KARACHI, June 14: The senior Sindh Minister Syed Sardar Ahmad will present on Thursday afternoon the 2006-07 budget with an outlay of about Rs165-170 billion, including a record development programme of Rs32 billion in the provincial assembly. The inclusion of an all funded development programme in the budget is a departure from the practice followed during last four years when the annual development programme (ADP) was unfunded and the budget document carried a brief note that said “subject to the availability of funds”.
Mr Jalil, who is Chief Minister’s adviser on Finance, will not be able to present the budget because he is not an elected member of the Sindh Assembly and, therefore, his cabinet colleague Syed Sardar Ahmad, who was finance minister before he took over as excise and taxation minister, will deliver the budget speech.
This will be the first budget after President Musharraf amended the 1997 Award of National Finance Commission (NFC). The award retains the principle of population as the single criterion for distribution of funds among the provinces and has rejected the demand of Sindh, Balochistan and the NWFP, which wanted multiple criteria that should include tax collection, size of the province, and economic backwardness also as factors to be given weightage.
Under the amended NFC Award the share of the provinces in the federal divisible tax pool has been increased and it will increase every year by one per cent. However, the distribution of one-sixteenth of the sales tax collection is being distributed in a way that breaches the promise of the federal government made in 1999, when octroi and zila tax were abolished and provinces were to be compensated on the basis of historical collection of octroi. An audit carried out by the federal government has fixed Sindh’s historical share at 46 per cent which is being denied in the new arrangement.
Nonetheless, the improved collection of taxes in the current fiscal year -—Rs710 billion plus an indicated recovery of Rs835 billion next year by the Central Board of Revenue -- has already enlarged Sindh’s share from initial estimate of Rs86.40 billion to Rs95 billion in the current fiscal year and expected flow of about Rs120 billion next year.
Sources in the Sindh government claim to begin the year 2006-07 with a safe surplus cushion of about Rs15 to Rs20 billion. The availability of a credit balance of Rs15 to Rs20 billion and an expected flow of Rs120 billion has given tremendous confidence to the coalition government in Sindh which, otherwise was uncomfortable most of the time in last two years and was on the verge of breakup early this year at least on three occasions. The intervention of President Musharraf and Prime Minister Shaukat Aziz saved the coalition.
But Sardar Ahmad is expected to make a hard-hitting budget speech on Thursday to demoralize the opposition. He is expected to announce a 15 per cent raise in salaries of employees and in pension of retired government servants.
Prime Minister’s Adviser on Finance Dr Salman Shah announced in Karachi on Tuesday of a review of the interest rates charged by federal government from the provinces. The federal government has been charging 17 and 18 per cent rates on the loans given to the provinces. The repayment mode is such that the bulk of the debt servicing amount of provinces is adjusted against interest and a very little part of the principal amount is cleared.In June 2005 when Sardar Ahmad was finance minister, he disclosed in his budget speech that Sindh overpaid the loans borrowed from Islamabad but still a large amount has to be paid back. “We are paying for the loans we never borrowed”, he had declared in his budget speech last year. Dr Salman Shah’s statement must have consoled him and other members of the assembly.
Sindh’s budget will set a stage to launch an election campaign. The development budget will have Rs24 billion for the province and Rs8 billion for the districts. There is expected to be Rs2 billion development package each for Karachi, Hyderabad and rural areas. There would be allocations for livestock farms, promotion of dairy products, improvement of quality of life in rural areas, and infra structure projects.
