PESHAWAR: The Khyber Pakhtunkhwa Public Financial Management Reforms Strategy 2017-2020 has underscored the need of boosting the province’s own revenue as the province is largely dependent on the federal government for a large chunk of its income.

The document, a copy of which is available with Dawn, was approved by the provincial cabinet earlier last month. It was prepared by the finance department, while the DFID-funded Sub National Governance (SNG) provided technical support in formulation of the policy.

The policy focuses on six core policy objectives including policy driven planning and budgeting, credible and transparent budget, improved predictability and control in budget execution, resource mobilisation, assets and liabilities management and accountability for results.

The document notes that a key effect of fiscal federalism in Pakistan is that transfers from federal government constitute a large chunk of the provincial resources, amounting to over 80 percent of the total general revenue receipts in KP.

Says management of funds handled by finance dept should be strengthened

It said that provincial tax and non-tax receipts present an inconsistent trend and a large chunk of it comes from the recently devolved Sales Tax on Services. The report notes that increasing wage bill and pension liabilities of the government claim a large portion of the budget, leaving a constrained fiscal space to meet development needs of the province. Additionally, the LGs are greatly dependent on transfers from the provincial government to meet their expenditure requirements due to underutilisation of their revenue potential, despite the fact that the LGs are assigned revenue functions under the LGA 2013.

In the words of the report, though the province has undertaken several initiatives to increase its resources, austerity measures and budget deficit management, the need to mobilise provincial resources to boost own source revenues has never been clearer, especially with the initiation of 9th National Finance Commission (NFC) deliberations.

It said that provincial planning and development department launched the Medium Term Inclusive Growth Strategy for Reclaiming Prosperity in KP, which is founded on key principles of focusing private sector-led growth.

The report said the sales tax survey conducted in Peshawar, Mardan and Abbottabad earlier in 2014 also showed that the potential of sales tax on services was almost 10 times the revenues being collected.

About assets and liabilities management, the report noted the KP financial assets were mainly fixed income securities – investments under different types of funds managed by the finance department i.e. General Provident Investment Fund, Pension Fund and Hydel Development Fund, while it also allocates considerable resources to public sector entities.

However, the report points out that monitoring of such entities and management of funds needs strengthening to allow KP in determining the adequacy of returns on its investments and reporting of risks.

It said after 18th constitutional amendment, the provinces have been allowed to create debt; however, an overarching framework has to be agreed with the National Economic Council. It also suggested need for specialised capabilities in the department to carry out debt sustainability analysis and develop policy options as part of a methodical debt management strategy

According to it, to ensure implementation of the PFM strategy, two oversight committees one led by the minister and a sub-committee of the administrative secretaries will be set up.

The minister committee will be headed by the finance minister and meet once within six months to lead the reforms from political perspective, while the sub-committee of the administrative secretaries of the P&D, local government, elementary and secondary education and health department and headed by secretary finance will be responsible for strategic evaluations and operational monitoring of reforms and will meet once within two months.

Published in Dawn, April 4th, 2017