$304m WB loan to strengthen Punjab’s digital effectiveness

Updated 24 Oct 2020

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The programme supports efficiencies in public resource management that generate savings and create fiscal space for growth-generating investments in the province. — AFP/File
The programme supports efficiencies in public resource management that generate savings and create fiscal space for growth-generating investments in the province. — AFP/File

ISLAMABAD: World Bank has approved a loan of $304 million in financing for the Punjab Resource Improvement and Digital Effectiveness Programme (Pride) that will support the provincial government in strengthening fiscal risk management and budget formulation to ensure reliable resource allocation for public services.

Pride will support efficiencies in public resource management that generate savings and create fiscal space for growth-generating investments in the province. It supports the Punjab Growth Strategy and the Punjab Public Financial Management Reforms Strategy – both of which aim at developing a robust public financial management system.

The programme supports efficiencies in public resource management that generate savings and create fiscal space for growth-generating investments in the province. It will also improve revenue collection by increasing registration of businesses and real estate, and simplifying tax administration processes such as registration, filing, payment, refunds and appeals, WB announced on Friday.

Planning and budgeting function in Punjab still faces some challenges, and according to the Public Expenditure and Financial Accountability 2019, expenditure policies with stated objectives are not costed to offer their impact on the current and multiyear expenditure framework.

As a result, government programmes are devised without determining the fiscal impact, the report says.

While activities funded through recurrent budget are more predictable, there is a risk of inadequate cash flow due to limited fiscal space for development scheme within the Pride boundary already initiated by the Punjab government. The risk of budget execution challenges further increases as the process of medium-term fiscal framework (MTFF) is not formalised in the province and no indicative budget ceiling is provided to the line departments, it says.

“The Pride programme is integral to the WB’s whole-of-country approach in helping Pakistan strengthen public financial management systems at the federal and provincial levels,” said WB Country Director for Pakistan Najy Benhassine.

“Punjab is the largest province, accounting for 55 per cent of the population and about 60pc of the economy, so improving quality and access to public services is key to Pakistan’s development,” he added.

“With prolonged restrictions on face-to-face services due to Covid-19, the Pride programme will help the provincial government expand its existing citizen feedback model and accelerate the use of technology for revenue mobilisation and public procurement,” said Task Team Leader for Pride Akmal Minallah.

“The programme also puts in place monitoring and transparency mechanisms at the provincial and local levels that increase government accountability.”

Fiscal risk exposure remains a fundamental public financial management challenge in Punjab. This is the result of a large pension spend at 12.3pc of provincial revenues; considerable uncollateralised debt stock arising from trade in agricultural commodities; and many state-owned enterprises and public-private partnership projects with increased provincial guarantees which contribute to high fiscal risks.

Punjab’s own tax receipts currently account for only 0.8pc of the its estimated economic output, indicating that the province may be collecting only a quarter of its tax potential. A recent analysis of the province’s tax potential by the WB indicates that the largest revenue potential is in sales tax on services, urban immovable property tax, stamp duty and capital value tax.

Published in Dawn, October 24th, 2020