Budget surpluses not mandatory, argue provinces

The federal government did not share details of prior actions in relation to $5.3 billion International Monetary Fund (IMF) programme under Extended Fund Facility (EFF), an amount Finance Minister Dar claims has been increased to $6.5 billion, with the provinces at the second meeting of Council of Common Interests (CCI).
A senior official told Business Recorder after this CCI meeting that provinces were not taken into confidence about agreed terms and prior actions of the new IMF programme. "The federal government has not officially shared anything with provinces in this regard," he added.
On July 4, head of the IMF mission Jeffrey Franks told media at a joint news conference with Finance Minister Senator Ishaq Dar at the conclusion of policy level talks that one of the prior actions for new loan was to seek approval of the agreement from CCI for broad-based political support.
When contacted, a senior official of a provincial government also confirmed that federal government had not shared anything with the provinces at official level. However, he said that discussions were held on the issue of provincial surpluses and that provinces argued that it was not mandatory for them to generate budget surplus. An official of Khyber Pakhtunkhwa Finance department said even if the provincial government strove to generate budget surpluses, the failure by the federal government to achieve projected revenue collection would make it difficult, adding that a huge gap between projected and actual revenue collection had negatively impacted on the provincial budget during the last few years. The official added that the provincial budgets were prepared on the basis of their projected share from the divisible pool, and a shortfall in revenue collection in the divisible pool would result in a decrease of their share.
"Out budgets suffer due to failure by the federal government to achieve projected revenue collection target," he added. The official said it was communicated to the federal government that generating budget surpluses was optional, not required or mandatory, for the provincial governments.
An official of Finance Ministry claimed the provinces agreed to make an effort towards generating surpluses provided that revenue collection target for the current fiscal year was achieved. In response to a major IMF conditionality with respect to implementation of power sector reforms, especially rationalisation of electricity tariff and subsides, he said that most of the measures agreed with the Fund had been incorporated in the energy policy.