40,573 459,332 (4,929) 464,209 299,977 51,610 27,192 24,419 129,267 0 50,000 (25) (10) (15) 80,000 (683) 119,100 37,000 82,100 164,232 149,200 2,000 13,032 68,557 32,330 36,227 395,652 7,911

Classification I. RECEIPTS (A + B) A. Federal Consolidated Fund (1+2+3)

1. Recoveries of Loans/Advances - Provinces - Others 2. Permanent Debt - Government Bonds - Pakistan Investment Bonds - FEBCs - FCBCs - U.S. Dollar Bearer Certificates - Ijara Sukuk Bonds - Special US Dollar Bonds 3. Floating Debt - Prize Bonds - Treasury Bills B. Public Account - Saving Schemes - G.P. Fund - Deposits (Net) II. DISBURSEMENT - Government Investments, loans, and Advances and Others - Repayment of Short Term Credits CAPITAL RECEIPTS NET (I - II) Net Lending to Others:

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ESTIMATED PROVINCIAL SURPLUS

3.6 The estimated provincial surplus has been projected at Rs 124,882 million for 2011-12 as against Rs 166,925 million in budget estimates 2010-11 and Rs 119,805 million in revised estimates 2010-11. 3.7 Total net transfers to provinces is given in the following Table-12:

TABLE - 12 TRANSFER TO PROVINCES (NET)

(Rs in Million) Classification Total Transfer to Provinces Divisible Pool Straight Transfers Special Grants/Subventions Project Loans Program Loans Japanese Grant Less Payments to Federal Govt. Interest Payments Loans Repayments Transfer to Provinces (Net) Budget 2010-11 1,119,516 865,778 167,864 54,398 31,385 0 90 42,500 16,638 25,863 1,077,016 Revised 2010-11 1,073,742 834,664 163,037 54,060 21,929 0 52 50,938 18,508 32,429 1,022,804 Budget 2011-12 1,313,712 1,043,933 159,388 55,430 38,239 16,632 90 42,830 15,638 27,192 1,270,882

3.8 The transfer to provinces on net basis registered an increase of Rs 54,212 million in the revised estimates 2010-11. These are placed at Rs 1,270,882 million in budget estimates 2011-12 i.e. an increase of 24.3% over the revised estimates 2010-11.

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EXTERNAL RESOURCES 3.9 The budget estimates 2011-12 have been projected for this head at Rs 413,929 million which is 7.1% higher than budget estimates 2010-11. Details of receipts from external resources are given in Table-13 below:

TABLE - 13 EXTERNAL RESOURCES

(Rs in Million) Classification I. EXTERNAL LOANS (A to E) A. Project Loans (i+ii) i Federal Government - Ministries/Divisions - Corporations/Autonomous Bodies ii Provinces B. C. D. E. Programme Loans Euro Bonds Tokyo Pledges Other Aid - Islamic Development Bank - IMF Budget 2010-11 286,934 64,794 39,180 26,076 13,104 25,613 80,341 43,250 55,299 43,250 43,250 0 99,686 13,566 7,576 218 5,772 7,526 26,694 0 51,900 386,620 Revised 2010-11 254,720 94,050 76,720 37,373 39,348 17,330 39,019 42850 10,070 68,731 0 68,731 35,104 11,729 6,321 809 4,600 8,724 3,599 0 11,051 289,824 Budget 2011-12 287,236 67,509 34,500 14,883 19,616 33,009 117,832 44,000 13,895 44,000 44,000 0 126,693 9,298 4,043 25 5,230 9,170 3,661 70,400 34,164 413,929

II. EXTERNAL GRANTS - Project Grants Federal Autonomous Bodies Provinces - Budget Support Grants - Tokyo Pledges - Privatization Proceeds - Kerry Lugar TOTAL (I + II)

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CHAPTER - 4 PROVINCIAL SHARE IN FEDERAL REVENUE RECEIPTS

NFC Award 4.1 In Pakistan, about 93% resources are generated at federal level whereas only 7% resources are generated by the provinces. Therefore, provinces rely on the Federal Government for meeting their expenditure requirements. In order to maintain inter-governmental fiscal relationship, Article 160 of the Constitution provides for setting up of National Finance Commission (NFC) at intervals not exceeding five years. The mandate of NFC is to recommend to the President for the distribution of resources between the Federal and Provincial Governments. The President, through Presidential Order, gives legal cover to the recommendations of the NFC. 4.2 The 5th NFC gave the Award in 1996. 6th NFC was constituted in 2000 but it could not give the Award and its life expired in July 2005. Accordingly, 7th NFC was constituted in July 2005 which gave the Award in the years 2010, after a period of 14 years. 4.3 Through this Award, the financial autonomy of the provinces has been ensured by increasing their share in the Divisible Pool (taxes) i.e. from 50% to 56% in 2010-11 and 57.5% from 2011-12 onwards. In case of Balochistan, the share from the divisible pool has been guaranteed at Rs. 83 billion in financial year 201011, which is more than double from the actual divisible pool share of financial year 2009-10. It has further been guaranteed that Balochistan province would receive provincial share in the divisible pool based on the budgetary projections from financial year 2011-12 onwards for the NFC period. Shortfall, if any, based on the actual collection reported by FBR would be borne by the Federal Government itself. In the financial year 2010-11, in order to match the share of Balochistan Province with the guaranteed figures of Rs. 83.00 billion, Federal Government has paid Rs. 16.7 billion from its own resources upto 30th April, 2011. 4.4 For the first time in the history, multiple indicators have been adopted for distribution of provincial share in the divisible pool whereas in all the previous Awards, population was the sole criterion for distribution of provincial share in the divisible pool with special grants (subventions) to smaller provinces.

