June 10, 2003	Tuesday	Rabi-us-Sani 9, 1424

KARACHI, June 9: Budget makers in all the four provinces are beset with two major handicaps as they start giving final shape to the annual receipt-expenditure account sheet for the next fiscal. These two handicaps are the availability of resources from the federal government, for the second consecutive year on the basis of the expired NFC formula, and no relief from Islamabad on their debt-servicing, which now constitutes 16-17 per cent of their expenditure budgets.

The federal budget indicates a total of Rs214.83 billion for all the four provinces for the fiscal 2003-04 to finance their yearly revenue and capital expenditure and also the development budget.

Officials and planners expect total size of the provincial budgets to exceed Rs330 billion in the next fiscal, which means the provinces are being given a hard task of generating more than Rs100 billion from their own revenue sources.

With the budget presentations hardly 72 to 96 hours away, the budget makers are exploring all possible avenues of revenue generations and looking at the possibility of cutting down on the expenditure where they could do so.

All the provinces have been given a task of financing Rs47 billion annual development programme from their own sources, which include federal transfers and provincial revenue. Total development outlay of all the four provinces is likely to go up to Rs80 billion if other components that include Tameer-i-Pakistan, priorities programme, Drought Related Emergency Assistance are taken into account.

On the revenue expenditure side, the huge debt-servicing liability has now become a nightmare for the budget makers. The federal government has stopped offering cash development loans to the provinces since 2000. Islamabad levies 17 to 18 per cent on the cash development loans, tubewell loans and other credits.

During the deliberations of the National Finance Commission, which failed to give any award, all the four provinces unanimously asked for a write-off and a cut in the interest rate.

The case for debt relief by the provinces became all the more convincing after the federal government itself obtained a substantial relief from its donors. But Islamabad is showing no signs of giving similar generous treatment to its constituent provinces.

While the MMA government in NWFP is making considerable noises on its financial troubles and demanding accumulated royalty on hydel power source, the relatively pliant governments in Sindh, Punjab and Balochistan are somewhat quite but uneasy and are making complaints in soft voices.

“The budget 2003-04 is the best under the present circumstances. But the provinces should be given their respective shares on the basis of their capacity to generate resources,” the MQM government in Sindh and a close ally of Islamabad said only the other day.

Balochistan’s financial problems are increasing day by day and hence unable to remain silent. Punjab too has been showing signs of displeasure.

Punjab has been on the receiving end in the current fiscal too. For some unexplained reasons, its share from the divisible pool has been cut down from Rs92.16 billion promised in the budget 2002-03 to Rs90.90 billion. There was a small deduction in the budgetary allocation of straight transfers from Rs5.27 billion to Rs5.25 billion.

Overall, the four provinces were promised a total transfer of Rs193.51 billion in the current financial year’s budget. But a revised estimate shows actual transfers at Rs192.82 billion, a straight cut of Rs692.67 million.

But in all this adjustment Sindh has gained. It got Rs600 million from a small rise in its population ratio worked out on the basis of 1997 population census. From the divisible pool, Sindh got Rs37.57 billion as against Rs37.06 billion indicated in the province. Similarly, there was some increase in the straight transfers, which went up to Rs19.72 billion from original allocation of Rs19.38 billion.

The allocation of Rs214.83 billion resources for all the four provinces has been made on the expectation that total tax pool would be Rs510 billion and revenue from oil and gas would be higher. With mounting pressure of unemployment all the four provinces want to offer employment opportunities. The Sindh government wants to activate more than 2,500 constructed schools and over 300 health care units. It expects an increase of Rs700 million hike in revenue expenditure.

Now that size of the development programmes is being expanded at the federal and provincial level, it will lead to increase in revenue expenditure burden on the budget for which resources will have to be generated.