LAHORE: The Punjab budget 2020-21 has been presented in the backdrop of tough economic conditions. The estimates have been framed under the macroeconomic assumptions that the real GDP growth will be 2.1 percent, inflation will be at 6.5 percent and the FBR revenue will be Rs 4,962 billion during next financial year.
The total receipts of the government have been pitched at Rs 2,240.6 billion. This includes general revenue receipt of Rs 1,750 billion including federal divisible pool transfers of Rs 1,433 billion and provincial revenues of Rs 317.0 billion.
The current expenditure of the government has been pitched at Rs 1,318.0 billion which is only 1.4 percent higher than the budget estimate for 2019-20.
The Covid-19 resulted in a major adjustment in the fiscal position of the government of Punjab as the government's revenue fell short of its target by Rs 635 billion compared to the budget estimates. This included a shortfall of Rs 509 billion in federal transfers and Rs 126 billion in provincial own source revenues.
Major expenditure cuts had to be imposed on development and non-development expenditure. The revised estimate for current expenditure of the government was brought down from a start-of-the-year estimate of Rs 1,299 billion to Rs 1,257 billion.
The government used all available resources to protect ADP spending from falling below Rs 250.3 billion from the original estimate of Rs 350.0 billion.
Due to the tight fiscal situation, the government has almost kept the major expenditure heads like salary, pension, non-salary etc frozen at the level of the allocation during 2019-20. The size of development expenditure is estimated to be Rs 337 billion as against Rs 350.0 billion in 2019-20.
The budget also stipulates an EPS of Rs 125.0 billion which, of course, is conditional to achievement of revenue targets by the FBR.
The government has formulated Punjab's Post Covid-19 Public Investment Strategy titled "Responsive Investment for Social Protection and Economic Stimulus (RISE)".
The strategy presents targeted interventions and policy responses to contain the Covid-19 crisis. The budget 2020-21 includes the China Pakistan Economic Corridor as one of the important priority areas. The two major ongoing projects being implemented by the government of Punjab are Orange Line Metro Train Project and Allama Iqbal Industrial City, Faisalabad. For FY 2020-21, adequate resources have been prioritized for the timely completion of both the projects. The government also intends to use PPP financing to enlarge its portfolio of development interventions. In this regard, effort has been made to create an enabling environment for PPP projects.
The budget will continue to pursue sustainable development goals agenda. While putting massive pressure on the healthcare systems, the Covid-19 has pushed a large portion of the population into extreme poverty and hunger in the largest province of Pakistan which requires a strong sustainable recovery approach.
The Punjab believes that the response to the pandemic cannot be de-linked from actions on the SDGs. Rather it seeks to continue working on accelerating sustainable development goals as a tool to 'recover better' and build a healthier and safer Punjab.
The government of Punjab had also adopted a proactive approach to mitigate the negative impact on livelihoods by announcing a tax relief package worth more than Rs18 billion in the last quarter of FY 2019-20 along with increased expenditure on healthcare facilities, preventive and curative measures and social protection package to offset the unemployment effect. The Chief Minister's Insaf Imdad Programme 2020 for targeted monetary relief to the unemployed population segments was launched with a total outlay of Rs 10 billion; Rs 1.0 billion was earmarked for disaster relief response and Rs 2.6 billion was transferred directly to the lowest district tier for relief measures.
Furthermore, since it has been estimated that the negative impact of Covid-19 will continue till at least the first half of FY 2020-21, the government has adopted a multi-pronged fiscal strategy with a focus on striking a balance between i) Revenue generation through economic growth and broadening of the tax base rather than increasing taxes ii) Relief/economic stimulus for businesses, especially the construction sector iii) social protection by providing relief to the Covid-19 affected sectors of the economy.
The Covid-19 and its economic and social fallout overshadowed the contemporaneously lurking locust infestation peril that directly threatens food security. Pakistan, being a predominantly agricultural economy, stands to be massively hit by the menace. As an emergency response measure, the Punjab acted swiftly and allocated Rs 500 million for locust control in addition to the budget for disaster relief measures.
The pragmatic and economically sound provincial financial management owes in large measure to the forum of the Standing Committee of the Cabinet on Finance and Development (SCCFD). Its mandate has already witnessed an evolution of sorts.
The budget document encapsulates some salient decisions of the SCCFD which enabled major course corrections, occasionally with policy implications.
The initiatives of inclusive budgeting and framework for rolling expenditure (FRE) constitute paradigmatic shifts and are expected to take financial management a few notches higher in calibre and standard. Inclusive budgeting is already off to a very promising start and FRE shall be employed rigorously for modulating expenditure management adroitly.
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