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4.5 The Recommendations of the NFC has been given legal cover through Presidents Order No. 5 of 2010, which is reproduced as follows:

"PRESIDENT'S ORDER No. 5 of 2010

AN

ORDER
to provide for distribution of revenues and certain grants WHEREAS in pursuance of clause (1) of Article 160 of the Constitution of the Islamic Republic of Pakistan hereinafter referred to as the Constitution, the President, by the Finance Division's Notification No. S.R.O. 739(I)/2005, dated 21st July 2005, as modified by the said Division's Notification No. S.R.O. 693(I)/2009, dated 24th July 2009, appointed a National Finance Commission to make recommendations, among other matters, as to the distribution between the Federation and the Provinces of the net proceeds of certain taxes; AND WHEREAS the said Commission has also submitted its recommendations with regard to the said distribution; NOW, THEREFORE, in pursuance of clauses (4) and (7) of Article 160 of the Constitution, the President is pleased to make the following Order: 1. Short title and commencement. (1) This Order may be called the Distribution of Revenues and Grants-in-Aid Order, 2010. (2) It shall come into force on the first day of July, 2010.

2. Definitions. In this Order, unless there is anything repugnant in the subject or context, (a) "net proceeds" means, in relation to any tax, duty or levy, the proceeds thereof reduced by the cost of collection as ascertained and certified by the Auditor General of Pakistan; and "taxes on income" includes corporation tax but does not include taxes on income consisting of remuneration paid out of the Federal Consolidated Fund.

(b)

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3. Distribution of Revenues. (1) The divisible pool taxes in each year shall consist of the following taxes levied and collected by the Federal Government in that year, namely: (a) (b) (c) (d) (e) (f) (g) (h) taxes on income; wealth tax; capital value tax; taxes on the sales and purchases of goods imported, exported, produced, manufactured or consumed; export duties on cotton; customs duties; federal excise duties excluding the excise duty on gas charged at wellhead; and any other tax which may be levied by the Federal Government.

(2) One percent of the net proceeds of divisible pool taxes shall be assigned to Government of Khyber Pakhtunkhwa to meet the expenses on war on terror. (3) After deducting the amounts as prescribed in clause (2), of the balance amount of the net proceeds of divisible pool taxes, fifty-six percent shall be assigned to provinces during the financial year 2010-11 and fifty-seven and half percent from the financial year 2011-12 onwards. The share of the Federal Government in the net proceeds of divisible pool shall be forty - four percent during the financial year 2010-11 and forty-two and half percent from the financial year 2011-12 onwards. 4. Allocation of shares to the Provincial Governments.(1) The Provincewise ratios given in clause (2) are based on multiple indicators. The indicators and their respective weights as agreed upon are: (a) (b) (c) (d) Population Poverty or backwardness Revenue collection or generation Inverse population density 82.0% 10.3% 5.0% 2.7%

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(2) The sum assigned to the Provincial Governments under Article 3 shall be distributed amongst the Provinces on the basis of the percentage specified against each: (a) (b) (c) (d) Balochistan Khyber Pakhtunkhwa Punjab Sindh Total: 9.09% 14.62% 51.74% 24.55% 100.00%

(3) The Federal Government shall guarantee that Balochistan province shall receive the projected sum of eighty-three billion rupees from the provincial share in the net proceeds of divisible pool taxes in the first year of the Award. Any shortfall in this amount shall be made up by the Federal Government from its own resources. This arrangement for Balochistan shall remain protected throughout the remaining four years of the Award based on annual budgetary projections. 5. Payment of net proceeds of royalty on crude oil.Each of the provinces shall be paid in each financial year as a share in the net proceeds of the total royalties on crude oil an amount which bears to the total net proceeds the same proportion as the production of crude oil in the Province in that year bears to the total production of crude oil. 6. Payment of net proceeds of development surcharge on natural gas to the Provinces.(1) Each of the Provinces shall be paid in each financial year as a share in the net proceeds to be worked out based on average rate per MMBTU of the respective province. The average rate per MMBTU shall be derived by notionally clubbing both the royalty on natural gas and development surcharge on Gas. Royalty on natural gas shall be distributed in accordance with clause (1) of Article 161 of the Constitution whereas the development surcharge on natural gas would be distributed by making adjustments based on this average rate. (2) The development surcharge on natural gas for Balochistan with effect from 1st July 2002, shall be re-worked out hypothetically on the basis of the formula given in clause (1) and the amount, subject to maximum of ten billion rupees, shall be paid in five years in five equal installments by the Federal Government as grants to be charged on the Federal Consolidated Fund.

