Punjab’s spending plan for the first four months — from July 1 to October 31 — of the next financial year unveiled last week clearly and unmistakably carries PML-N’s signature all over it: a massive development stimulus, a bloated subsidy and social protection programme, and an increase in the pay and pension of government employees.
The Rs1.7 trillion expenditures authorised last week by the caretaker provincial administration led by Mohsin Naqvi to manage the affairs of the government in the run-up to the national election is loaded with a development stimulus of Rs325 billion, social protection and subsidy programme of Rs103.3bn, an endowment fund of Rs1bn for journalists, abolition of existing taxes on the IT sector, and allocations for the establishment of an IT Park in Lahore.
No wonder it has triggered a debate on whether the caretakers have transgressed their mandate and if the massive allocations for development, social protection, and subsidy for the period leading up to new elections that must be held in October are meant to lift the sagging electoral prospects of the Noon League in the province.
The plan contains a development programme for the four months, which is 47 per cent of the Rs685bn target for the entire outgoing year. Likewise, the current expenditure of Rs721.9bn for the period compares the original full-year expenditure estimates of Rs1.71tr for the outgoing year.
The pay and pension bill is projected at Rs275.1bn for four months, showing a significant rise when compared with the entire FY23 estimates of Rs747.9bn. Other major expenditures include social protection of Rs70bn and a subsidy of Rs33.3bn for public transport and water and sanitation services. The cost of service delivery is estimated at Rs153.6bn for the interim period. This compares with a sum of Rs303.9bn budget for the entire outgoing year.
The PML-N ticket aspirants are looking towards their leadership to give them something to sell to their constituents
Under the Elections Act 2017, the role of the caretaker governments has been restricted to the performance of day-to-day, routine functions necessary to run the affairs of the government and assist the Election Commission of Pakistan (ECP) in holding the new elections. They are also forbidden from taking crucial policy decisions like imposing or abolishing taxes except in urgent situations and disallowed from entering into contracts or undertakings.
Likewise, Article 126 of the Constitution also severely curtails the financial powers of provincial caretaker governments and restricts them to ‘authorisation of expenditure’ from the Provincial Consolidated Fund (PCF) for a period not exceeding four months in any financial year.
So it is only fair if the analysts are questioning the intention of the caretakers behind the ‘initiatives’ that should have been left for an elected government to take. What ‘urgent situation’ existed in the province that prompted the caretakers to withdraw taxes on the IT sector or create an endowment fund for the journalists?
Why are such huge allocations made for the development schemes — even for the ongoing ones? Why does it plan to spend roughly 60pc of the social protection funds of Rs120bn set aside for the full year in just four months leading to the national elections, if not to help a particular political party?
Many analysts think that the caretaker government in Punjab has transgressed its mandate as defined in the Elections Act 2017 and the Constitution.
“A look at the expenditures reinforces the impression that the caretakers are acting as an extension of the PML-N in the country’s largest province where the battle for power will be fought in the election,” a political science teacher from a public-sector university in Lahore argued while speaking to Dawn on the condition of anonymity.
“The League’s popularity has taken a severe hit in the province, especially in its stronghold of Central Punjab, because of the spike in the cost of living over the last year. Even its core support group of the traders in Punjab is no longer united in its support for the League,” he went on.
A senior government official agreed. “The PML-N is under pressure to show the voters that it is taking measures to provide them relief to revive its weakened support base in Punjab,” he said. “The issue is that it couldn’t do much to relieve the inflation-stricken low-middle-income sections of the population in the federal budget as it doesn’t have cash for this.
“Also, the landmark 18th Amendment to the Constitution and the 7th National Finance Commission (NFC) Award have curtailed its powers to provide relief to the people by transferring most powers and financial resources to the provinces. Thus, it is reliant on the provinces for providing relief to the people,” he insisted.
The PML-N legislators and ticket aspirants are also looking towards their leadership to give them something to sell to their constituents burdened by soaring inflation, eroding income and growing unemployment in the wake of the economic crisis as the party’s development-financed local networks crumble.
“It, therefore, is quite natural for the party to use the willing caretakers to provide the much-needed developmental push to help it improve its electoral prospects. You know as well as I that the caretaker government’s decisions are significantly influenced by the PML-N leadership as is underscored by an endowment fund announced for journalists on the pattern of a similar federal initiative,” the university teacher contended.
The ‘leaked’ documents show that on the revenue side, the province expects to collect Rs1.52tr, including Rs881.9bn in receipts from the federal transfers under the NFC award in the interim period, whereas the province’s own revenue collection is estimated at Rs193.3bn, including tax target of Rs131.2bn and non-tax revenue of Rs62.1bn.
The foreign project and programme assistance is estimated at Rs27.1bn. In addition, the food account targets a receipt of Rs395.2bn. Furthermore, the province will carry forward a cash surplus of Rs400bn, which will be partly used to pay the last tranche of wheat or food procurement debt of over Rs150bn.
“We have committed with the centre a Rs112bn surplus at the end of the four-month period. But the actual surplus would be much more than that,” finance secretary Mujahid Sherdil told Dawn. He explained that the allocations for development will be spent only on ongoing schemes, and no new project will be undertaken.
“There is no ‘block allocation’ against the development budget as reported by media. Each rupee has been earmarked against the schemes,” he said, arguing that the allocations for development expenditure are crucial to avoid project cost overruns. He said the social protection mechanism is still being designed.
“It could be cash transfers to people on the pattern of the Benazir Income Support Programme or wheat flour subsidy. This is a continuation of the facility being provided to the low-income groups for the last two decades.”
In a highly charged political environment, it is advisable that the Punjab caretaker government remains careful in financial matters so that the credibility of the next elections in the province is not questioned.
Published in Dawn, The Business and Finance Weekly, June 26th, 2023