KARACHI, June 9: Sindh Finance Minister Syed Sardar Ahmad is presenting on Friday provincial budget of Rs140-145 billion for 2005-06 in the Sindh Assembly. The budget is expected to show the highest ever deficit of Rs24-25 billion.
In the fiscal year 2004-05, the size of the budget was Rs123 billion. It included about Rs105 billion current revenue expenditure and Rs18 billion development outlay.
With a stalemate in the National Finance Commission running for the third consecutive year, the budget 2005-06 is being drawn up on the basis of the 1996 NFC award.
During the next fiscal year, the federal budget documents indicate a flow of Rs86.42 billion for Sindh. The province will get Rs56.89 billion from the pool of income tax, sales tax, capital value tax, federal excise and sales tax. A sum of Rs29.52 billion is indicated as straight transfer on account of collection of royalty on oil and gas, gas development surcharge, excise duty on gas, and 2.5 per cent provincial GST.
The federal budget documents stipulate Sindh’s development outlay at Rs14.11 billion, of which the provincial government is expected to contribute Rs8.75 billion. The federal assistance, mostly foreign aid, amounts to Rs5.37 billion. But the Sindh government is expected to take up a development programme of Rs24 to Rs27 billion, subject to availability of resources.
The province is expected to improve its collection of provincial taxes and non-tax revenue to Rs23-24 billion. By withdrawing sales tax on laundries, dry cleaners and marriage halls in the federal budget, Islamabad has given a loud signal to the provincial governments to explore levy and collection of sales tax on services in their respective territories. The tax collection on agricultural income remains ridiculously small at hardly Rs250 to Rs300 million. The water tax collection is also miserably low.
Sources are confident of getting a resource distribution formula from President Pervez Musharraf in about four to six weeks that is likely to provide Sindh additional Rs6 to Rs8 billion for the budget under a new arrangement. The expected increase in the flow of funds is from an increase of provincial share from 37.5 per cent to 47.5 per cent and also the possibility of revenue collection of a province getting even some token weightage in the resource distribution arrangement.
After the May 30 informal meeting of the NFC, chief ministers of the four provinces are said to have authorized President Musharraf to announce the resource distribution formula. The president is also reported to have pledged that he would incorporate views of all the provinces, including that of multiple criteria for the resources distribution.
Sindh budget makers have pinned their hopes in the expected resource distribution formula to be given by President Musharraf, which will substantially meet the indicated deficit of the provincial budget 2005-06.
According to well-placed sources, the current revenue expenditure for 2005-06 was expected to be around Rs125 billion, while the development outlay would be somewhere between Rs25 and Rs27 billion. But the financing of bulk of development programmes will be tentative as almost the entire amount of Sindh’s share in federal funds and the provincial collection of taxes will go in meeting the growing current revenue expenses.
The Sindh’s revenue expenditure budget in the current financial year is likely to exceed the projected amount of about Rs105 billion because of the opening up of jobs in the government, a 15 per cent rise in wages in the last budget, an impact of 25 to 30 per cent rise in salaries and pensions in the 2005-06 budget, and the effect of double-digit inflation, particularly that of petrol and fuel. The current expenditure has increased because of the creation of four new districts in the province.
For the last few years, the Sindh budget has been showing an inflated expenditure, as more than 30,000 to 35,000 available vacancies were never filled but the amount allocated under these heads was utilized for development and non-development purposes.
Since the induction of a coalition government, Sindh has come under tremendous pressure from the legislators of ruling parties to open up government jobs and allocate development funds in their respective constituencies.
In the current fiscal year, 45 per cent of the development funds were for new schemes. The same pressure to provide funds for these schemes is there to allocate funds in 2005-06, and hence the swelling of development outlay.
