This document provides an overview of Pakistan's economy for 2012-2013, including key challenges and policy considerations. It summarizes the country's federal budget, revenue sources, expenditure breakdown, and development plan for the fiscal year. Some of the main economic challenges highlighted are a deteriorating business environment, declining foreign investment, inflationary pressures, and energy shortages. The outlook for 2013 is described as further deterioration due to political uncertainty and fiscal indiscipline. A charter for the economy is suggested focusing on domestic resource mobilization, self-reliance, and good governance.

1. ECONOMY OF PAKISTAN: 2012-13
Presentation by
Prof. Dr. Khawaja Amjad Saeed
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).
Main Focus
1. Economy of Pakistan
2. Federal Budget: 2012-2013
3. Economic Challenges: 2013
4. Fiscal Policy
5. Suggested Charter of Economy
1

2. WELCOME TO OUR PROGRAM
PRESENTATION FRAME
1.Economy of Pakistan
2.Constitution of Pakistan 1973: Economic Matters
3.Federal Budget: 2012-13
4.Pakistan: Economic Challenges: 2013
5.Economic Management Matrix
6.Fiscal Policy
7.Suggested Charter of Economy
2

3. 1: ECONOMY OF PAKISTAN
3
S. No. Components
1. Agriculture
2. Manufacturing
3. Services
Components

4. 1-1: AGRICULTURE
4
S. No. Components
1. Livestock
2. Crops:
1. Major
2. Minor
3. Fishing
4. Forestry
Components

5. 1-2: MANUFACTURING
5
S. No. Components
1. Industry:
High Tech
LSM
SME
Cottage
2. Minerals
3. Electricity
4. Construction
Components

6. 1-3: SERVICES
6
S. No. Components
1. Physical
2. Social
3. Financial
4. Intellectual
Components

7. 2: CONSTITUTION OF PAKISTAN 1973:
ECONOMIC MATTERS
7
Article Emphasis
03 Exploitation: Eliminate
18 Freedom: Trade, Business or
Profession
37 Promotion: Social Justice and
Elimination of Social Evils
38 Well Being: Social and Economic of
People

8. 3: FEDERAL BUDGET: 2012-13
8
MASTER CHART
(FEDERAL BUDGET 2012-2013)
Particulars Rs. b %
NEEDED
1. Current Expenditure 2,612 81
2. ADP: 2012-2013 591 19
AVAILABLE 3,203 100
Net Federal Revenue 1,775 51
SHORTFALL 1,428* 49
3,203 100
FINANCING PATTERN
1.Capital Receipts (Net) 484 34
2. Bank Borrowings 478 34
3.External Receipts 386 27
4.Estimated Provincial Surplus 80 05
1,428* 100

9. 3-1: FEDERAL REVENUE BUDGET: 2012-13
9
FEDERAL REVENUE BUDGET 2012-13
Particulars Rs. b %
CURRENT REVENUE
1. Indirect Taxes 1,572* 49
Composition Rs.b %
Sales Tax 1,077 69
Custom Duties 248 15
Federal Excise 125 08
Others (Plus Petroleum Levy) 122 08
1,572* 100
2. Direct Taxes 932 29
2,504 78
3. Non-Tax Revenue 730 22
3,234 100

10. 3-1: FEDERAL REVENUE BUDGET: 2012-13
10
Rs. B %
4. Less: Transfer to Provinces 1,459
Net Federal Revenue 1,775
CURRENT
EXPENDITURE
1. Debt Servicing 1,142 44
2. Defence Affairs & Services 545 21
3. Cost of Running Govt 404 15
4. Grants & Transfer to Provinces 312 12
5. Subsidies 209 08
2,612 100
Less: Deficit in Revenue Budget 837
1,775

11. 3-2: FEDERAL ANNUAL DEVELOPMENT PLAN
2012-2013
11
ANNUAL DEVELOPMENT PLAN 2012-2013
Particulars Rs. b %
DEVELOPMENT
EXPENDITURE
1. Federal Govt: 2012-13
Departments (rs. 207b),
Corporations (Rs. 80b)
Special Programs (Rs. 27b)
Special Areas (Rs. 36b) and
ERRA* Rs. (10b)
360 61
2. Other Developments
Expenditure
154 26
3. Provincial Governments 77 13
591 100
*Earthquake Rehabilitation & Reconstruction Authority

12. 3-2: FEDERAL ANNUAL DEVELOPMENT PLAN
2012-2013
12
FINANCING
PATTERN
Rs.b %
1. Bank Borrowings 484 82
2. External Receipts 386 65
3. Estimated Provincial
surplus
80 14
4. Net Internal Resources (359)* (61)
591 100

13. 3-2: FEDERAL ANNUAL DEVELOPMENT PLAN
2012-2013
13
BREAK UP OF
INTERNAL
RESOURCES
Rs. b
1. Deficit in Revenue Budget
for 2012-2013
837
2. Less: Net Capital Receipts (478)
(359)*

14. 3-3: PROVINCIAL ALLOCATION: 7TH
NATIONAL
FINANCIAL AWARD
14
Province Allocated
%
Population*
%
Punjab 48 57.36
Sindh 27 23.71
KPK 16 13.82
Balochistan 09 5.11
100 100
*Based on Population Census of 1997.

