ISLAMABAD: The Pakistan Tehreek-i-Insaf (PTI)-led coalition government in Khyber Pakhtunkhwa has approved a three-year rolling plan that sets medium-term targets for macroeconomic indicators.

Projections for the next three years reveal the downward revision in development expenditure in the remaining years of the PTI-led coalition government in KP.

The Budget Strategy Paper (BSP), prepared by the KP Finance Department, estimates revenue receipts and expenditures over the next three years: 2017-18, 2018-19 and 2019-20.

Given the province’s economic outlook, the paper proposes a meagre increase of Rs974 million, or 0.193pc, for 2017-18 over the current fiscal year’s budget outlay of Rs505 billion.

In the two subsequent years, an increase of over 12pc and 9.6pc has been projected in the budget size on the assumption that federal transfers to the province will witness approximately 14pc growth over the preceding year.

The document reveals downward trends for almost all major sectors owing to the province’s cash-related woes.

The most disturbing part of the document is the upward trend in the size of current expenditures, which are projected to grow at an average rate of 10pc in the next three years.

The paper shows that 72.4pc of total expenditures are categorised as current. Major chunks of these expenditures go towards the payment of salaries, pension, non-salary expenditures, interest payments and federal and foreign debt repayments. Despite proposed austerity measures, the number of government employees is on the rise in all provincial departments. As a result, the persistent rise in human resources through new posts created because of political considerations is posing a serious threat to fiscal health of the province.

KP’s own tax and non-tax revenues are not increasing at a suitable pace to offset the rising trend in current expenditures. This results in drastic cuts in the allocation for development works. The document projects that KP will be left with fiscal space – money that can be allocated for development expenditures – of Rs133.03bn for 2017-18 against current year’s Rs161bn, a decline of 20.4pc.

The development outlay or fiscal space projected for the next two years is at Rs160.74bn and Rs179.41bn, respectively. This projection is on the assumption that the province will get Rs36bn as foreign aid.

The breakup of the development outlay shows that the provincial component of the Annual Development Programme (ADP) for 2017-18, 2018-19 and 2019-20 is projected at Rs67.92bn, Rs87.32bn and Rs100.38bn, respectively.

The ADP for the district government is projected at Rs29.11bn for 2017-18 against current year’s Rs33.9bn, showing a decline of 4.7pc in the transfer of funds to district governments. For the next two years, the ADP for districts is projected at Rs37.42bn and Rs43.02bn, respectively.

On the revenue side, the paper projects that the province will receive Rs337.74bn from the federal divisible pool in 2017-18 against current year’s Rs293.69bn, an increase of 15pc.

It is projected that the province will receive Rs40.58bn as 1pc of the divisible pool for its contribution to the war against terror. It will receive Rs17.2bn in straight transfers or payment on duties and royalties on the production of oil and gas.

The amount on the account of war on terror was projected to grow to Rs46.67bn in 2018-19 and Rs53.67bn in 2019-20. Straight transfers will remain unchanged at Rs17.2bn for the next two years. Under the BSP, the province’s tax and non-tax receipts are projected at Rs40.48bn for 2017-18 against current year’s Rs49.50bn, showing a decline of Rs9bn or 18pc.

KP’s tax revenue is projected at Rs19.98bn for 2017-18 against current year’s Rs18.17bn, showing a marginal increase.

Published in Dawn, February 22nd, 2017