ISLAMABAD, June 7: The federal government is expected to incur around Rs80-85 billion additional expenditure on some unusual accounts during fiscal year 2004-05, finance ministry sources told Dawn.
This would, however, be offset by more than Rs50 billion saving on account of continuation of the fifth National Finance Commission (NFC) award and the remaining through low utilization of Public Sector Development Programme (PSDP), the sources said.
The finance ministry sources said the centre was required to give Rs257.5 billion to the provinces on the basis of its offer of 47.4 per cent share to them from the divisible pool under the sixth NFC award.
The agreement could not materialize and the provincial share from this pool under the existing award would now be just Rs204 billion. Because the NFC agreement was not sealed, the centre found an additional fiscal space of Rs53.5 billion.
The centre may give some special grants under discretionary powers of the president to smaller provinces to help them overcome their fiscal woes. The sources said the government required about Rs14 billion on the restructuring of Pakistan Telecommunication Company Limited (PTCL) and Oil and Gas Development Company Limited (OGDCL) to prepare them for privatization.
The State Bank of Pakistan (SBP) is estimated to face a financial impact of Rs25-30 billion from falling interest rates. The policy of low interest rates was adopted by the central bank on the advice of the federal government to contain inflation, otherwise increase in the cost of borrowing would have resulted in cost-push inflation.
The government is projecting to compensate the SBP by providing it over Rs3 billion as compared to Rs6 billion during the current year. Another sum of Rs7-9 billion is expected to be paid as subsidy to oil refineries as part of government guarantees to ensure their rates of return.
Power utilities - Wapda and the KESC - are projected to take Rs35 billion during the year 2004-05. Besides, the subsidy on general sales tax would eat away another Rs15 billion. The import of essential commodities like wheat and sugar is also likely to consume about Rs7 billion.
Besides, the federal government will need to provide Rs6 billion to Azad Kashmir. Aside from this, a Rs35 billion loss is expected on account of some 20 per cent reduction in non-tax revenue.
The sources said that defence and development allocations "have historically been almost equal" but for the first time in 2004-05, the development budget would get a higher amount than that of defence.
The sources, however, conceded that development budget was seldom utilized in full while defence budget was revised upward every year. Budget estimates for 2003-04 had projected defence spending at Rs160 billion or 3.6 per cent of GDP but is now expected to touch 4 per cent of GDP by end of current fiscal year.