The province has launched an austerity drive as it has suffered a hefty shortfall in federal transfers under the National Finance Commission award and has diverted substantial part of its resources for flood rescue and relief operations.

Punjab Planning and Development Department (P&D) officials told Dawn last week that the province would be facing a shortfall of Rs30 billion on account of the downward revision of tax revenue collection projections of the Federal Board of Revenue (FBR) to around Rs1550 billion from original estimates of Rs1667 billion. “That obviously has hit our development programme ,” a senior P&D official said.

In addition to the shortfall in the federal transfers under the NFC award, the Punjab government was forced to curtail another Rs30 billion from the  funds allocated for provincial development programme for helping millions of people who had lost their crops, cattle, houses, businesses and life-savings in the devastating summer floods.

The federal government has transferred Rs170 billion to Punjab under the NFCaward in the first six months of the current financial year to December against the projection of Rs180 billion, showing a shortfall of Rs10 billion. “The province could cut its development programme further in case the FBR misses its revised revenue collection target,” the official said.

“The provincial development programmes are based on the estimates of what they stood to receive from the federal government. Any reduction in federal transfers due to lower tax collection always hits the provincial development spending,” he said.

Sources in the provincial finance department said the department had released an amount of Rs62 billion for development projects in the first half of the fiscal year. “We are restricting the release of development funds to Rs10-11 billion a month,” a finance department official told this writer.

The utilisation of the released development funds has, however, been very slow during the first half of the year. “The utilisation has not exceeded 50 per cent of the funds provided to the P&D during the first half of the year,” the official said.

Officials blame the floods and cash flow problems arising from shortfall in the province’s share from the federal tax revenue for the slower-than-last-year utilisation of the development funds.

“We had anticipated the shortfall in the federal tax revenue collection (and consequently provincial share from the beginning of the financial year) and started to adjust our development spending accordingly,” the P&D official claimed. “But the losses from the floods were unexpected and huge and have brought the provincial budget under severe pressure compelling the government to reduce its development spending to make room for providing relief to the affected population.

Besides, the government’s total attention was drawn towards helping the affected people in the flood-hit areas,” he said. The development spending was likely to pick up during the rest of the year as cash flow normalises, he added.

Officials were not optimistic of the province creating surplus as directed by the federation to reduce the consolidated federal budgetary deficit which is feared to top eight per cent of gross domestic product (GDP) to Rs1.4 trillion unless more tax revenue is generated and government expenditure slashed.

The federal government has already announced to cut its overall expenditure, development and non-development both, for the current year by 30 per cent.

The Punjab government has also undertaken a massive exercise to reform its administrative structure to reduce its non-salary non-development expenditure.

Punjab Finance Minister Tanvir Ashraf Kaira has recently announced cutting jobs in BPS-17-21. Many posts have been downgraded. Additionally, several provincial departments have been abolished or merged together in order to save money. According to the minister, the austerity measures, abolition/merger of departments and job cuts are expected to save the province Rs6.10 billion.

“The exercise for reforming provincial non-development expenditure and overhauling the administrative structure was going on for more than last two years,” Kaira said. In reply to a question, he said the austerity measures did not have anything to do with the federal government’s directive to the provinces, especially Punjab and Sindh, to create surplus at the end of the fiscal.

He said the administrative and non-expenditure reform had been necessitated by the adoption of the 18th amendment under which several departments and subjects would be devolved to the provincial level. “The expenditure and administrative reforms are a continuing process,” he said.

He also blamed floods for slower progress on development projects but was hopeful that the pace of development would pick in the months to come and the provincial government would be able to implement the revised programme before the end of the year.