Balochistan is not likely to produce any budget surplus as required by the federal government to hold down the country’s consolidated deficit as the provincial government already faces the challenge of covering a very large hole of Rs37bn in its planned development spending for the present year.
“We are facing a deficit of around Rs37bn this year. So I don’t think we will be able to create a surplus,” Provincial Finance Secretary Akber Khan Durrani told Dawn from Quetta by phone.
We will see what the federal government has to say (about provincial budget surplus), he added.
The province, according to the federal finance ministry web site, has been showing a budget surplus of Rs34.5bn for the first three quarters of the ongoing fiscal year to March as its total development and non-development expenditure stood slightly less than Rs130bn against revenue receipts of Rs164.26bn for the period.
“We are facing a deficit of around Rs37bn in the current year. So I don’t think we will be able to create a surplus”, says Provincial Finance Secretary Akber Khan Durrani
The federal budget for the present financial year requires the province’s to together produce a surplus of over Rs339bn to meet the fiscal deficit target of 3.8pc of GDP.
Balochistan is required to contribute a budget surplus of slightly less than Rs31bn according to its share of 9.09pc in the federal taxes.
Balochistan’s Rs282.77bn budget for the current financial year boosted its development spending by a third to Rs71bn — including a foreign project assistance component of Rs6bn — from last year’s original estimates of Rs54bn.
But the planned provincial development spending faced a financing gap of approximately 57pc of its core uplift investment of Rs65bn from its own resources as the total available resource was estimated to be just over Rs28b.
“We have been cutting our non-development expenditure to cover our budget deficit,” Durrani said. He contended that the finance department had already released 62pc of the province’s core development budget of Rs65bn during the first three quarters of the ongoing year. But the actual utilisation of the funds remains quite low.
According to the details of Balochistan’s fiscal operations posted by the federal finance ministry on its web site, the provincial government had spent Rs17.68bn in the first nine months of the current year.
At the time of announcing its budget, the Balochistan government had claimed that the allocations for development, transport, education, health, water supply, infrastructure and productive sectors, and security had been boosted to attract foreign investors and turn the province into a regional commercial and industrial hub in the wake of the China Pakistan Economic Corridor (CPEC).
The total provincial consolidated fund for 2016-17 was estimated to be Rs289.37bn as it included an expenditure of Rs6.58bn for state trading in food.
The budget size, excluding the food account, was just over 16pc, heftier than the previous year’s Rs243.53bn.
The revenue estimates included federal transfers, including straight transfers, of Rs196.84bn, tax and non-tax receipts of Rs9.12bn, GDS arrears of Rs10bn, ways and means debt of Rs17.70bn, loan recoveries of Rs5.38bn and foreign development assistance of Rs6.18bn.
The budget proposed current expenditure of Rs184.76bn on service delivery; of this, an amount of Rs30.26bn was earmarked for security, Rs43.67bn for education, Rs17.37bn for health, Rs17.79bn for social protection and pro-poor subsidies and Rs28.29bn for general public services. Likewise, Rs26.83bn had been allocated for capital spending and Rs18.9bn for debt payments while an investment of Rs3bn was to be made in the provincial pension fund and Rs1bn in the education endowment fund.
The government has been implementing austerity measures to cut expenditure and improve tax revenues in order to reduce its budget deficit, officials claim. The current expenditure during the first nine months of the year stood at Rs112.08bn against Rs185bn budget for the entire year.
The provincial tax collection has also improved with provincial GST on services yielding Rs2.84bn in the first three quarters of the year and motor vehicle tax another Rs580m. Non-tax revenues collection was just below Rs4bn during the period.
Durrani said the details of the next budget were being worked out but the total size of the provincial budget for 2017/2018 was expected to grow to more than Rs300bn. “We plan to further increase our development expenditure next year. The public investment will focus on social sector, infrastructure, agriculture, fisheries, etc.”
Until end March, Balochistan had received Rs150bn in federal transfers from its promised share of Rs196.84bn for the entire year.
Balochistan’s share in the country’s tax income has already surged by more than six times from Rs29bn in 2010/2011, the first year of the 7th NFC award.
Additionally, the province is also being reimbursed gas development surcharge arrears of Rs120bn outstanding since 1954 in equal annual instalments of Rs12bn after the retrospective increase in gas wellhead prices.
The increase in provincial revenue has since helped it significantly raise its development investment from its own resources by almost five times from a little above Rs13bn in 2010/2011.
Durrani said the province’s share from the federal divisible tax pool was guaranteed under the 7th National Finance Commission (NFC) award. “It means that we will continue to get the money promised by the federal government even if it fails to meet its tax collection target.”So far we have not seen any cut in our share in the federal transfers.”
Published in Dawn, The Business and Finance Weekly, May 8th, 2017