KP Budget: A friend for all... except the industry

Published June 21, 2021
Breakup of provincial expenditure.
Breakup of provincial expenditure.

Following in the footsteps of the Centre and Punjab, Khyber Pakhtunkhwa’s budget for 2021-22 also focuses on spurring economic growth and offsetting the impact of Covid-19 through massive development spending, tax concessions, salary and pension hikes.

The Rs1.1 trillion budget boasts a historic development outlay of Rs370 billion and also proposes enhanced allocations for tourism, science and information technology, local government, health and education sectors.

In the post-budget briefing, KP Finance Minister Taimur Saleem Jhagra said that it was a historic budget, which had been prepared in a most difficult situation. However, he seemed optimistic about the future and said that the difficult period was over.

Also, it is the first time that the provincial budget has crossed the threshold of a trillion and attempts to please every segment of the population with whatever incentive the government could throw at a time when the ruling Pakistan Tehrik Insaf is heading towards the next polls. In KP, where the PTI rule is in its eighth year, the odds are even higher for the government to keep the population happy in difficult economic situations.

‘The agriculture land tax exemptions alone would benefit about 700,000 farmers across the province’

The budgetary proposals show that the government has the same in mind and tried to turn the budget into attractive bait for every segment of economic life. Government employees who just three weeks ago were heading towards a complete strike have been given 10 per cent salary raises. To woo the business community, industry and professionals, the government has reduced taxes on 31 services, offered exemption from professional and land taxes and introduced a nominal tax of Rs1 on registration of vehicles.

“The agriculture land tax exemptions alone would benefit about 700,000 farmers across the province,” Mr Jhagra said.

The government has also allocated Rs2.6bn to give monthly stipends for about 20,000 prayer leaders across the province. The proposal floated by Pervez Khattak’s government in the run-up to the 2018 general elections was stuck in limbo and would materialise when the Mahmood Khan government would be heading to polls.

The government has also unveiled a proposal to dole out a loan scheme of Rs10bn to revive small businesses which have been badly hit by the pandemic. These small loans would be disbursed through the Bank of Khyber. Rs10bn each have been allocated for a subsidy on wheat and a provision of food basket to the poor. The government has also announced an increase in the minimum wage to Rs21,000 for labourers.

The budget has also proposed to hire 23,000 teachers and 10,000 model classrooms would be set up under the early childhood education programme across the province while Rs4.5bn would be spent on new furniture.

In the health sector, the government has planned rehabilitation of all major hospitals of the province at the cost of Rs14.9bn over two years. Besides, the government has also decided to cover liver transplant under Sehat Sahulat Scheme and Rs1bn have been allocated for this purpose. Rs2.7bn would be spent on rehabilitation of all basic health units and rural health centres of the province.

An amount of Rs2.8bn will be spent on the extension of Rescue 1122 services which would be set up at all tehsil levels. The tourism department has also received a massive boost of development funds from Rs2bn to Rs12bn which would be utilised on setting up integrated tourism zones and an innovation fund of Rs3.8bn and a KP 400-kanal water park in Swabi district.

The science and information technology sector has also received a boost from Rs1.1bn to Rs2.5bn to set up a knowledge-based economy in the province. Rs48bn will be spent on the road sector, Rs13bn on agriculture and Rs1bn on women empowerment.

The government has also set out a massive tax target of Rs75bn for the next fiscal year, which was 52pc higher than the current target. The KP government has during the current fiscal year managed to achieve over Rs50bn during the current fiscal.

Zahid Ullah Shinwari, former president of Sarhad Chamber of Commerce and Industry was of the view that there was little for the industry in the budget; however, said that the only thing that could benefit them was exemption from professional tax.

However, Mr Shinwar sounded the alarm over the high tax target for the next year and said that instead of genuinely increasing the province tax base, the tax collectors would further hound the business community to achieve their target. “It is going to be difficult,” he said. He said that there was only Rs5bn for the industry in the Rs371bn development budget, which was literally peanuts.

Mr Shinwari criticised the government for failing to capitalise on trade with Afghanistan, which accounted for nearly 70pc of provincial industry and 80pc of the services sector.

Published in Dawn, The Business and Finance Weekly, June 21st, 2021

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