THE KP budget 2021-22 is a sort of please-all document that hands out something to almost everyone in the hope of pushing growth with the help of a large but exaggerated development stimulus of Rs371bn. The growth strategy is in line with the ruling PTI’s renewed focus on economic development through an expansionary fiscal policy ahead of the 2023 elections. The budget focuses on acceleration of recovery, employment generation, improvement in human development indicators and public service delivery. Besides, the Rs1.12tr spending plan seeks to mitigate the impact of Covid-19 on people and businesses. The government plans to increase the provincial tax revenues by a hefty 54pc to Rs42.3bn without imposing any new tax while giving significant relief in 30 provincial services, agriculture land tax, motor vehicle registration fee, urban immovable property, etc. It has also announced a district development programme for accommodating public works schemes suggested by its lawmakers to help their electoral chances. A scheme has been developed for extending loans to young men, women, IT professionals and entrepreneurs. The scope of the province’s flagship universal health insurance is being extended to the merged districts of the former tribal areas and 1122 emergency response services are being expanded to the tehsil level. Likewise, a food support programme is being set up. Additionally, the budget aims to undertake pension reforms that will save Rs13bn and help move towards contributory pension schemes. That will help the province cut its future pension burden and create space for more meaningful pro-poor interventions.

The most important steps the government plans to take in order to implement its development priorities relates to its decision to release 100pc funds for uplift schemes from the very first day of the financial year. That should improve development spending and help to optimise the utilisation of funds. However, some challenges remain. The first risk to the development spending plan arises from the exaggerated estimates of resources available. For example, the budget estimates the receipt of over Rs34bn from other provinces to assist it in the accelerated development of the merged districts of ex-Fata. These funds are unlikely to materialise before the finalisation of a new NFC award. The other major challenge is lack of capacity to spend money efficiently. The province is projecting utilisation of just 53pc — Rs168.8bn — of its original annual development programme of Rs317.9bn during the outgoing year. There is little evidence that it can spend the targeted amount next year.

Published in Dawn, June 21st, 2021

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