March 29, 2003	Saturday	Muharram 25, 1424

PESHAWAR, March 28: The NWFP government has undertaken exercises at various levels to prepare its budget for the next financial year amidst growing confusion about the new National Finance Commission award — due to take effect from July 1, 2003, according to sources.

“Without knowing that the province would receive direct federal transfers during the next financial year in accordance with the current NFC award or the new award, the budget preparations would nothing more than a blind shot,” said a finance manager of the province.

Federal government is required to announce new NFC award to underline distribution of resources among the federation and federating units for the next five years starting from July 1, 2003.

However, official sources and members of the provincial cabinet talking to Dawn expressed ignorance as to when would the federal government undertake preparations for the new NFC award — for which new commission has yet to be notified by the Finance Division, Islamabad.

“With only three months left of the current fiscal year, how could it be possible for the federal government to make the provinces develop consensus necessary for giving the new NFC award,” said the sources.

A senior government functionary who has been involved in the inconclusive exercise of giving new NFC award during the last days of the military government, talking to Dawn, anticipated that the tenure of the current NFC award might well be extended for one more year.

“After the federal government has not yet started process to prepare new NFC award, it is unlikely that the country is going to have new award before June 30, 2003,” said the official, adding “it is not so simple to develop consensus among the federating units viz-a-viz the resource distribution plan for the next five years”.

NWFP draws over 90 per cent of its total annual revenue receipts from external resources — mainly direct federal transfers and subvention in line with the resource distribution formula laid down under the NFC award — hence, according to sources, in the absence of a clear picture about the actual projections for the next financial year preparation of the provincial budget might end up in an exercise in futility.

Another finance manager of the province said that the provincial government went for starting preparations for the next financial year’s budget at this juncture of the current financial year in view of its compulsions to submit its budgetary plan for the 2003-04 to World Bank to qualify for its second $90 million tranche under its Structural Adjustment Credit (SAC) facility.

Normally, according to the sources, exercises relating to prepare budget for new financial year start somewhere in April. But this time round the provincial government undertook the preparations in the middle of March — in an escape from the past.

The current NFC award completed its term of five-year operations on June 30, 2002.

However, after the military government failure to give the new NFC award in proper time the current NFC award’s application was extended for one more year — up to June 30, 2003.

“Though the picture is not clear about the new NFC award, we can’t stop official business,” said a senior official of the finance department, adding that “last minute changes could be made [in the budgetary plan] if the federal government manages to announce new NFC award”.

According to sources, provincial government departments have been asked to draw their current expenditure requirements for the next financial year as well as the receipts they contribute to the provincial own receipts — which hardly makes 10 per cent of the total annual revenue receipts of the province.

The total annual revenue receipts of the province for the next financial year, said the sources, would be estimated in accordance with the resource distribution formula laid down under the current NFC award.

The estimated projections for expenditure and provincial own receipts for the next financial year would also be fixed in the light of the guidelines set forth by the current financial year.

Though the senior government functionaries said that it would only require minor changes if the new NFC award was announced after the currently undertaken preparatory exercise was completed, other well-placed official sources apprehended “this might not be the case”.

They said that the province might require to bring about major changes in its current revenue expenditure and annual development plan for the next financial year if the new NFC award envisaged new fiscal and monetary guidelines and set forth development priorities different than those presently followed under the current NFC award.