PESHAWAR: Covid-19 has taken a colossal toll on Khyber Pakhtunkhwa’s budget, accounting for a whopping Rs100 billion shortfall in revenues, forcing the government to do some belt-tightening to cope with the financial drop.

Finance minister Taimur Saleem Khan Jhagra told a pre-budget briefing here on Friday that the pandemic had also taken a toll on financing development.

He, however, said there would be no new taxes in the next budget, while the issue of the duplication of certain taxes would be addressed.

“The province observed a significant dip in progress because of Covid-19. The estimated revenue receipt excluding merged districts and foreign aid was Rs442 billion compared to the pre-pandemic estimation of Rs540 billion, resulting in a budget deficit of nearly Rs100 billion,” he said.

The minister said the situation had resulted in lower development spending.

Minister says new taxes won’t be imposed

He said the financial year 2020-21 post-pandemic would be one of the most challenging ones in recent times.

“I will present a unique budget this time in view of the pandemic that resulted in global recession,” he said.

Jhagra, who also holds health as additional portfolio, said Rs100 billion deficit included Rs60 billion federal transfers, Rs30 billion net hydel profit payments and Rs10 billion province’s own resources.

He said the development expenditure would come under pressure in the next budget due to Covid-19 but the government would strive to curtail unnecessary expenses.

The minister said it was the government’s endeavour to place the minimum possible cut on development budget.

“Our economy will not grow if development spending is stopped,” he said.

Jhagra said the government was determined to spend Rs85 billion of the total Rs108 billion annual development programme in settled districts of the province by the end of the ongoing financial year and of the total allocation of Rs40 billion, from Rs6 billion to Rs8 billion had been released to the newly-merged tribal districts.

The minister claimed that the financial year 2019-20 was progressing as a year of economic growth in KP that was based on a bold agenda of financial reforms introduced by the government resulting in record growth in revenue, including 12 per cent (Rs33 billion) increase in revenue share from the FBR and 73 per cent in revenue share from the Khyber Pakhtunkhwa Revenue Authority.

He said the development budget witnessed an increase of Rs25 billion for settled districts compared to the previous year and an increase of Rs48 billion for the merged districts.

Jhagra said the government had been on the path of making major changes in how the government finance works such as rolling forecasting – Integrated Cash Flow Model, actual receipts and expenditure based budgeting, Integrated Budget Call Circular, securing monthly NHP releases, KPRA performance based incentive system, ADP rationalisation exercise and formulation of an ADP policy.

He said the government was going to present record health budget in the aftermath of Covid-19.

The minister said the government would also make investment to improve service delivery system, while the additional funds of Rs6 billion would be allocated for pension in the new budget.

He said the province had so far received Rs15 billion from the centre on account of net hydel profit.

Jhagra said the government would take steps to minimise the impacts of Covid-19 on economy.

He said development spending would be maximised to revive economy and generate employment, while tax reforms and incentives would enhance compliance and expand tax base.

Published in Dawn, June 6th, 2020