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Sindh budget

June 13, 2012

SINDH’S budget for the next fiscal comes as no surprise. Few expected it to be any different from previous budgets. A government that has dithered on implementing tough tax reforms during the first four years of its stint in power can hardly be expected to change course in this area in an election year, and risk losing the political support of powerful lobbies resisting reforms. Therefore, its next budget only further entrenches trends like the lack of financial discipline and effort to increase provincial tax revenues. Like other provinces, Sindh too has jacked up its development outlay for the next year to a hefty Rs231bn. Just over 78 per cent of the development expenditure will be contributed by the provincial government from its own revenues while the remaining will be financed through federal assistance and grants, and foreign loans.

Few will dispute the increase in public spending on economic and social development. After all, it boosts economic growth and creates jobs and brings down poverty levels. But it is unfortunate that the Sindh government’s decision to raise spending seems to have been motivated by political rather than economic considerations — the question whether this is being done to help the ruling parties’ candidates in the polls is a valid one. Still no one expects the full utilisation of the funds given the province’s lack of capacity to handle this size of development. But that is not the only objection to the province’s desire to show such a heavy development outlay. It will not impress because its execution will depend on Sindh’s share in federal taxes, grants and assistance.

The Sindh government’s unwillingness to improve its own tax base makes its development projections prone to risk and dependent on the federal government’s ability, or the lack of it, to meet tax targets in the new financial year.