WITH high hopes of a multi-billion special grant from the federal government, an equally large budgetary support from the World Bank and a record receipt expected from Wapda, the NWFP government has set for itself the biggest-ever development agenda for 2005-06.
The next year’s budget envisages Rs20.98 billion annual development programme (ADP).
In the total ADP outlay, the provincially funded component is Rs11.2 billion, which means that the province would need to arrange more than 50 per cent of the funds on its own. So, the government intends to restrict its total current expenditure to about Rs51 billion against the projected revenue receipts of Rs58.4 billion which would leave it with a saving of Rs7 billion.
However, much of it would go towards the government’s growing expenditure requirements on the capital side as the province is anticipating a wide gap in its capital receipts and capital expenditure. As a result, the government has projected a total deficit of Rs2.3 billion.
The budget in fact, entails a net deficit of Rs4 billion as the government has over estimated its receipts on account of net hydro profit by Rs2 billion.The provincial government will be facing a hazard in case it does not get Rs5 billion special grant from the federal government.
While the volume of current and capital expenditure would largely depend on the flow of proceeds from the federal government and Wapda, the smooth implementation of its enlarged ADP will depend on foreign donors and its own ability to mobilize funds for the provincially-funded component of the plan.
Out of the total revenue receipts, 78.6 per cent would come from the centre including Rs34.9 billion from the federal divisible pool(FDP), a subvention of Rs5 billion under the NFC award, Rs987 million from straight transfers and yet an another amount of Rs5 billion promised by the prime minister as a special grant. Similarly, 13 per cent of the receipts, amounting to Rs8 billion from Wapda is expected as the NWFP’s annual share on net annual hydel profit.
All this would help the province to raise only 7.7 per cent of the its annual provincial revenue receipts amounting to Rs4.5 billion, the scope of which will shrink further due to tax cuts for small farmers and owners of self-occupied houses upto five marlas in urban areas.
The impact of the tax on individual farmer and property owners may not be of great economic value, but it will save a large number of people from the hassles which they under go at the hands of tax collectors. However the bid to raise Rs70 million revenue from the land and agriculture income tax may be difficult after the tax exemption. This tax relief involves an annual financial implication of more than Rs38 million.
On the capital receipts side, the province expects getting Rs5.2 billion tranche under the World Bank’s structural adjustment credit. If the amount comes during the next fiscal, an amount of Rs2.1 billion will be used to repay prematurely cash development loan from the centre while the remaining amount is expected to be diverted to the development side and a proportion is likely to be utilized in meeting growing expenditure on pay and pensions.
The centre’s decision to raise the pay scales of the public sector employees from 2005-06 will increase the province’s expenditure, on both the counts, by Rs6.5 billion. The province’s expenditure under the two heads is likely to soar to Rs30 billion,—-more than 50 per cent of the province’s total annual revenue receipts [Rs58 billion] to be consumed by this important obligation.
On the current expenditure side, the province has projected a growth of about 20 per cent.
The province is set to register an increase by over Rs8 billion under its cuurent expenditure during the next financial year as compared with the fiscal ending on June 30, 2005. It has stipulated total current expenditure at over Rs51 billion for FY05-06 against Rs42.7 billion recorded during the outgoing fiscal year.
The province is anticipating over Rs4 billion deficit as a result of a gap between its capital receipts and capital expenditure incurred under the food and non-food accounts.
Similarly, the province is faced with a deficit of Rs1 billion in its capital receipts classified as “other capital receipts” that involve the unfunded debt [provident funds] and various types of loans.
In the year 2004-05 too, the Durrani-led provincial government had announced that the then prime minister Mir Zafar Ullah Jamali had promised to release Rs8 billion while the province received a capped share amount of Rs six billion on account of net hydro profit Same is likely to happen as the province is not likely to get net hydro profits beyond Rs6 billion.
With 92.3 per cent of the total receipts coming from external sources and that too in a situation when the provincial finance managers will keep looking towards the financial disbursements from the centre, Rs20.98 billion ADP appears to be an uphill task for provincial government which could not translate into reality its Rs16.2 billion ADP for 2004-05.
Even though the provincial finance minister has claimed that over Rs15 billion was released for development activities during the FY04-05, it is hard to imagine that this would stand utilized by the end of the current financial year. At the close of the first three quarters of the FY 04-05, the provincial line departments and project executing agencies had utilized merely 35 per cent of the total size of the ADP.
All the good intentions and higher aims with which the provincial government has prepared its ADP 2005-06 would, therefore, depend on the clergy-led NWFP government’s ability to mobilize funds from the centre and the international donor agencies, particularly the Asian Development Bank and the World Bank.