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7. Grants-in-Aid to the Provinces.There shall be charged upon the Federal Consolidated Fund each year, as grants-in-aid of the revenues of the province of Sindh an amount equivalent to 0.66% of the provincial share in the net proceeds of divisible pool as a compensation for the losses on account of abolition of octroi and zilla tax. 8. Sales tax on services.NFC recognizes that sales tax on services is a Provincial subject under the Constitution of the Islamic Republic of Pakistan, and may be collected by respective Provinces, if they so desired. 9. Miscellaneous.(1) NFC also recommended increase in the rate of excise duty on natural gas to Rs10.0 per MMBTU. Federal Government may initiate necessary legislation accordingly. (2) The NFC recommended that the Federal Government and Provincial Governments should streamline their tax collection systems to reduce leakages and increase their revenues through efforts to improve taxation in order to achieve a 15% tax to GDP ratio by the terminal year i.e. 2014-15. Provinces would initiate steps to effectively tax the agriculture and real estate sectors. Federal Government and Provincial Governments may take necessary administrative and legislative steps accordingly. (3) Federal Government and Provincial Governments would develop and enforce mechanism for maintaining fiscal discipline at the Federal and Provincial levels through legislative and administrative measures. (4) The Federal Government may assist the Provinces through specific grants in times of unforeseen calamities. (5) The meetings of the NFC may be convened regularly on a quarterly basis to monitor implementation of the award in letter and spirit. 10. Repeal. The Distribution of Revenues and Grants-in-Aid Order, 1997 (P.O. No. 1 of 1997), and the Distribution of Revenues and Grants-in-Aid, Order, 2010 (P.O. 4 of 2010) are hereby repealed. ASIF ALI ZARDARI, President."

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4.6 The following Table shows the estimated transfers to the Provincial Governments on account of their share in federal taxes and straight transfers during the year 2011-2012.

TABLE - 14 SHARE OF PROVINCES IN FEDERAL REVENUE RECEIPTS

(Rs in Million) Classification Budget 2010-11 Revised 2010-11 Budget 2011-12

DIVISIBLE POOL TAXES Income Tax Capital Value Tax Sales Tax excl. GST Federal Excise (Net of Gas) Customs Duties (excl. EDS) Royalty on Crude Oil Royalty on Natural Gas Gas Development Surcharge (GDS) Excise Duty on Natural Gas GST on Services*
Total:

352,667 2,645 328,630 82,346 99,490 15,037 29,439 27,061 7,144 89,183 1,033,643 494,257 279,630 160,359 99,398 1,033,644

337,304 2,493 330,398 69,122 95,348 19,213 34,440 31,072 12,326 65,985 997,701 463,594 277,878 156,921 99,307 997,701

407,924 0 437,404 85,977 112,627 14,879 32,140 24,427 15,359 72,583 1,203,321 576,862 324,409 191,847 110,204 1,203,321

PROVINCE- WISE SHARE Punjab Sindh Khyber Pakhtunkhwa ** Balochistan

Total:

* The indicative shares of GST on Services are strictly provisional at this stage. These shares would be revised and adjusted in the light of decision taken after discussions with the provinces. ** Inclusive 1% War on Terror

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CHAPTER - 5 CURRENT EXPENDITURE ( 2011-12 )

5.1 Following Table shows summary of current expenditure:

TABLE - 15 CURRENT EXPENDITURE ( SUMMARY )

(Rs in Million) Classification Interest Payment Interest on Domestic Debt Interest on Foreign Debt Pension Military Civil Defence Affairs and Services Defence Services Defence Administration Grants and Transfers Grants to Provinces Grants to Others Subsidies Running of Civil Government Pay and Allowances Others Provision for Pay and Pension TOTAL CURRENT EXPENDITURE Repayment of Long Term Foreign Debt
TOTAL CURRENT EXPENDITURE (Including Repayments)

Budget 2010-11 698,556 621,759 76,797 90,680 71,915 18,765 442,173 440,746 1,427 227,168 54,398 172,770 126,684 193,263 88,627 104,636 45,000 1,823,524 174,369 1,997,892

Revised 2010-11 728,042 653,628 74,414 92,688 71,915 20,773 444,640 443,245 1,395 299,975 54,060 245,915 395,801 207,351 92,582 114,769 0 2,168,498 127,422 2,295,921

Budget 2011-12 790,977 714,671 76,306 96,138 73,218 22,920 495,215 493,745 1,470 294,986 55,430 239,556 166,448 202,914 103,881 99,033 25,000 2,071,679 243,179 2,314,859

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5.2 The revised estimates for 2010-11 on account of current expenditure have increased to Rs 2,295,921 million from the budget estimates of Rs 1,997,892 million. For 2011-12, the current expenditure has been estimated at Rs 2,314,859 million, showing an increase of less than 1% over revised estimates 2010-11. 5.3 Following Table indicates the comparative position of the budget and revised estimates of current expenditure for the year 2010-11 and the budget estimates for 2011-12.

TABLE - 16 CURRENT EXPENDITURE

(Rs in Million) Classification General Public Service Defence Affairs and Services Public Order and Safety Affairs Economic Affairs Environment Protection Housing and Community Amenities Health Affairs & Services Recreational, Culture and Religion Education Affairs and Services Social Protection TOTAL: Budget 2010-11 1,387,664 442,173 51,263 66,897 448 1,842 7,283 4,359 34,500 1,463 1,997,892 Revised 2010-11 1,655,566 444,640 58,735 79,960 448 1,657 7,455 4,197 40,324 2,940 2,295,921 Budget 2011-12 1,659,978 495,215 59,609 50,307 577 1,602 2,646 4,247 39,513 1,164 2,314,859

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5.4 The bulk of expenditure has been placed under General Public Service. The expenditure against this head has been budgeted at Rs 1,659,978 million i.e. 71.7% of current expenditure, while 21.4% for Defence, and 2.6% for Public Order and Safety have been allocated in the budget estimates 2011-12.

