A ballooning budget deficit, up by an estimated 350 per cent, has forced the Balochistan government to resort to indiscriminate borrowings from the State Bank of Pakistan. The original budget deficit estimated at Rs2.5 billion at the beginning of fiscal year is expected to swell to Rs9.5 billion by the end of the financial year, according to one official estimate.
In absence of adequate federal grant and transfer of resources and almost a virtual freeze in the share of the Divisible Pool for the past several years, the province has been left with no option but to resort to indiscriminate borrowings.
A Rs30 billion non-development expenditure and an annual development plan of Rs12.87 billion was budgeted for the current fiscal year. As usual, the development planning, though an annual exercise, did not correspond with the ground realities. Resource management was politically driven. Nor was the expectation of resource mobilization for implementing of the Rs12.87 billion ADP very realistic either. Similar was the situation in the last fiscal.
The desperate cash- strapped provincial government sought financial help from the Asian Development Bank under the Resource Management Programme and finally got a commitment of $120 million soft loan to repay the federal Government very costly loans from the federal government.
Before that, the Balochistan secured an overdraft of Rs10 billion from the State Bank. Whereas the corporate sector is given loan by the National Bank of Pakistan at a single digit rate, the Balochistan government was given loan at 14 per cent. In the past, it was 16 per cent. Now the loan burden on Balochistan government has reached upto Rs57 billion-a substantial increase during the present government.
The delayed federal fiscal transfers has forced the provincial government to indulge in indiscriminate or desperate borrowings from the State Bank during the past two years. The federal government was supposed to transfer resources on bi-weekly basis-78 instalments during a single fiscal year. It is a constitutional requirement. The inordinate delays caused a serious financial crisis.
The monthly transfer of resources is merely Rs1.3 billion to Balochistan from the federal government. The provincial government is disbursing salary to its 345,000 employees, including those of the district governments and the provincial government departments, Civil Secretariat staff etc about Rs1.61 billion a month. There is a shortfall Rs310 million per month because of the gap between revenue receipts and revenue expenditure.
From the provincial budget, there is a direct transfer of 37.5 per cent to the district governments as per arbitrarily amended rules. Secondly, the federal government is deducting the provincial liabilities at source-debt servicing, WAPDA electricity bills and the unjustified subsidy on wheat. On account of debt servicing, Rs3.5 billion is deducted at source. In all, Rs8.5 billion is sliced away from the federal allocations or federal transfer depriving Balochistan enough resources to manage its financial affairs. Deduction at source is the biggest irritant for the provincial finance managers. The monthly gap of resources is plugged through borrowings from the State Bank.
Balochistan’s Public Sector Development Programme (PSDP) comprised 850 development schemes costing about Rs12.87 billion. The PSDP included 516 on-going schemes and 334 new schemes for the current fiscal year. After a few months, the PSDP was reviewed and slashed to mere 600 schemes. At the close of fiscal year, the government was able to implement merely 350 schemes.
Cash-strapped provincial Finance Department refused to release the committed funds for the PSDP. It had to slash the PSDP and by December last, it released merely Rs4 billion. The year may end up with a development expenditure of just Rs7 billion.
Most of the new schemes were frozen as a result of fund shortage and only on-going schemes were financed. However, the formula adopted in the original budget estimates was to finance 30 per cent new schemes and 70 per cent on going schemes.
Presenting the provincial budget with minimum knowledge about the future funding or transfer of resources is seen a very difficult, if not impossible, exercise. The opposition parties in the Balochistan strongly protested during last budget session for not including the development schemes they suggested for their constituencies. They protested that a major share of the budget was allocated for the constituencies of MMA ministers and the rest was given to the Muslim leaguers.
Even some members of the ruling party including former Finance, Planning and Development Minister Jaffar Khan Mandokhel, former Chief Minister Mir Jan Mohammad Khan Jamali and Shah Zaman Rind also complained about this discrimination. The protest of opposition members continued almost through out the current financial year. And despite assurances on the floor of the house in all the assembly sessions, the government failed to satisfy opposition members on this count.
Sources in the planning and development department told this scribe that government was not able to fulfil its commitment due to financial crisis. The Provincial Finance Minister, Syed Ehsan Shah, told Dawn that he would not in a comfortable position to present the provincial budget unless substantial increase in Federal transfer of resources was announced under new National Finance Commission (NFC) Award.
“ If NFC Award was not announced before June we will be not able to prepare our budget,” Syed Ehsan Shah said and added that award is looking far away as provinces have still not agreed on a consensus formula. The issue of Gas Development Surcharge between Sindh and Balochistan was still not settled, which is very important for Balochistan in increasing of its share in the next NFC award.
However, there is a hope that the outstanding amount of Rs6 billion on account of gas revenue may be paid to Balochistan. Secondly, Asian Development Bank and its Resource Management Programme is another hope for receiving additional resources for the next fiscal year.
The ADB had already committed 430 million dollar to Balochistan in next few years under the second phase of Resource Management Programme for strengthening the local councils and institutional capacity building for social services, mainly health and education. The provincial government is disappointed that that the ADB funding will be coming at least after 18 months and not before that.
Independent observers of the province believe that the prevailing political situation of Balochistan would continue if Islamabad will not take serious steps to help this province in coming out of financial crisis. “ Reservations and apprehensions of the nationalist parties would be stronger in coming days that would create more difficulties for both federal and provincial governments,” a senior economist of the province cautioned.
A ballooning budget deficit, up by an estimated 350 per cent, has forced the Balochistan government to resort to indiscriminate borrowings from the State Bank of Pakistan. The original budget deficit estimated at Rs2.5 billion at the beginning of fiscal year is expected to swell to Rs9.5 billion by the end of the financial year, according to one official estimate.
