Khyber Pakhtunkhwa (KPK) budget was announced on 25 May, two and a half weeks before the federal budget was announced on 12 June, the Punjab budget was announced a day later on 13 June, Sindh on 14 June, and Balochistan on 21 June – dates that may reflect prevailing political considerations however all provincial budgets, like the federal budget, deviate but little from their previous budgets.
The similarity of the 2024-25 budget’s revenue and expenditure thrust with the previous ten budgets tabled by Pakistan Peoples’ Party’s (PPP) Sindh government and the Pakistan Tehreek-e-Insaf (PTI) administration in Khyber Pakhtunkhwa (KPK) may be rationalised on the grounds that the two parties have been in power in these two provinces since 2013.
Balochistan operates within its own unique political dynamics however with the country more critically assessing the performance of first time chief minister Maryam Nawaz Sharif widely believed to be the political heir of PML-N supremo, the same yardstick is, perhaps unfairly, not being applied.
Be that as it may, the one common feature of all four provincial budgets is the continuation of heavy reliance on federal transfers with little attempt to actually raise own revenue.
The transfers, based on the Finance Bill and amended in case of any subsequent change in taxes levied or withdrawn, or an unforeseen shortfall, will be distributed as per the 2010 National Finance Commission award.
Federal transfers as per the provincial budgets show Punjab’s budget formulators in the worst possible light with 79 percent reliance on federal transfers, trailed by KPK’s 77 percent, Balochistan’s 76 percent and Sindh’s refreshing 62 percent.
Sindh government clearly is in the lead in relying less on federal transfers and the reason is attributable to increasing revenue from sales tax on services, budgeted to rise from 230 billion rupees in the revised estimates of last year (lower by 5 billion rupees only than was budgeted) to 350 billion rupees in the current year – a 52 percent rise.
Punjab sadly envisages a rise from 224.8 million rupees in the revised estimates of last year - a higher shortfall from the budgeted 235 million rupees relative to Sindh - to 294 million rupees in 2024-25, a rise of an impressive 30.7 percent but total collections budgeted are lower than in Sindh.
KPK envisages a 7 billion rupees rise in sales tax collections on services in 2024-25 compared to the revised estimates of 2023-24.
Balochistan with its ongoing insurgency is limited in raising its own revenues.
The four provincial governments did not deem it politically expedient to levy a tax on the income of the rich and political extremely influential landlords that is at par with the rate paid by the salaried class.
Farm tax, designated a provincial subject in the constitution, is much drooled over by the Federal Board of Revenue (FBR) each year on the grounds that the rich famers enjoy a yield well above the national average, that allows them to rake in hefty profits each year, as well as enjoy subsidies on many inputs.
The landlords are heavily represented in the country’s national assembly, which enables them to ensure that the constitution is not amended to make farm income a federal subject but also in provincial assemblies, which accounts for a derailment of attempts to raise revenue from their income.
KPK envisages tax from agriculture income at a low of 114 million rupees in 2024-25, the same as realized and budgeted in the outgoing year. Sindh government envisages 6 billion rupees next fiscal year – up from the 2 billion rupees in the revised estimates of last year (budgeted at 3.630 billion rupees).
Punjab has budgeted an appallingly low 3.5 billion rupees for this year, identical to the amount last year. And Balochistan budgeted 1086.7 million rupees for next year against 776.2 million realised in 2023-24 and budgeted at 1035 million rupees last year.
In terms of expenditure, the KPK budget envisages a 10 percent increase in salaries and pensions – projected to cost an additional 35 billion rupees.
The federal budget raised salaries from between 20 and 25 percent (depending on the pay scale), a largess to be delivered at the taxpayer’s expense which, reports indicate, have prompted the KPK government to reconsider its original proposal.
Raising it to the level on offer by the federal government would mean an additional 76 billion rupees. Punjab apishly followed the federal government lead in announcing a 20 to 25 percent raise and a 15 percent hike in pensions.
Sindh went a step further and raised salaries by 30 percent and 15 percent pensions, while Balochistan raised salaries by 22 to 25 percent.
The only leverage available to federal and provincial governments, the former a perennial borrower domestically and from abroad, and the latter heavily reliant on federal transfers, is to reduce expenditures.
In this context, the KPK government took the most appropriate decision in limiting the raise of salaries to 10 percent, though ideally a salary freeze across the board would have been the most economically prudent decision to take.
Sadly, the status quo parties have always considered 7 percent of the country’s total labour force (paid at the taxpayers’ expense) to be key players in ensuring the implementation of their directives and therefore their political continuity which explains their insistence on raising public sector employees’ salaries at well above the rate of inflation even when, as is the case today, the economy is suffering from unsustainable budget deficits and heavier than ever reliance on borrowing.
The rest of the budgeted outlay by all provinces had one point of deviation, reflecting their party’s priorities. KPK budgeted an amount of 28 billion rupees for the much appreciated sehat card, though some needed changes were made, including limiting its use to the Benazir Income Support Programme beneficiaries and small surgeries only available in public hospitals.
Punjab’s signature outlay is to be on mobile hospitals and one would assume that this was accounted for in the health budget which was raised from 8074 million rupees in the revised estimates of last year to 8827 million rupees in the current year – a 9 percent increase though lower than KPK’s outlay on the extremely popular sehat card. Free laptops and free scooters for girls echo free gifting of items purchased at the taxpayers’ expense by her Uncle when he was chief minister.
Sindh government allocated 25 billion rupees over five years for free rooftop solar home systems to 2.6 million grid households.
While it is not known by how much demand will decline as a result, yet the salutary intent of this policy is to provide cheap electricity to the poor. Ignored is that it will also imply lower demand from the national grid that in turn would raise consumer tariffs as well as the tariff equalization subsidies payable by the centre.
To conclude, like the federal budget, the provinces too did not undertake any out of the box policies in terms of expenditure or revenue generation, and therefore it has been more of the very same.
Copyright Business Recorder, 2024
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