Sindh Budget : Plan with a populist flavour

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

The Sindh government doubts the GDP growth numbers. It is also not as optimistic for the year ahead as the federal government. The Sindh budget made the divergence in the opinions of the PTI and the PPP obvious. The PTI government at the centre hopes to mobilise a significantly high (Rs5.8 trillion) tax revenue in 2021-22 whereas Sindh scaled down its tax collection target by Rs8.4 billion to Rs304bn in the year ahead from Rs313.3bn in 2020-21.

The federal government expects provincial governments to post budget surpluses of Rs570bn collectively to support its efforts to contain the fiscal deficit. Keeping its own priorities in sight, Sindh projected a Rs25.7bn deficit as the spending plan overshoots revenue in its budget proposals presented last week.

Finance Minister Shaukat Tarin, who earlier served in the same capacity (2009-10) in the PPP government, did help Sindh as he pledged higher revenue transfers to the province honouring the National Finance Commission (NFC) provisions. Compared with last year’s Rs760.3bn, Sindh expects to receive Rs869.6bn in 2021-22.

The budget speech of Chief Minister Murad Ali Shah, who also holds the finance portfolio, had a typical PPP flavour. It was high on promises with populist verbosity. Mr Shah blamed the pandemic and low federal resource transfers for missing last year’s development targets.

‘The private sector in Sindh intends to challenge the unilateral increase of 47pc in the minimum wage’

Sindh prioritised allocations for Covid-19 management, social infrastructure, social security net and agriculture after making provisions for sustaining the provincial government. The recurring current expenditure will consume Rs1.08tr of the Rs1.47tr budget. The development spending is projected at Rs329bn and the residual Rs59.4bn will cover current capital expenditure.

The province will continue to lean on federal transfers of Rs869.6bn in 2021-22. Citing the pandemic fallout, Mr Shah refrained from attempting to expand the provincial tax net and left the agriculture income out of the net. “Look at the Sindh Assembly composition. The strong presence of landed aristocracy means Sindh can’t be expected to move unilaterally towards removing this anomaly in the tax regime. The tax exemption to agri income provides a safe window to the urban elite for tax avoidance,” said a Sindh watcher.

The pandemic exposed the fissures in the health infrastructure and the Covid-19 fallout multiplied the economic stress. Chief Minister Shah-led PPP team proposed to increase the share of the social sector and social security.

In the absence of credible data, the picture of the regional economy continues to be hazy. However, the lack of very basic amenities in Karachi — like water, sewage and public transport — casts serious suspicions on the claims of improving governance in Sindh.

“Politics apart, the PPP can’t hope to change the perception of bad governance until it delivers in Karachi. Its handling of the health threat under the pandemic earned it goodwill. The province is ahead of others in projects under the public-private partnership mode. But this has not compensated for its underperformance in the mega city,” commented an analyst. PPP stalwarts accept that Rs110bn is insufficient for addressing the needs of Karachi that Mr Shah says needs Rs3tr investment for visible improvement.

The PPP has historically been more responsive towards demands of the poor. It proposed a 20pc higher salary raise and revised up the minimum wage to Rs25,000 compared with a lower increase at the centre.

“No, the budget is not innovative. In the absence of better insights into the situation, much depends on the whims of party leaders,” said a senior member of the finance team.

In a mailed comment, Mr Shah contested the claim. “The Sindh budget is not whims-based. It is drafted keeping in view the fiscal framework and need-based demands generated by health, education, police and other nation-building departments. It promotes the principle of balanced growth/development. We ensured that every taluka of Sindh gets development schemes.

“The budget was drafted involving all stakeholders like traders, industrialists, agriculturists and economists. It is a participatory budget.”

Explaining the thought behind scaling down the tax revenue targets, he said, “This is because of concessions granted last year on registration fees/stamp duties to boost the construction industry. The property market has also been slow.”

The PPP, which has been ruling the province for the past 13 years, has yet to win over the business class that continues to perceive it as anti-business and pro-workers and out to hurt its interests. “The dilapidated condition of industrial areas in Sindh reflects the value the PPP attaches to investors’ needs. The unilateral 47pc increase in the minimum wage from Rs17,000 to Rs25,000 in a difficult business environment is unjustified. Why was the Minimum Wage Board, a trilateral forum, bypassed? The private sector intends to challenge the move in court,” said Majyd Aziz, a popular business leader in Karachi.

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

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