PESHAWAR, Oct 6: NWFP’s fiscal deficit would increase if the quantum of federal transfers on the basis of the new national finance commission award (NFC) and its own resources do not improve soon, according to official sources.
Interviews conducted with senior government functionaries revealed that though fiscal deficit has declined marginally during the last financial year after the revenue and expenditure fell considerably short of the budget targets and due to increased foreign assistance, the province was likely to taste growth of fiscal deficit once the World Bank’s credit facility was no more there after two years and it did not get greater flow of federal transfers under the new NFC award.
Provincial government has managed to bring down the size of its deficit in the 2002-03 financial year as compared with the 2001-02 financial year mainly by compressing its expenditure and marginal growth in its federal transfers resulted because of improved revenue collections recorded by the Central Board of Revenue.
On the face of it the provincial government, official sources said, recorded an achievement but in fact its poverty reduction programme paid a heavy price because of reduced expenditure.
The province, an official said, spent Rs 5.5 billion less than the estimated size of its annual development programme in the 2002-03 financial year with the result that several schemes saw shortfall and the effectiveness of the strategy was undermined.
Province’s own receipts did not improve, as a result the government had to rely on federal transfers.
Provincial finance managers, when contacted, without dispelling the impression said that this scenario had also been apprehended by the World Bank in one of its latest reports on the Provincial Reforms Programme (PRP) — financed by it under its SAC facility during the 2002-03 financial year.
The document contains that “NWFP may have difficulty in sustaining its reform programme in the medium-term (after SAC) unless it benefits from a rather generous NFC award, aggressively pursues increase in own revenues, and keeps tight controls on current expenditure”.
An official said that it was because of the perceived threat that the sitting provincial government, in continuation with its predecessor’s launched move, had intensified attempts to pressurize the federal government for notifying the new NFC to enable it to hold its maiden meeting and give the new award well before the current financial year’s end on June 30, 2004.
“Further delay in the announcement of the new award would magnify the risks posed to NWFP’s feeble kitty,” remarked an official of the province.
The provincial government’s predicament has also been noted with concern in one of the official documents available with Dawn.
It contains that “If these conditions do not hold (federal transfers and provincial own receipts do not register growth, size of annually transferred subvention does not grow), then the province would have a fiscally less sustainable situation to finance the provincial poverty reduction programme once the SAC funding runs out”.
The World Bank’s review mission, which recently visited the provincial capital to review the implementation of PRP, in its report had pointed out that less than the budget growth in revenue had translated into a slower increase in expenditure making the community and economic services to take the brunt.