ISLAMABAD: Federal Minister for Finance and Revenue, Abdul Hafeez Sheikh, has said that the economy of the country is being run while meeting certain international commitments, adding that "we have to fulfil these obligations." He stated this while winding up the debate on Finance Bill 2010-11 in Upper House. Later the house was prorogued sine die.

The Minister said that the country is passing through a critical economic situation due to international recession and some flawed economic policies of previous governments. He underlined the need for combined efforts to steer the country out from the current financial crisis. He supported the government decision of approaching IMF to bail out the country's economy.

"The country might have defaulted, had the government not accepted the IMF programme taking some bold and unpopular decisions," he maintained. No doubt, he said, Pakistan is a sovereign country but it is imperative to fulfil the commitments.

He dispelled the impression that the new policies introduced in the budget would cause inflation, saying that the poor class would not hurt, but the policies would discourage the affluent. "We are not going to withdraw subsidies, but rationalising them by focusing on the poor. The rich should not take benefit from subsidies in the name of the poor," he added.

He underlined that over Rs 4 billion were allocated for subsidies at utility stores, adding that subsidy on the electricity has also been retained for those who use up to 300 units. Against the reservations loudly expressed by almost all the coalition partners and some PPP parliamentarians for not taking them onboard while formulating the budget, the Minister claimed that all the stakeholders including the Parliament, concerned committees, trade s, businessmen, industrialists and labour s were fully on board.

He said that this budget is important in the sense that it is the first budget after the 18th Amendment and NFC Award, adding that it is unprecedented the combined budget of the provinces is larger than the federal budget due to these measures. The Finance Minister loudly praised the role of the army and other law enforcement agencies, who he said, have laid down their lives for the security of the people.

"We assure them that we are with them and would support them to fulfil their requirements," he asserted. "We must have to tighten our belts to meet these challenges. We must show resolve that it is a short term necessity," the Minister added.

The Minister said that the government borrowing result in inflation and mark-up rise and crowd out the private sector because when the government is borrowing the banks prefer to lend to the government than the private sector and in that case the private sector have to face high mark-up. The government wants to promote fiscal austerity by making inflation a key component of our fiscal policy and efforts are being made to tackle it through budget, the minister added.

Commenting on the taxation policy, the Minister said that not a single custom duty has been enhanced instead duty on as many as 29 items was reduced aimed at providing relief to the masses. He said that capital gain tax was imposed on the demand of majority of the public despite the pressure.

Without mentioning the VAT, he said, the government has decided to reform a uniform sale tax policy and minimised the chances of tax evasion. He assured that the GST would not be imposed on food items, health and educational commodities aimed at rescuing the poor from the inflation.

Earlier, the House opposed with majority a resolution of opposition senators recommending reduction of the budgetary allocation for the current expenditure by 20 percent and enhancing the allocation for the Higher Education. Besides, five resolutions of the opposition senators were withdrawn on the assurance of the Finance Minister to form committees or send them to the concerned committees for debate.

These resolutions were for reducing allocations of the Pakistan Railways and adding it to the PSDP; allocation of Rs 10 million for making the Federal Bureau of Statistics as an autonomous body; introducing of wealth tax for Social Safety Net Expenditure; increasing of minimum wage from Rs 7000 to Rs 9000 and capping maximum mark up rate for the Business and Industry at 10 percent. BR