PESHAWAR, Nov 2: Increase in expenditure under the pay and pension heads has resulted into a persistent financial crisis for the NWFP government as it has consistently been relying on the ‘ways and means’ facility of the State Bank since the start of the current financial year, according to official sources.

“The fiscal crisis has been persistent since the start of the current financial year chiefly because of the federal government’s decision to effect substantial increase in the public sector employees’ salary,” said an official of the provincial government.

The NWFP government, said official sources, experienced an increase of around Rs5 billion as a result of the federal government’s decision to upward revise salary and pension of the public sector’s in-service and retired employees, respectively.

The decision, said the sources, left the province with no other option but to heavily rely on the ‘ways and means’ facility offered by the State Bank to the federating units.

Since the start of the current financial year, according to official sources, the province has been availing an amount of Rs1.5 billion to Rs2 billion from the state bank’s credit facility to meet its pressing expenditure requirements.

Federal government’s move of raising pay and pension of the public sector employees without assigning additional resources to the federating units for meeting their increased expenditure requirements under the said head caused a serious financial crisis for the NWFP government as, said the sources, its main bank account had been persistently running into negative right from the start of the current financial year.

NWFP’s salary expenditure had swelled well over to over Rs25 billion during the current fiscal from Rs21.5 billion the previous fiscal.

Similarly, increase in pension paid to around 100,000 retired provincial public sector employees, said the sources, led to raise the expenditure under this head to Rs4 billion, an increase of Rs500 million.

Officials said that the provincial government’s frequent requests to the federal government for providing additional funds to enable it bridge the gap between its expenditure and receipts did not bring desired results.

“NWFP’s requests for provision of additional Rs4.5 billion to offset the monetary implications resulted by the pay raise

decision did not attract positive response as the federal authorities have adopted silence

over the issue,” said a finance manager.

However, the release of over Rs2.25 billion special funds, during the last couple of weeks, by the federal government for carrying out relief activities in the earthquake affected areas has, apparently, resulted in a temporary relief for the provincial government.

The transfer of funds improved the government’s financial health for the time being.

“As the relief funds are required to be diverted to the earthquake affected districts for carrying out relief activities and distributing compensation money, the provincial government’s account number-1 would again run into negative after some time,” said an official source.

The relief funds have created extra fiscal space for the government and by managing these funds the government would be able to meet its some of the pressing budgetary requirements with certain degree of ease.