‘A continuing National Finance Commission (NFC) stalemate and an unending uncertainty on the availability of resources till the last minute kept the budget makers of Sindh ‘under great stress and strain said the Sindh finance minister Syed Sardar Ahmad.

The budget documents amply reflect this uncertainty which is also evident in case of two other provinces. The NFC stalemate has delayed the 05-06 budget presentations of the NWFP and Balochistan. Balochistan is scheduled to announce its budget next Wednesday (June 22) but so far no date has been announced by the NWFP. The MMA leadership is desperately trying to get Rs14 billion additional grant for the next year before formulating its budget.

What was missing in the Sardar Ahmads budget speech was a review of the devolution process and the fiscal, administrative and political relationship between the district and the provincial governments. Nonetheless, the finance minister proudly claimed that Sindh took a lead in working out a just and fair resources distribution award between the provincial and the district governments.

Now that district governments have completed the first term and elections are due in next few weeks a full dress review on the relationship between the provincial and district governments seems most desirable.

The 05-06 budget was prepared by the provincial government on the expectations Rs81 billion from Islamabad. But later, the federal budget documents gave a good news that the actual amount is Rs86 billion plus. This additional amount of Rs5 billion plus has to a large extent offset about Rs6 billion gap in the Rs119 billion revenue expenditure for the next fiscal year.

Now, the Sindh government is confronted with mobilisation of funds to finance an over ambitious Rs24 billion development programme. We will manage this from our own savings, receipts from our pending claims with Islamabad and by squeezing out funds from the revenue expenditure budget against allocation for thousands of jobs in various departments that remain vacant said the finance minister while spelling out his strategy in the post-budget press conference on June 11, 2005.

In his speech delivered on the floor of the Sindh Assembly on June 10, the Sindh minister made certain startling disclosures that show how shabbily the Sindh province is being treated by the federal government.

For example, he revealed that Sindh is servicing those federal governments loans which it never borrowed from Islamabad. It sounds ridiculous and is apparently unbelievable. Syed Sardar Ahmad complained that ‘they are deducting loans, which Sindh has not taken, and hence he demanded, “at least the deductions need to be stopped forthwith.

Sardars call at least for, “ stopping the deductions apparently looks like a cry in the wilderness as almost after a week of his delivery of budget speech, no notice was taken in Islamabad. “No response as yet, a source in the government replied on telephone when asked if anyone in the federal finance ministry took notice of Sindhs finance ministers woes.

The problem is that a few wizards in the federal finance ministry, by design or by default, have miscalculated the loans advanced to Sindh and have extracted a much higher repayment amount than what was due. While Sindh’s calculations suggest that liability was, less than one third of what was estimated in Islamabad, Karachi has ended up paying Rs17 billion more than what was due.

‘We have paid amount of Rs32.20 billion as against our liability of Rs15 billion the finance minister said. He complained that the federal government is continuing with the deductions despite this over payment and even after the fact has been brought into notice of Islamabad.

Like Sindh, other provinces are unhappy over Islamabads debt servicing policy. Islamabad offered cash development loans to all provinces till the year 2000 and is now charging 12 to 18 per cent interest. The mode of payment is such that bulk of the amount paid for debt-servicing to Islamabad goes towards the adjustment of interests and a very small amount of principal is adjusted. Islamabad has resisted moves made by provinces to swap these loans with borrowings from the market when in 2003 the rates were as low as less than two per cent.

The budget speech provided Sardar Ahmad an opportunity to make his point on debt-servicing issue. Against a total loan liability of Rs54 billion, Sindh has so far paid Rs110.20 billion to Islamabad. There is still an unpaid principal amount of Rs35.75 billion because 84 per cent of the repayment amounting to Rs92.66 billion went towards interest payment and only a small amount towards the adjustment of the principal amount.

Sindh utilised part of a World Bank loan to payback Rs6.20 billion and intends to adjust another Rs2 billion loan amount in near future. It has so far provided the province a relief of one billion rupees in debt servicing and a much needed fiscal space.

‘We have taken this issue with the federal government, and hopefully we would be able to lower our domestic debt stock the minister says.

Islamabads indifference bordering almost to hostility has made people in the government bitter and there is no effort to conceal it. The finance minister in his post-budget press conference blamed the federal government for overstepping its limits of taxation and enforcing a sales tax on servicesan exclusive provincial domain

He recalled that the sales tax on beauty parlours, marriage halls and dry cleaners was enforced in the year 2,000. When informed that this was an exclusive provincial jurisdiction, the federal government came out with an ordinance to take up the role of administering this tax on behalf of the provinces. If it was so, the federal government should have distributed this tax on the basis of collection.

Sardar accused Islamabad of distributing even the recovery of the sales tax on services on the basis of population. He gave collection and province wise distribution figures till 2003-04 that showed Sindh got much less share than the amount of sales tax on these services. His bitterness was more than evident when asked: “what if President Musharafs award on resource distribution goes against the wishes of Sindh?. “It will add to the disappointment and frustration of the people of the province was the reluctant reply.

During the current fiscal year, the revenue expenditure increased by Rs800 million to more than Rs105 billion because of the 15 per cent increase in the salaries of the government employees. The provincial receipts during 04-05 are now being estimated at around Rs102.5 billion.

Sindh has managed to encash a pending claim of over Rs5 billion which has wiped out the revenue gap and provided some funds for financing Rs18 billion development programme taken up by both the provincial and the district governments.

By December 2004, hardly 30 per cent of the development funds were released to provincial and district governments. Shoaib Bokhari, the Sindh development and planning minister claimed during the post-budget press conference that more than 99 per cent of Rs18 billion development funds were released and utilization is in range of 80 per cent plus.