PESHAWAR, June 6: The gap between the NWFP government’s total revenue receipts and expenditure is set to expand further during the 2005-06 financial year due to the federal government’s decision to effect pay increase for government employees, official sources said.

“The province has already lost fiscal space available to it during the last financial year because of 15 per cent pay raise. Further increase in the next year would cause a severe blow to its kitty if it is not provided additional funds by the federal government,” said a finance manager of the NWFP government.

The NWFP’s salary bill, which makes more than 50 per cent of the total annual revenue receipts, was projected at Rs51.4 billion in the 2004-05 financial year. It rose by about Rs2.5 billion in the last fiscal because of the 15 per cent pay raise.

“In case another increase by 15 per cent is effected it would mean that expenditure under the said head would grow by over Rs2.5 billion,” said the officer, “in such an eventuality the province would have to borrow funds to meet expenditures”.

Officials, however, said that the federal government had not yet intimated the provincial government as to how much raise it is going to announce in salaries of government employees.

“The matter has been kept very secret by the federal government and even we have not yet been informed of the decision of the Pay and Pension Committee,” said a finance manager, adding that the decision would come to be known once the federal budget was announced.

Non-communication of the Pay and Pension Committee’s decision had adversely affected budget making process in the province as the government was not in a position to determine its expenditure under the head of salaries.

“Salary bills eat up more than 50 per cent of the total annual revenue and unless the provincial government knows its expenditure under the said head it would be difficult for it to make budget, “said the officer.

Some other official quarters said that an increase by about Rs3 billion was expected under the head of salary. Due to this increase the provincial government would lose the fiscal space it had managed to create by bringing down its annual electricity bill by around Rs1bn during the last financial year and an other saving of Rs2bn due to premature retirement of some expensive loans to the federal government.