GENERAL PUBLIC SERVICE

5.5 The details under General Public Service are given in Table-17.

TABLE - 17 GENERAL PUBLIC SERVICE

(Rs in Million) Classification Budget 2010-11 1,387,664 1,090,236 90,680 76,797 174,369 621,759 126,630 103 227,168 2,488 2,267 5,665 1,254 58,483 Revised 2010-11 1,655,566 1,329,159 92,688 74,414 127,422 653,628 381,007 95 299,975 3,910 2,506 5,552 1,219 13,150 Budget 2011-12 1,659,978 1,308,917 96,138 76,307 243,179 714,671 178,622 88 294,986 2,736 2,524 6,059 1,390 43,278

GENERAL PUBLIC SERVICE

Executive & Legislatives Organs, Financial - Superannuation Allowance & Pensions - Servicing of Foreign Debt - Foreign Loan Repayment - Servicing of Domestic Debt - Others Foreign Economic Aid Transfer Payments General Services Basic Research R&D General Public Services Administration of General Public Service General Public Services not elsewhere defined

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5.6 Under General Public Service, the major portion gives to executive & legislatives organs, financial and fiscal affairs. At Rs 1,308,917 million, it forms 78.9% of the allocation of Rs 1,659,978 million. The main heads of expenses are servicing of domestic debt, foreign loan repayment and others. Other major item is the transfer payments.

DEFENCE AFFAIRS AND SERVICES

5.7 Details of estimates of expenditure on Defence Affairs and Services in 201011 (budget & revised) and 2011-12 (budget) are given below:

TABLE - 18 DEFENCE AFFAIRS AND SERVICES

(Rs in Million) Classification Budget 2010-11 Revised 2010-11 Budget 2011-12

DEFENCE AFFAIRS AND SERVICES

442,173 1,427 440,746 176,726 111,240 119,370 34,664 (1,254)

444,640 1,395 443,245 176,726 111,327 117,557 38,890 (1,254)

495,215 1,470 493,745 206,488 128,283 117,591 42,638 (1,255)

Defence Administration Defence Services Employees Related Expenses Operating Expenses Physical Assets Civil Works Less Recoveries

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PUBLIC ORDER AND SAFETY AFFAIRS

5.8 Under this head an amount of Rs 59,609 million has been provided in the budget 2011-12 as compared with Rs 51,263 million in the budget estimates 2010-11 and Rs 58,735 billion in revised estimates 2010-11. The allocation for Police (Rs 55,429 million) forms the major component under this classification which has share of 93% in total allocation of this head. The following Table provides the details:

TABLE - 19 PUBLIC ORDER AND SAFETY AFFAIRS

(Rs in Million) Budget 2010-11 Revised 2010-11 Budget 2011-12

Classification

PUBLIC ORDER AND SAFETY AFFAIRS Law Courts Police Fire Protection Prison Administration and Operation R and D Public Order and Safety Administration of Public Order

51,263 1,744 47,760 89 17 17 1,637

58,735 1,766 55,058 89 17 17 1,789

59,609 2,401 55,429 102 23 19 1,635

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ECONOMIC AFFAIRS
5.9 The allocation under this head in the budget 2011-12 has been projected at Rs 50,307 million. This is less by 24.8% than the budget estimates of 2010-11 and 37.1% than the revised estimates 2010-11. The main reason for this reduction is elimination of subsidies. The following Table provides the details under this head:

TABLE - 20 ECONOMIC AFFAIRS

(Rs in Million) Classification Budget 2010-11 Revised 2010-11 Budget 2011-12

ECONOMIC AFFAIRS
General Economic, Commercial & Labour Affairs Agriculture, Food, Irrigation, Forestry and Fishing Fuel and Energy Mining and Manufacturing Construction and Transport Communications Other Industries

66,897

79,960

50,307

24,603

33,831

25,166

29,821 507 1,806 7,503 1,773 885

15,840 11,401 1,618 7,285 1,677 8,308

12,108 539 1,760 8,415 2,115 205

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ENVIRONMENT PROTECTION
5.10 Environment Protection has been provided with Rs 577 million for 2011-12 under Waste Water Management which is higher than by 28.8% as compared with budget and revised estimates 2010-11.

TABLE - 21 ENVIRONMENT PROTECTION

(Rs in Million) Classification Budget 2010-11 Revised 2010-11 Budget 2011-12

ENVIRONMENT PROTECTION
Waste Water Management

448 448

448 448

577 577

HOUSING AND COMMUNITY AMENITIES

5.11 An allocation of Rs 1,602 million has been provided in the budget 2011-12 for community development. Details are as under:

TABLE - 22 HOUSING AND COMMUNITY AMENITIES

(Rs in Million) Classification Budget 2010-11 Revised 2010-11 Budget 2011-12

HOUSING AND COMMUNITY AMENITIES Community Development

1,842 1,842

1,657 1,657

1,602 1,602

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HEALTH AFFAIRS AND SERVICES

5.12 Under Health Affairs and Services a total allocation of Rs 2,646 million has been made in the budget estimates 2011-12. Details are given in the following Table:

TABLE - 23 HEALTH AFFAIRS AND SERVICES

(Rs in Million) Classification Budget 2010-11 Revised 2010-11 Budget 2011-12

HEALTH AFFAIRS AND SERVICES Medical Products, Appliances and Equipment Hospitals Services Public Health Services R & D Health Health Administration

7,283 83

7,455 80

2,646 0

6,408 522 2 269

6,627 487 2 258

2,435 140 0 70

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RECREATIONAL, CULTURE AND RELIGION

5.13 In budget 2011-12 an amount of Rs 4,247 million has been provided for Recreational, Culture and Religion. The bulk of the expenditure has been earmarked for Broadcasting and Publishing which is 77.8% of the total allocation under this head. Details are given in Table-24:

