The amended finance bill for the remaining months of fiscal 2018-2019 was read out during the National Assembly session underway in the capital on Tuesday, September 18.
Prime Minister Imran Khan, ministers and lawmakers from various political parties are in attendance at the session.
Finance Minister Asad Umar presented the budget speech, detailing the amendments the Pakistan Tehreek-i-Insaf (PTI)-led government is bringing to the federal budget announced by the PML-N government in May this year.
The finance minister began his speech with an assessment of the country's economic situation, noting that the budged deficit had expanded to 6.6 per cent from 4.1 per cent at the start of the last government's tenure.
"The most dangerous situation is that if we continue as we have, the budget deficit will expand 7.2 per cent by the end of the ongoing year. This is the assessment of the finance ministry as well as economic experts," Umar said.
Warning that the country's foreign exchange reserves had depleted to only two months of import cover, and drawing attention to the fall in the rupee's value against the dollar, the finance minister said that difficult decisions had to be made or inflationary pressures would build up to the point that they would become painful for the average consumer.
"We need to decide — not the government alone, but the parliament together — if we want to continue like this?" he asked.
"The government overestimated revenues by Rs350 billion and understated expenditures by Rs250bn," he said. "In total, there's a Rs890bn difference in the projected and budgeted figures for the deficit which we have to arrest."
"These are difficult times, and they call for difficult measures," Umar said. "We need to make sure the burden of our economic measures fall on those who can bear it. The poor are already resource stressed, and we cannot burden them further. Sure, we can seek bailouts but that is not the solution: we can only grow when our economy grows, our industries and our people grow."
"For farmers, we are ensuring the provision of urea by boosting local production and by importing 100,000 tons from abroad coupled with a Rs6-7 billion subsidy."
"We will provide Rs540,000 per family in the form of the Sehat Insaf Card for doctors' fees and medicines in Fata and Islamabad. We have also instructed the Punjab government to introduce the facility in that province as well."
"We have also directed the release of Rs4.5bn for the completion of a housing scheme for the underprivileged."
"Minimum pension has been increased by 10pc for EOBI pensioners."
"The past government had projected that it would increase the petroleum levy from Rs185bn to Rs300bn, but we feel that this is highly unfair on the average customer. The government will absorb that impact."
Prior to the commencement of the NA session, a meeting of the federal cabinet had approved the proposed amendments to the finance bill, sources told DawnNewsTV.
On the grapevine
According to sources, the cabinet had decided to cut the federal development programme by almost Rs250 billion to Rs725 billion, whereas the budget deficit will be brought down to 5.1 per cent of the growth rate.
The government has also decided to increase regulatory duties on imports of vehicles and cell phones. It is also going to reduce the tax relief accorded to salaried persons as well as individual taxpayers.
According to sources, the government has also decided to raise the tax rate in the highest income tax slab from 15pc to 29pc. They said customs duty will also be increased on more than 5,000 items, whereas regulatory duty will be increased on the import of more than 900 items.
The 'mini-budget' will also increase the rate of withholding tax on banking transactions for non-tax filers.
The cabinet also approved the issuance of health cards, sources said.
Media reports have suggested that the government is looking at a fiscal adjustment of 1.5 to 2pc of gross domestic product (GDP), or Rs600-750 billion, through amendments to the federal budget 2018-19.
The government is aiming at a massive cut in development expenditure to the extent of over one per cent of GDP and through the withdrawal of tax and duty exemptions.
Consultative sessions continued until the last moment to deliberate completely banning the import of some 130-150 unnecessary items such as second-hand cars, while increasing duty rates on others including luxury items such as expensive phones, jewellery and food items. These trade measures are estimated to have an impact of over $1 billion on the current account deficit.
The current cumulative cost of tax and duty exemptions is estimated to be to the tune of Rs550bn which the government aims to bring down to around Rs200bn, thus transferring an impact of almost Rs350bn back to the people.