PAKISTAN’S largest province, Punjab, has announced a budget that contains few notable features.
To the rest of the country, Punjab appears as a province on the move, with large-scale infrastructure projects unfolding and playing host to some districts with the best social indicators in Pakistan. But a closer look takes some of the shine off this rosy view.
The central task that the provinces are faced with is to increase their revenue effort, following the massive devolution of power and the federal resources upon them after the NFC award and the 18th Amendment to the Constitution.
Although the provincial government has managed to generate some headlines around its revenue effort this year, and has contracted some innovative work to develop a template to increase collections under property taxes, the revenue effort still fails to impress.
Provincial taxes have doubled since 2012, the year before the elections, which on the surface might sound impressive. The amount collected under direct taxes has remained the same since then.
Although collection under capital value tax on immoveable property shows significant increases since 2012, tax on agriculture incomes continues to languish despite a strong pledge by the provincial authorities to tap this revenue line.
More than half the increase in revenue for the next year will come from federal transfers, showing a slackening of the provincial revenue effort.
Given the scale of their ambitions on the expenditure side, this could prove to be quite problematic.
The good news is that the government is boasting an ‘unprecedented’ increase of 70pc in its total allocations for education, the bulk of which is for primary schools.
The usual allocations for ‘schemes’ is not that large, but the package for the agriculture sector is pegged at Rs50bn for next year and consists, predictably enough, of projects such as more roads, the uplift of the irrigation network and flood control.
There is a massive allocation of Rs92bn for the provincial transport infrastructure of which Rs85bn are for the Orange Line metro train, to be financed by a Chinese loan — talk about spending it all in one place.
Transfers to local governments show no appreciable increase from the previous year, despite a pledge that these “will come in place” this year, but without a functioning provincial finance award.
The Punjab budget remains top-heavy and unimaginative with lump allocations for pet projects in particular areas and no significant development on the revenue effort.
Published in Dawn, June 14th, 2016