TABLE - 24 RECREATIONAL, CULTURE AND RELIGION

(Rs in Million) Classification Budget 2010-11 Revised 2010-11 Budget 2011-12

RECREATIONAL, CULTURE & RELIGION

4,359

4,197

4,247

Recreational and Sporting Services Cultural Services Broadcasting and Publishing Religious Affairs Administration of Information, Recreation & Culture

151 448 2,893 683

86 314 2,932 601

0 347 3,303 387

184

264

210

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EDUCATION AFFAIRS AND SERVICES

5.14 The Education Affairs and Services have been provided with Rs 39,513 million in the budget estimates 2011-12 as compared with Rs 34,500 million under budget estimates 2010-11 and Rs 40,324 million in revised estimates 2010-11. The bulk of expenditure at Rs 29,111 million has been allocated for Tertiary Education Affairs and Services in budget 2011-12 which is 73.7% of the total allocation under this head. The details are as under:

TABLE - 25 EDUCATION AFFAIRS AND SERVICES

(Rs in Million) Classification Budget 2010-11 Revised 2010-11 Budget 2011-12

EDUCATION AFFAIRS AND SERVICES Pre-Primary & Primary Education Affairs Services Secondary Education Affairs and Services Tertiary Education Affairs and Services Social Welfare & Special Education Div. Subsidiary Services to Education Administration Education Affairs and Services not elsewhere Classified

34,500

40,324

39,513

3,174 4,232 25,210 42 35 1,260 547

3,245 4,425 31,166 34 35 884 534

4,148 4,893 29,111 54 95 700 513

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SOCIAL PROTECTION
5.15 The social protection has been allocated with Rs 1,164 million in the budget 2011-12 which is lesser by Rs 299 million as compared with budget estimates 2010-11 and also lesser by Rs 1,776 million than the revised estimates 2010-11.

TABLE - 26 SOCIAL PROTECTION

(Rs in Million) Classification SOCIAL PROTECTION Administration Others Budget 2010-11 1,463 916 548 Revised 2010-11 2,940 2,341 599 Budget 2011-12 1,164 828 337

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CHAPTER - 6 SUBSIDIES & GRANTS 2011-12 SUBSIDIES

6.1 As a matter of public policy the Government provides subsidies to give relief to the citizens. In the budget estimates 2010-11 subsidies were 1.5% of GDP; in revised estimates 2010-11 increased to 2.19% of GDP; and in the budget estimates 2011-12 decreased to 0.79% of GDP. Table-27 provides the details:

TABLE - 27 SUBSIDIES
(Rs in Million) Classification Subsidy to WAPDA/PEPCO Adjustment of Addl. surcharge against GST Inter-Disco Tariff Differential To Pick up Receivables from FATA To Pick up Interest Payment for TFCs Subsidy to KESC Adjustment of Addl. surcharge against GST KESC - to Pick up Tariff Differential KESC - Payable to PSO & PKGCL Subsidy to TCP Import of Sugar TCP - Import/Export of Wheat TCP - Cotton Operation Subsidy to USC USC - Ramzan Package USC - Sale of Sugar Budget 2010-11 84,000 4,000 30,000 10,000 40,000 3,317 1,000 2,000 317 17,130 4,000 12,000 1,130 4,200 700 3,500 Revised 2010-11 295,827 7,000 238,827 10,000 40,000 47,317 1,000 46,000 317 17,130 4,000 12,000 1,130 4,200 700 3,500 Budget 2011-12 122,700 10,000 50,000 7,000 55,700 24,588 350 24,000 238 4,000 4,000 0 0 2,000 2,000 0 Contd.

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SUBSIDIES
(Rs in Million) Classification Subsidy to PASSCO PASSCO - Sale of Wheat PASSCO - Paddy Operation PASSCO - Mung Operation Subsidy to Others Fauji Fertilizer Bin Qasim Ltd Oil Refineries/OMCs Servicing of Outstanding Foreign Loan Liability of SOPREST/GIK Instt. Topi Wheat Reserved Stock R & D Support to Textile Sector Manufacturers of Phosphatic Pottasic Fertilizer Imports of Phosphatic Pottasic Fertilizer TCP for Import of Urea Fertilizer Sale of Wheat to FATA Sale of Wheat in Gilgit Baltistan Sale of Salt in Gilgit Baltistan Total Subsidies: Budget 2010-11 2,900 600 2,000 300 15,137 185 10,807 200 3,000 0 0 0 0 233 707 4 126,684 Revised 2010-11 2,900 600 2,000 300 28,427 185 10,807 38 4,000 7,500 800 200 4,000 233 659 4 395,801 Budget 2011-12 74 0 0 74 13,086 162 7,921 0 4,000 0 0 0 0 255 744 4 166,448

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GRANTS
6.2 The detail of grants to the provinces and others is given in the following Table:

TABLE - 28 GRANTS
(Rs in Million) Budget 2010-11 Revised 2010-11 Budget 2011-12

Classification

I. GRANTS TO PROVINCES (A+B): A. SPECIAL GRANTS: Punjab Sindh Khyber Pakhtunkhwa Balochistan B. LUMP PROVISION: II. GRANTS TO OTHERS: Pakistan Railways to meet losses AJK Earthquake affected areas Grants to AJK Grant-in-Aid to Gilgit Baltistan Contingent Liabilities National Internship Program Remission of ZTBL loans HBFCL NBP Admn. Fee & PED Expenses etc. Remission of Agri. Loans of Farmers of Bajor Swat & Buner Payment to PIA for repair & maintenance of VVIP Aircraft

54,398 53,654 5,166 6,790 25,000 16,698 744 172,770 21,856 53 11,250 0 110,000 3,600 1,000 1,000 10 1,000 1,000

54,060 54,060 5,227 7,107 25,018 16,708 0 245,915 32,642 53 12,940 0 141,686 2,928 400 1,000 0 151 0 Contd..

