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KARACHI, June 9: The new Sindh government has decided in principle to raise funds for the annual development programme (ADP), which had shrunk to Rs100 billion in current financial year, in the upcoming budget to Rs190bn.

The ADP for 2012-13 was Rs181bn (Rs161bn for provincial ADP and Rs20bn for districts ADP), which had been capped at Rs100bn and out of it, Rs97bn had already been released for uplift schemes, said an official in the finance department who wished not to be named.

He said till mid-April, the government’s financial position was relatively good as its balance was surplus but it went into red after paying salaries to employees in May. The situation was a result of lower than expected release of funds by the federal government after the Federal Board of Revenue failed to meet its target, he said.

The official said the FBR cited loadshedding, terrorism in the rest of the country and perceived volatile security situation in Karachi as reasons for its failure. Thus the province was forced to request an overdraft from the State Bank of Pakistan in mid-May to run the day-to-day affairs but the federal government came to its rescue and provided a breather on May 17 by releasing Rs12bn to enable the Sindh government to give June paycheques to its employees. “At present, the province’s financial position is dwindling,” said the official.

Despite that the new rulers had decided in principle to reserve Rs190bn for the ADP in the next financial year but its shape would be finalised after the presentation of federal budget expected to be announced on June 12, he said.

Sources in the finance department said that Sindh chief secretary Mohammad Ijaz Chaudhry had had a meeting at the Sindh secretariat on May 20 to discuss a broad overview of existing fiscal position of the province.

Finance Secretary Sohail Rajput reportedly informed the meeting that there was a shortfall of around 23 per cent in the current year against the budget receipts mainly under the component of divisible pool taxes. It was met by lower releases of funds for development schemes as the finance department released Rs95 billion out of Rs181bn ADP funds, he said.

He projected the overall availability of funds for the provincial ADP at Rs96bn for the next FY and said it could improve only after slightly better tax collection by the federal finance ministry.

Additional Chief Secretary Development Arif Ahmed Khan told the meeting that development allocations as well as expenditure increased ‘phenomenally’ in the post-7th NFC award period.

However, the overall releases and expenditures dipped in the current FY primarily on account of ‘fragile fiscal position’ of the provincial government, he said.

He pointed out that the inclusion of a sizeable number of non-ADP schemes together with Rs121bn worth new schemes had also led to a ‘huge throw forward of Rs557bn.’

The senior official said: ‘It was quite challenging to prepare next year’s budget as the overall fiscal space for development is short and the new government’s priorities too are not available yet. Serious efforts are being made to maintain at least current financial year’s level of provincial ADP at Rs160bn.”

Answering a query by the chief secretary about potential sources of revenues, the finance secretary replied the PPP (public-private partnership) mechanism was evolved to reduce burden on public funds and tap on market capital, but the portfolio was comparatively small.

He suggested the second possible source could be a ‘more scientific asset management for leveraging (government’s) assets for getting funds from the market.’

The chief secretary observed that the government now needed to prepare itself for taking initiatives in the oil and gas sector under the 18th Amendment, and this could prove a ‘game changer,’ according to the minutes of the meeting.

The meeting decided that the finance department would prepare report on the implications of regularisation of contractual employees as well as the issue of ‘illegal appointments’ as both issues were likely to further constrain the province’s fiscal space.

The meeting decided that the P&D Department would prepare a brief for the new government on the issues of ‘thin spread of allocations and huge throw forward’.

It was resolved by the meeting that the programmes and projects carrying high impacts in the context of economic growth, job creation, poverty reduction, improving livelihoods, building human capital and resolving chronic water and energy problems should be given top priority in the development sector. The participants also underlined the importance of ‘scientific and systematic monitoring of development schemes.’