| June 18, 2003 | Wednesday | Rabi-us-Sani 17, 1424 |
Please Visit our Sponsor (Ads open in separate window)
NWFP finances
AMIDST a pandemonium created by the burning of budget documents and ‘no LFO no’ shouts from the opposition benches in the Sindh Assembly on Monday, Finance Minister Syed Sardar Ahmad presented a tax-free Rs 105 billion provincial budget for the next fiscal year. However, the Rs 1.36 billion surplus budget does not have much to show for the two stated objectives of the government — poverty alleviation and social sector development. There is very little for ‘the 98 per cent’ of the province’s population — urban and rural — whose plight is so often spoken of but precious little is done to alleviate it. Poverty alleviation and social development can take place only through employment generation and the spread of education and skill development — two areas which have not received any priority in the matter of budgetary allocations. In respect of both resource mobilization and expenditure, the budget is of a routine nature largely cast in the mould of previous budgets. It does not reflect any innovation or initiatives despite the fact that an urban-based political party claiming commitment to radical economic reforms to change the fortunes of the downtrodden dominates the provincial government today and may have provided the basic inspiration behind next year’s financial housekeeping. Even the fabulous incomes of the ‘two per cent’ feudal lords have not been touched.
The province continues to depend to the extent of 85 per cent of its revenues on federal assignments (from the divisible pool of taxes) and direct transfers and would raise only Rs 14.73 billion out of its own sources. The budget is silent about the financing of the Annual Development Programme (ADP). It seems to have been left to subsequent developments. The scheme of allocation of resources does not respond adequately to the challenges the province faces. Education, administration and debt repayment and servicing claim about equal allocations of around Rs 18 billion each in the revenue budget. Law and order gets over nine billion rupees — a hefty allocation, justifiable possibly in terms of a worsening crime and security situation which for long has been discouraging investment and keeping the province’s economy in a stagnant state. For more than a decade now investment in public and private sector industry has been negligible. Poor law and order situation is partly the result of political manipulation and manoeuvrings by the establishment to keep its opponents at bay.
The population-based formula for the division of the federal taxes between the provinces is to the disadvantage of Sindh. It does not take into consideration the proportion of revenue collection by each province (Sindh contributes over 60 per cent and is assigned only 23 per cent), nor is it compensated for the social services rendered to the endless influx of migrants from other provinces, with the result that these services remain under severe pressure. Also, the budget has poor provisions for education and health care and much of what is provided often remains unutilized, for in many cases projects are unnecessarily delayed and funds are not released on time. The finance minister himself admitted that 15 per cent of the allocations of the ADP and the Public Sector Development Programme (PSDP) for Sindh might remain unutilized as had been the case during the outgoing year because “the great turmoil in political and administrative arena and the fledgling district governments’ capacity to utilize funds are the major factors.”
The few relief measures the budget provides include exemption of small houses from property tax, downward revision of stamp duty on property transactions and exemption of owners of 16 acres of irrigated and 32 acres of non-irrigated land from income tax. The total development allocations of Rs 14.73 billion include the ADP of Rs 11 billion, foreign project assistance of Rs 2.43 billion and Rs 1.30 billion for drought emergency relief. Compared to the ADP utilization of the current year of Rs 5.74 billion, the one for the next year is 92 per cent higher. Education gets Rs 1.66 billion and the amount will be spent on provision of textbooks free of cost up to matric and scholarships. A provision has been made for compulsory primary education for about 200,000 children. A new programme of rural development is to be launched and Rs. 3.7 billion has been earmarked for this purpose. It will be located in South Sindh. Karachi gets Rs 930 million under the ADP — Rs 344 million for education and literacy, Rs 205 million for health and physical planning, which includes repair and renovation of roads and sewerage system and two flyovers.
THE NWFP budget for the fiscal year 2003-04, with a total outlay of Rs. 51.5 billion, has a revenue shortfall of Rs. 11.65 billion. In comparison with last year’s deficit of Rs 13 billion in a total outlay of Rs 48.56 billion, this is a minor reduction in shortfall. The outgoing year’s shortfall was partially bridged with an additional seven billion rupees the province received as its share of profit from the sale of hydroelectricity from Tarbela, besides the estimated Rs. 10 billion. For the coming year the revised estimate of receivable hydroelectric profit share stands at a reduced figure of six billion rupees for some unexplained reason. The provincial budget has earmarked Rs 14.6 billion for its Annual Development Programme (ADP), up from the revised and actually utilized Rs 11.57 billion in the outgoing year. Like in the past, over 90 per cent of the province’s total annual receipts will come from the federal divisible pool and hydroelectricity profit share in the upcoming year.
With the elected government in office for the first time since October 1999, a reasonably higher allocation for ADP was the least one expected from the budget of fiscal 2003-04. But this has not happened owing, perhaps, to the in-built deficit, which has become a customary feature of the Frontier budget over the years. This, yet again, underscores the need to give smaller and less developed provinces like the NWFP a bigger share from the federal divisible pool than is their due — to help them catch up with the more developed provinces. The increase in the next year’s ADP allocation over the outgoing year’s receipts may not be as substantial as would appear to be the case. This is because the outgoing year’s original ADP allocation of Rs 13.67 was later revised downward to Rs 11.57 billion as some of the expected foreign aid and grants did not materialize. There is, thus, no guarantee that International Development Agencies (IDAs) would provide the bulk of the funding the provincial government is counting on to implement its ADP this year either. Of the total Rs 14.6 ADP allocations, the federal government will provide a little over two billion and the provincial government will generate another two billion rupees from its own revenue base. The rest of the funding — mostly in loans — is expected to be released by the IDAs.
A hefty Rs 1.2 billion out of the total ADP allocation would go into the Tameer-i-Sarhad Programme to be implemented by the MPAs each of whom would get five million rupees to spend on development projects in their respective constituencies. True, the education and health sectors will receive higher allocations of Rs 2.6 billion and one billion, respectively, which is good, but one wonders how much of the money allocated to education would go to support the madressahs as against the public schools. The planned upgradation of a total of 600 schools in the province is nonetheless a welcome step. But the MMA government’s plan to set up a separate medical college for women is more of an ideological choice than an actual need. All in all, the NWFP budget for the fiscal 2003-04 is a continuation of the traditional financial policy of heavy reliance on external debt rather than fuller exploration of the province’s own revenue generating potential, say, in the industrial and socio-economic sectors — that can move it closer to the point of economic self-reliance.