January 10, 2007	Wednesday	Zilhaj 19, 1427

KARACHI, Jan 9: Sindh’s present financial and budgetary position is being described as best among all the four provinces where development pace is being maintained with a positive cash flow as against Punjab which for the first time is depending heavily on the overdraft of State Bank of Pakistan because of its high publicised capital intensive mega projects.

Officials in Karachi estimate Punjab’s overdraft with the State Bank of Pakistan now exceeds Rs20 billion figure and many of its high profile development projects are unlikely to complete because of funds availability only for the first phase.

Punjab has taken up ambitious projects like sports city, education city, in agriculture and in other areas where funds availability on sustainable basis is doubtful.

“There are hardly any economic returns on many of these Punjab projects and the bubble may burst in coming months,” a senior official said while asserting that development taken up in Sindh has already started giving results which will become more visible in coming months.

Two other provinces — NWFP and Balochistan — suffer from resources scarcity on account of being denied their legitimate share in hydel power profits and in oil and gas, other minerals and in fisheries.

The NWFP is just managing is budgetary affairs with its limited resources while Balochistan has secured almost half the amount of its budget as overdraft from State Bank. The government’s total borrowing from the banks in first half of this fiscal year amounts to Rs95 billion, a big part of which is shared by Punjab and Balochistan.

While maintaining a credit balance with State Bank of Pakistan, Sindh has released about 80 per cent of the allocated funds Rs17 billion for development to the line departments. “Almost Rs14 billion have been released to take development schemes in respect of special packages, special projects, Thar packages and other areas”.

The senior Sindh minister had announced in his budget speech a total investment of Rs52 billion for development in the current fiscal year. Total investment outlay — both the provincial and federal — he disclosed amounted to Rs117 billion. The plan addresses both urban and rural areas to provide basic infrastructure and promote livestock farming in the province.

“Islamabad has provided the promised funds — about Rs60 billion — in last six months and Sindh has mopped up as much as 92 per cent of projected taxes and more than 50 per cent of non-tax revenue. All the 23 district governments have been given their shares of funds and provincial government is meeting all its obligations.

In last five years or so, the Sindh government has retired Rs11.4bn loans that have given budgetary operators a lot of fiscal space to address to the social sectors. In addition, the Sindh government has kept aside Rs5.8 billion for pension fund from last three years budgets. This fund has now been placed in term deposits of big banks which give government roughly a 10 per cent yearly return.

The government is now considering to appoint a professional fund manager while maintaining enlargement of pension fund in the coming years to reach a stage when all pensioners — 38,000 only in Karachi and thousand others in other parts of the province — get their monthly pension from the income of this fund. The Sindh government is providing about Rs4 billion for pension every year and the proposed fund is expected to give it a further fiscal space.

“A special cell has been set up top monitor the results of steps taken in recent past’’ a senior officer disclosed while pointing out that well reputed institutions — IBA Karachi and Sukkur, LUMS and others are being engaged — to carry out independent studies at micro level of the affect of government spending in various areas.

In the current fiscal year, the government departed from the previous accounting system and has adopted a new system which officials claim is much more transparent and gives no room to conceal any thing.

With all these achievement, the rural elite continue to be a source of concern for the Sindh government. The landed gentry neither pay due tax on their income nor do they pay full price of irrigation services. While the annual collection of tax from landed gentry remains pitifully low —hardly Rs150 million — the irrigation department is also receiving a fraction of due amount.

The six months collection by the Irrigation Department is hardly Rs20 million as against indicated collection of Rs230 million. This is against kharif crops, - cotton, sugarcane and rice - the main cash earners.

“A primitive, outdated and corrupt Board of Revenue can never exploit the full tax potential,” remarked an official who is convinced that the World Bank proposal of setting up a Provincial Revenue Authority in which Excise and Taxation and Board of Revenue are merged is answer to the problem.

There are indications that provinces may be asked to collect CVT on real estate transactions but so far no official communication has been made by Islamabad to provinces. The provinces also remain unaware of the responsibilities which may emerge from the proposed legislation on provincial autonomy.

A periodical meeting of the federal and provincial ministers on stock taking remains merely a formality as Islamabad does not feel any responsibility to keep provinces update on financial and economic issues.