LAHORE: Severe financial crunch facing Punjab on account of a significant shortfall in its budgeted income of Rs1,652 billion for the present fiscal year has eliminated the chances of the province meeting a federal requirement of producing the cash surplus of Rs147.8bn to help keep down the consolidated federal fiscal deficit.
The total provincial revenue receipts for the period from July to March stood at Rs1,046bn because of the much lower-than-the-targeted collection of federal and provincial tax income, surge in its current expenditure, and drop in its non-tax revenue.
Punjab had so far been showing cash surplus, which stood at Rs157.3bn at the end of the third quarter of the present year to March. But the provincial finance department officials told Dawn that it would be impossible to show cash surplus at the end of the year as most provincial expenditure and payments are “back-loaded”.
Punjab finance minister Makhdum Hashim Jawan Bakht had told this reporter a few days back that the province’s commitment to show the cash surplus equaling almost 0.4 per cent of GDP (gross domestic product) hinged on the ability of the Federal Board of Revenue’s ability to meet the tax collect target of Rs4.4 trillion. “Since the FBR does not appear to be meeting its tax target that has already been revised down to Rs4.1tr, the province is likely to face a big hole of Rs120bn in its income from the federal tax divisible pool. Therefore, it will not be possible for us to produce the surplus,” he said.
Punjab’s share from the divisible pool for the present year was estimated to be Rs1,276bn based on the FBR tax target of Rs4,400bn. In the first three quarters, the province has received just Rs866.6bn from the Centre. The provincial finance managers expect the FBR collection to be around Rs4tr. According to some officials, the provincial share from the pool could be Rs150-180bn less than the promised amount.
It is also unclear whether or not the delayed payment of Rs121bn ‘held back by Islamabad from Punjab’s share in the last financial year to show a lower-than-actual consolidated federal fiscal deficit’ is part of the total transfers from the pool made during this fiscal year. The federal government had paid these arrears in July 2018, but the amount is not reflected in the provincial non-tax receipts (as payments of arrears from the previous year make part of the provincial non-tax income in the new fiscal).
The financial crunch is compounded by a major slowdown in the provincial tax and non-tax income collection and an increase in the provincial expenditure in spite of significantly reduced public development stimulus. The province could gather slightly more than 50 per cent of the budgeted tax target of Rs275.8bn for the year in the first three quarters of the fiscal to March. Similarly, the non-tax revenues stood at Rs38bn against the budgeted estimate of Rs100bn for the year because of non-payment by the federal government of net hydel profits payment of Rs41.5bn.
Published in Dawn, June 5th, 2019