15. 4: PAKISTAN: ECONOMIC CHALLENGES: 2013
15
A: Economy Challenges 2012
1. Business Environment: Deteriorating
2. Foreign Investment: Declining
3. Exchange Rate: Depreciating
4. Inflationary Pressure: Building Up
5. Foreign Exchange Reserves: Depleting
6. Industrialists relocating their Industries Abroad
7. Electricity and Gas Shortages: Aggravating
8. Relations with International Financial Institutions Including
IMF: Deteriorating
9. Exports Growth: Turning Negative
10. Mysterious Growth in Remittances: Continuing
11. Economy Remaining the off radar Screen of the
Government

16. 4: PAKISTAN: ECONOMIC CHALLENGES: 2013
16
B: Measures with Question Mark
7th
NFC Award
1. New NFC Award diverted bulk of Federal Government
Resources to Provinces at a time when they were
needed more:
a. To Finance Growing Interest Payment
b. Security Related Expenditure
c. Bailing out of PEs with losses
d. Paying WAPDA/PEPCO to Finance their
Inefficiencies
2. Tax System:
Failure to Reform Taxation System and Broadening
Tax Base to Generate more Tax Revenues.

17. 4: PAKISTAN: ECONOMIC CHALLENGES: 2012
17
B: Measures with Question Mark
3. Petroleum Products
These are doubly taxed:
a. Exchange rate depreciation has increased the
landed cost of oil.
b. Petroleum Development Levy (PDL) is levied on
Inflated basis to mobilize more resources.

18. 4: PAKISTAN: ECONOMIC CHALLENGES 2013
18
C: 2013 Outlook
Outlook for 2013 is Likely to Further Deteriorate.
1. Political uncertainty with adverse consequences on the
economy.
2. Fiscal indiscipline hallmark of the Government during
election year.
3. Mobilization through taxation will take the back seat.
4. Reliance on Non-Tax Revenues would increase further.
5. Expenditure is expected to rise further with budget deficit
likely to be in the range of 6% 6.5% of GDP.
6. Economy will remain out of focus of the political
leadership.
7. Energy shortage (electricity and gas) to aggravate further.
8. Politics is likely to dominate economics.

19. 4: PAKISTAN: ECONOMIC CHALLENGES: 2013
19
D: Expected Trends 2013
1. GDP Trend : 3-4%
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. FDI to witness a sharp decline
d Sharp depreciation of exchange rate
e. Public debt is likely to worsen on account of large fiscal
deficit.

20. 4: PAKISTAN: ECONOMIC CHALLENGES: 2013
20
E: Consequences
1. National Security at Stake
2. Miss-Governance to Continue
3. In Search of a Direction

21. 5: ECONOMIC MANAGEMENT MATRIX
21
Economic
Dimension
Management
Dimension
Consumption Production Exchange Distribution Public
Finance
Planning
Organizing
Staffing
Leading
Controlling

22. 6: FISCAL POLICY
22
1. Objectives
a. Full Employment
b. Resource Mobilization
c. Resource Allocation
d. Maintenance of Economic Stability
e. Income Re-Distribution
2. Canons of Taxation: Adam Smith
a. Equity
b. Certainty
c. Convenience
d. Economy
3. Other Canons
a. Flexibility
b. Situation

23. 6: FISCAL POLICY
23
4. Income Tax Rates 2013
1. Individuals
- Non-Salaried - 5 brackets (10% -----25%)
- Salaried – 5 brackets (5.0% -----20%)
- Exempt upto Rs. 4 Lac
2. Companies
- Public, Private& Banking Companies 35%
- Small companies 25%
3. Dividend received by all tax payers 10% and 20% on banking
company from its assets management company
4. Property income
- Rs. 150,000 exempt
- Rates 5% -----10%
5. Capital gains
- With holding period less than six months 10%
- More than six month but less than 12 months 8%

24. 7: SUGGESTED CHARTER OF ECONOMY
1. Domestic Resource Mobilization
2. Income Tax by All
3. Self Reliance for Financing
4. ADP Financing
5. Provincial Govt Budgets
6. Public Enterprises Losses
7. Good Governance & Corporate Governance
8. Inflationary Impact: Salary increase
9. CBA----PSA
10. NPLs
11. Professionals Role
12. Holistic approach to Economic Development with equitable
distribution of wealth and income across the board
24