THE government of Khyber Pakhtunkhwa is most likely going to be slashing its development spending by Rs77bn, dealing a severe blow to the beleaguered economy of the province.

Most, if not all, of the cuts appear to be due to the overestimation of revenues in the last budget. Reportedly, the government had been warned that many of its revenue estimates were overly optimistic, and the funds allotted for the Annual Development Plan would not materialise.

But the objections were overruled by the chief minister. More specifically, the overestimation happened in collections under net hydel profit, an area that has historically been a bone of contention between the province and the centre.

Considering the total ADP of the province was set at Rs174bn, a cut of Rs77bn is a severe blow and calls for accountability of those responsible for setting such a target.

The provincial government had left some heads scratching when it announced its budget back in June 2015. It contained very optimistic revenue estimates from activities like the sale of felled trees and sales from housing colonies being erected under government aegis, as well as optimistic assumptions of recoveries of arrears from the centre.

Against this very confident revenue assumption, the provincial government had made some of the most lavish promises to the forthcoming local governments.

Development funds to be made available for local administrators have been reappropriated by the provincial authorities to help control the fiscal situation in the province, which now appears to be struggling to meet its commitments as revenues are not materialising in line with budgetary estimates.

Thus far, it seems that the bulk of the impact will be on what is being called the ‘dormant portfolio’ in the ADP, which means projects that are either dormant or should be rendered so, owing to the lack of funds.

The finance department has already written to the planning and development department of the provincial government asking it to identify the “portion of ADP to be made dormant” due to lack of availability of funds.

With the passage of time, there is a growing likelihood that the provincial authorities will face many difficulties in managing their fiscal framework, something that was pointed out when their budget was announced in June last year.

The provincial authorities should now modify their spending plans in line with revised revenue receipts and acknowledge that their budget contained overoptimistic revenue assumptions.

Published in Dawn, February 8th, 2016