55,430 54,880 5,166 7,970 25,000 16,744 550 239,556 25,000 0 15,000 8,164 150,000 700 1,000 1,000 10 0 0

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GRANTS
(Rs in Million) Classification Reimbursement of TT Charges on Home Remittances Lump Provision of Relief etc. Pakistan Remittance Initiatives Misecllaneous Grants
Grant to Provinces for emergency Relief

Budget 2010-11

Revised 2010-11

Budget 2011-12

0 0 0 20,000 0 0 0 0 0 2,000 227,168

2,204 2,485 742 30,000 16,921 250 110 0 2 1,403 299,975

2,357 2,400 815 30,000 9 100 200 800 2 2,000 294,986

GOP Contribution to President Rozgar Scheme Competition Commission of Pakistan Purchasing of shareholding of Private Banks in FWBL Institute of Cost & Management Accountants of Pakistan Grants to Bait-ul -Mal
TOTAL GRANTS (I to II):

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CHAPTER - 7 LOANS AND INVESTMENTS 2011-12

7.1 The financial assets of the federal government consist of investible funds and loans provided to the Azad Jammu & Kashmir (AJ&K) and various agencies/institutions and government servants to enable them to meet their loans and investment requirements. The significance of these funds lies in the fact that they meet the financial requirements of the provinces as well as some of the federal programmes.

CURRENT LOANS
7.2 Total current loans and advances have been estimated at Rs 11,680 million in budget 2011-12. These loans are provided by the federal government for various purposes as specified in Table-29.

TABLE - 29 CURRENT LOANS & ADVANCES

(Rs in Million) Budget 2010-11 28 3,000 6,796 100 4 1 of 132 10,061 132 10,052 132 11,680 Revised 2010-11 28 2,991 6,796 100 4 1 Budget 2011-12 36 3,300 8,007 200 4 1

Classification 1 Loans - WAPDA 2 Loans to Government Servants 3 Ways & Means Advance to AJ&K 4 Loans/Advances Friendly Countries 5 Loans/Advances Employees of PNRA 6 Junagadh & Kathiawar Chiefs 8 Loan to Printing Corporation Pakistan Total:

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DEVELOPMENT LOANS AND ADVANCES

7.3 Development loans and advances are granted to Provinces, Government of Azad Jammu & Kashmir, Public Sector Enterprise (PSEs), Local Bodies and others to assist them in carrying out their development programmes. Total development loans are estimated at Rs 137,695 million in the budget 2011-12 as against revised estimates of Rs 97,961 million in 2010-11. 7.4 Table - 30 shows the position of development loans:

TABLE - 30 LOANS AND ADVANCES BY THE FEDERAL GOVERNMENT

(Rs in Million) Classification 1 Development Loans & Advances 2 External Development Loans & Advances Total: Budget 2010-11 52,842 Revised 2010-11 37,468 Budget 2011-12 65,289

45,119 97,961

58,793 96,261

72,406 137,695

7.5 Development loans and advances increased to Rs 65,289 million in budget estimates 2011-12 from Rs 37,468 million in revised estimates 2010-11, showing an increase of 74.3%. 7.6 External development loans and advances increased to Rs 72,406 million in budget estimates 2011-12 from Rs 58,793 million in revised estimates 2010-11, showing an increase of 23.2%.

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CURRENT INVESTMENT
7.7 The investment on current account for the year 2011-12 has been estimated at Rs 20,649 million as compared to Rs 10,334 million in the revised estimates of 2010-11 which is higher by 100%. The comparative position is given below:

TABLE - 31 FEDERAL INVESTMENTS ON CURRENT ACCOUNT

(Rs in Million) Classification 1 Contribution towards ECO Trade 2 GoP Contribution to SAARC (SDF) 3 GoP Equity in the capital of KS&EW 4 GoP Equity in PIAC 5 Payment of Mark up on Loans by PASDEC 6 5th Gen. Capital Increase of ADB 7 Islamic Development Bank (IDB) 8 GoP Investment-Peoples Steel Mills 9 Equity from GoP for Pak China Inv.Co 10 11 12 13 14 15 16 16 GoP Equity in Pak Dairy Dev.Co.Ltd GoP Equity Investment NIP Karachi Investment in HBFCL's Equity SME Bank Ltd. Mortgage Refinance Co. (MRC) KESC Lump Provision Others Total: Budget 2010-11 2,100 1,165 578 3,677 50 517 1,127 232 1,400 83 291 3,200 2,500 1,200 0 0 0 18,121 Revised 2010-11 2,072 0 518 2,867 0 517 1,127 232 1,400 83 120 0 0 0 1,383 0 15 10,334 Budget 2011-12 2,192 1,400 0 3,831 59 544 1,127 160 1,500 45 379 3,000 2,000 1,200 0 3,210 2 20,649

