PESHAWAR, Feb 6: Financial managers of the Frontier government are anticipating a major cut in revenue from the federal divisible pool on account of the current economic slowdown, which they say will further hit the development budget of the province.

Background interviews with a number of officials governing provincial finances suggest that the inability of the Federal Board of Revenue (FBR) to achieve the revenue collection targets will impact resource availability for the provinces.

A senior official in the finance department, whishing not to be named, told Dawn that the federal transfers to the NWFP were on decline for the last couple of months, which was making things difficult for them to manage.

Details of the six months transactions from the centre to the province were yet to be finalised despite the lapse of one month, but the official said “decline has occurred in revenue collection”.

Media reports suggest that the FBR collected Rs628.22 billion in the first seven months of the current financial year against the target of Rs681.7 billion.

The official say overall inflation figures have dropped from 23 per cent to 20 per cent and the growth target has come down from 5.5 per cent to 3.5 per cent, and achieving the revenue collection target of Rs1.36 trillion for 2008-09 is next to impossible.

“This situation is going to hit us badly,” said the official, adding: “The provincial government will have to cut the development budget to manage its overall administrative liabilities. Owing to financial constraints, the NWFP government has already diverted funds earmarked for uplift schemes to be identified by MPAs to improve the law and order situation.

The funds allocated under the Tameer-i-Sarhad Programme (TSP), which is allocated to MPAs, will now be utilised for purchasing equipment and maintaining current expenses of the police force battling insurgency in the province.

Apart from decline in the proceeds from the federal divisible pool, the official said, the Water and Power Development Authority was also making irregular payments to the province on account of net hydel profit.

The provincial government, he said, was supposed to receive Rs3 billion as net hydel profit in the first six months against the capped amount of Rs6 billion.

However, in the first seven months of the current financial year, the province received only Rs500 million, he maintained. The official said the lower-than-budgeted federal transfers and growing current expenditures, particularly spending on law and order, would contribute towards a huge revenue shortfall.

The NWFP government had projected a surplus of Rs345.561 million for the current financial year, which would turn into a fiscal deficit of over Rs10 billion by the end of the year, he added.