ISLAMABAD: Despite an overblown controversy over the leak of a conversation between former finance minister Shaukat Tarin and two provincial chief ministers in August, Khyber Pakhtunkhwa is struggling to have a meeting with Ishaq Dar for payment of over Rs120 billion earmarked in the budget for merged districts of the tribal region and proceeds from the net hydel profit (NHP).

Briefing the media on Thursday, Khyber Pakhtunkhwa’s finance minister Taimoor Saleem Jhagra expressed fears that a phenomenal growth in pension expenditure at the federal and provincial levels would eat up the development budget by 2027 and yet government employees may be unable to get a pension.

He said he had repeatedly called for a meeting with Finance Minister Ishaq Dar and was in touch with the finance secretary for payment of dues, but in vain.

According to Mr Jhagra, the provinces’ share in the divisible pool was reaching them, but a lower revenue collection than the target was set to affect Khyber Pakhtunkhwa.

The provincial finance minister pointed out that the federal and provincial pension bills were going up by 20-25 per cent every year, but outlays were growing by only 10pc, creating a ticking bomb unless serious reforms were introduced.

The KP’s annual pension expenditure had grown to Rs108bn from a few billion rupees 10 years ago while the federal pension bill now stood between Rs1.2 trillion and Rs1.5trn.

“There will be no funds for development unless this issue is addressed,” he said. “Bureaucrats hamper reforms because they fear they won’t get a princely amount every month after retirement if the pension regime is overhauled.”

According to Mr Jhagra, the pension bill was the fastest growing head both at the federal and provincial levels. Khyber Pakhtunkhwa’s pension bill is set to reach Rs300bn by 2027.

Taimoor Jhagra said the provincial government had taken steps to control this runaway head by raising the early retirement age from 45 years to 55 and introducing a participatory pension fund for fresh employees with effect from July 1 this year.

Contributory scheme

Under this scheme, the employees would contribute 10pc to the pension fund while the KP government would contribute 12pc. “There will no longer be a fat pension bill to grapple with if the scheme is successful.”

The provincial finance minister said the fiscal system should be automated for all resources and heads to make it predictable for the provinces to make expenditures with confidence for goods and services.

An implementation in full of Treasury Single Account (TSA) under conditionalities of lender’s programmes could improve cash flows as an amount of Rs300bn allocated for entities in KP, and Rs3trillion allocated for federal bodies, were lying unutilised in various accounts.

Mr Jhagra said his province was going through financial constraints because funds were held up on four or five counts and outstanding dues had gone beyond Rs120bn. He said an expenditure of Rs74bn for merged districts of tribal areas was protected under the merger plan.

It is estimated at Rs90bn for the current fiscal year, but only Rs60bn was taken into account in the federal budget and when it was pointed out, former finance minister Miftah Ismail promised to make correction by announcing Rs90bn in his budget speech. “But the promise remains unfulfilled.”

Published in Dawn, December 9th, 2022