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CHAPTER - 8 PUBLIC SECTOR DEVELOPMENT PROGRAMME (PSDP) 2011-12

8.1 For the year 2011-12 National Economic Council (NEC) has approved an overall size of Public Sector Development Programme (PSDP) at Rs 730 billion which is equal to 3.5% of the Gross Domestic Product (GDP) compared to 2.6% of GDP in the Revised Estimates 2010-11. 8.2 The Salient features of PSDP allocation for 2011-12 are as follows: The PSDP has been raised to Rs 730 billion in the budget for 2011-12 showing an increase of 58% as against the revised estimates 2010-11 at Rs 462 billion. Federal PSDP for the year 2011-12 has been kept at Rs 300 billion which is higher by 61% than revised estimates 2010-11. The share of Federal Ministries/Divisions in 2011-12 PSDP is Rs 157 billion indicating an increase of 101.3% over revised estimates 2010-11. The Corporations' PSDP 2011-12 has been placed at Rs 72 billion indicating an increase of 110% over revised estimates 2010-11. An amount of Rs 33 billion has been provided in the budget 2011-12 for Special Programme which is higher by 45% as compared with budget estimates 2010-11 and by 45% against revised estimates 2010-11. Earthquake Rehabilitation and Reconstruction Authority (ERRA) has been allocated Rs 10 billion for budget estimates 2011-12. The provincial development programme for 2011-12 has been estimated at Rs 430 billion as against Rs 266 billion in revised estimates 2010-11 showed an increase of 61.7%.

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8.3 Table-27 indicates details of the size of Public Sector Development Programme (PSDP) for federal and provincial governments.

TABLE - 32 SIZE OF PSDP

Budget 2010-11 167,577 28,424 15,228 14,566 13,630 9,438 15,763 3,220 5,654 3,887 3,576 3,619 1,646 1,000 1,235 623 718 1,230 474 145 519 247 141 550 114 508 165 82 15 0 0 81

(Rs in Million) Revised 2010-11 99,545 17,173 10,738 7,874 7,072 5,145 15,040 1,549 2,997 2,051 1,528 1,778 630 366 802 421 310 451 200 70 519 91 52 379 78 260 60 98 9 0 0 30 Contd. Budget 2011-12 156,552 36,136 22,000 10,371 15,000 31,975 14,000 2,138 5,800 3,846 1,396 2,692 1,147 1,200 1,970 150 793 1,455 425 172 744 350 285 534 34 630 150 252 161 677 70 0

Classification (i) Federal Ministries/Divisions 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 Water & Power Division Pak. Atomic Energy Commission Finance Division Railways Division Planning & Development Division Higher Education Commission Industries & Production Division Interior Division Defence Division Housing & Works Division Cabinet Division Science & Tech. Research Division Law and Justice Division Revenue Division (FBR) Petroleum & Natural Resources Div. IT & Telecom Division Defence Production Division Commerce Division Communication Division excl. NHA Ports & Shipping Division Pak. Nuclear Regulatory Authority Ministry of Foreign Affairs Narcotics Control Division Establishment Division Information & Broadcasting Division Textile Industry Division Statistics Division Economic Affairs Division Capital Admn & Development Div. Inter Provincial Coordination Div. Ministry of Postal Services

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SIZE OF PSDP
(Rs in Million) Classification 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 Health Division Food & Agriculture Division Education Division Population Welfare Division Livestock & Dairy Dev. Division Environment Division Special Initiatives Division Women Development Division Social Welfare & Special Edu. Div. Labour & Manpower Division Local Govt. & Rural Dev. Division Tourism Division Culture Division Sports Division Youth Affairs Division Budget 2010-11 16,945 10,874 5,071 4,116 886 1,000 1,000 153 108 66 82 125 354 230 75 56,671 12,030 44,641 30,000 5,000 25,000 25,752 10,524 6,585 8,643 10,000 290,000 373,000 663,000 Revised 2010-11 10,125 5,575 2,689 1,855 362 514 128 73 54 39 30 55 135 105 38 34,478 10,760 23,719 22,775 5,000 17,775 23,201 9,000 6,308 7,893 16,000 196,000 266,000 462,000 Budget 2011-12 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 72,400 32,500 39,900 33,000 5,000 28,000 28,047 10,778 7,269 10,000 10,000 300,000 430,000 730,000

(ii) Corporations 1 WAPDA (Power) 2 National Highway Authority (NHA) (iii) Special Programme 1 People's Works Programme-I 2 People's Works Programme-II (iv) Special Areas 1 Azad Jammu & Kashmir 2 Gilgit Baltistan 3 FATA (v) ERRA A. Federal PSDP (i to v) B. Provincial PSDP Total PSDP (A+B)

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8.4 The following Table shows other development expenditure outside Public Sector Development Programme (PSDP):

TABLE -33 OUTSIDE PSDP

(Rs in Million) Budget 2010-11 123,545 45 2,500 3,000 800 4,000 200 500 2,000 45,000 , 50,000 10,000 1,500 500 3,500 0 Revised 2010-11 45,517 0 2,500 3,000 0 0 0 292 0 0 35,000 0 300 0 4,425 0 Budget 2011-12 97,085 45 2,500 0 0 12,000 0 500 2,000 5,000 50,000 10,000 40 0 1,000 14,000

Classification OTHER DEV. EXP. OUTSIDE PSDP Grants to SME Sector Development Program Grant for Reconstruction in Afghanistan Grants for Pakistan Poverty Alleviation Fund Subsidy to Manufacturers of Phosphatic & Potassic Fertilizer Subsidy to TCP for Import of Urea Fertilizer Subsidy to Importers of Phosphatic & Potassic Fertilizer Crops Loan Insurance Benazir Tractor Support Program Relief, Rehabilitation Reconstruction & Security of IDPs Benazir Income Support Program
(BISP)

Export Investment Development Fund SME Development Support Fund Venture Capital Fund PM Fiscal Relief Package for FATA/PATA Lump for Other Misc. Grants

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CHAPTER - 9 MEDIUM TERM BUDGETARY FRAMEWORK (MTBF) 2011-12

9.1 The Medium-Term Budgetary Framework (MTBF), budget management and key governance reform programme of the government, was rolled-out to entire Federal Government last year. As per the MTBF two important changes have been made in the process of budget making; the 'Budget Strategy Paper' and 'Output based Budgeting'. 9.2 This year the Budget Strategy Paper 2011-14 was presented in the Cabinet on 11 May 2011. The Budget Strategy Paper 2011-14 included; macroeconomic situation, key revenue and expenditure policies, medium-term fiscal and macroeconomic framework and indicative budget ceilings for all Federal Ministries. This indicative budget ceilings 2011-14 were communicated to all the Principal Accounting Officers of the federal government. Consultations on the Budget Strategy Paper 2011-14 were also made with the Parliamentary Standing Committees of Finance & Revenue, political parties, provinces, and the Economic Advisory Council. 9.3 Last year, the budget was presented by outputs (services) in the Parliament in a book called 'Federal Medium-Term Budget Estimates for Services Delivery 2010-13' (also called 'Green Book 2010-13'). The Green Book 2010-13 presented goals, outcomes outputs and inputs and linked these with three-years budgets within ceilings for each Principal Accounting Officer. In addition, key performance indicators and targets were presented for each output over the three-years period.

9.4 This year, the 'Federal Medium-Term Budget Estimates for Service Delivery 2011-14' book is being presented.
9.5 For the next year, the government intends to improve alignment of output-based budgeting with the New Framework for Growth, which was approved by the National economic council in its meeting of 28 May 2011. The government also intends to start the process of output-based monitoring with an aim to provide reports on the government's performance to the Cabinet. In addition, the Finance Division will take additional steps to strengthen linkages of MTBF with PIFRA (Project to Improve Financial Reporting and Auditing) including output-based budget preparation and output-based expenditure monitoring using the PIFRA system.

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9.6

Macroeconomic Indicators/Rolling targets for 2011-14 are provided below:

TABLE - 34 MACROECONOMIC INDICATORS/ROLLING TARGETS

Medium-Term Budgetary Statement Original Revised Budget Estimates 2010-11 2010-11

Budget 2011-12 4.2 12.0

Forecast 2012-13 4.5 9.5 2013-14 4.7 8.0

Real GDP Growth (%) Inflation (%)

4.5 9.5

2.4 15.5

(as percentage of GDP unless otherwise indicated) Total Revenue - Tax Revenue - FBR Revenue - Non Tax Revenue Total Expenditure - Current Expenditure - Development Expenditure Fiscal Deficit
Revenue Deficit/Surplus

14.9 10.9 9.7 4.0 18.9 14.6 4.3 -4.0 0.3 57.2 17,250

13.0 9.8 8.8 3.2 18.7 16.0 2.7 -5.7 -3.0 57.2 18,063

13.6 10.3 9.3 3.3 17.7 13.7 4.0 -4.0 0.0 53.2 21,041

13.4 10.5 9.6 2.9 16.9 12.8 4.1 -3.5 0.6 48.7 24,200

13.2 10.8 9.9 2.4 16.2 11.8 4.4 -3.0 1.4 45.9 27,464

Total Public Debt GDP at market prices (Rs. In Billions)

12:38 PM6/4/2011

BUDGET AT A GLANCE 2011-12

(Rs in Billion)

RECEIPTS
(a) Tax Revenue* (b) Non-Tax Revenue 2,074 A.

EXPENDITURE
CURRENT 2,315 791 96 243 495 295 166 203 25 452 355 300

658 Interest Payment

2,732 Pension

Gross Revenue Receipts

- Less Provincial Share

I. Net Revenue Recipts (a-b) II. Net Capital Receipts III. External Receipts IV. Estimated Provincial Surplus V. Bank Borrowing

1,203 Repayment of Foreign Loans 1,529 Defence Affairs & Services 396 Grants and Transfers 414 Subsidies 125 Running of Civil Government Provision for Pay & Pension 304 B. DEVELOPMENT

PSDP - Federal Government Development Loans & Grants to Provinces Other Dev. Expenditure TOTAL RESOURCES (I to V) 2,767 TOTAL EXPENDITURE (A+B)

55 97 2,767

*Out of which FBR collection has been estimated at Rs 1952 billion.

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WORKING OF FISCAL DEFICIT AND FINANCING BUDGET 2011-12 Rs in billion Working Deficit
a) Total Revenue and Grants Federal Revenue (net) Grants b) Total Federal Expenditure Current Expenditure Development and Net Lending PSDP Other Development Expenditure Net Lending c) Federal Deficit (a-b) Est. Provincial Surplus Overall Fiscal Deficit % of GDP Overall Fiscal Deficit (Excluding Grants) % of GDP

Financing of Deficit
1,656 Gross External Loans 1,529 Less Repayment 127 Long Term Foreign Loans 2,504 Short Term Foreign Loans 2,072 i) Net External Financing 433 ii) Domestic Financing 300 Bank Financing 97 of which SBP Financing 287 279 243 36 8 716 304 0 413 248 164 724 3.4%

36 Non Bank Financing -849 125 Public debt Public Account

-724 Total Financing of Deficit -3.4% % of GDP -851 -4.0%

12:38 PM6/4/2011