Punjab government announced a budget close to Rs2 trillion for inhabitants of over hundred million last week. It’s a well rounded budget. Punjab’s own revenues in the outgoing year were not far from the budgeted amount but targets seem optimistic. Since approximately three fifth of revenues are coming from federal divisible pool, achieving FY18 development expenditure of Rs630 billion is hinged upon federal government revenues performance which seems overly optimistic (read fiscal optimism published on May 30, 2017).

Punjab is aiming Rs1,154 trillion from the divisible pool which can only be achieved if FBR revenues are met. Same is the story for outgoing year, federal government has revised allocation to Punjab at Rs1,108 billion, the possibility of achieving it is similar to FBR’s chances of having 25 percent growth in tax revenues in the last quarter.

Punjab on its own is not doing that bad. The tax collection target of the government was Rs184 billion in FY17 and that is revised down to Rs175 billion. The target of FY18 is Rs231 billion - the government has rationalized tax on few services such as reducing tax on construction services to 5 percent from 16 percent to enhance the tax net. On the flip, tax on internet is imposed for usage of above Rs1500 per month and GST exemption is abolished for furnishing services.

The Punjab Revenue Authority is estimated to collect Rs84.2 billion in FY17( budgeted:Rs85bn). The PRA revenues have grown at a CAGR of 24 percent in past four years and it now eyes a growth of 50 percent in FY18. It’s a tough task; but the scope of collection is huge in the segment as services are around three fifth of the GDP and Punjab population is 55 percent of the country, amid the modern services growth is rampant.

The Board of Revenue (BOR) is falling short by 10 percent on its tax revenue targets to stand at Rs55 billion and the government is eyeing a 10 percent growth in FY16 to Rs61.4 billion. It’s not hard given the CAGR of 20 percent is the last four years. The third main tax revenue component is Excise, Taxation & Narcotics control (ET&NC) which is also shy of its target by around 10 percent to stand at Rs26.3 billion.

The province gained non-tax revenues where the receipts are Rs217 billion against the budgeted Rs96 billion and Punjab is eyeing to have Rs117 billion in FY18. But the devil lies in details. There are a massive Rs133 billion unbudgeted grants from federal government to Punjab. No wonder, the elder brother is helping the younger, who is running the show from the heart of PMLN. Had there been no unusual federal grants, non tax revenues would have been short by 12.5 percent from the budgeted amount.

The non-tax revenues (without grants and straight transfers) targets of the province were missed by 15 percent to stand at Rs68 billion in FY17 and government has rationalized its expectation in FY18 as non-tax revenues are budgeted at Rs70 billion. On the expenditure side, austerity is missing. Current revenue expenditure is revised up by 6 percent to Rs900 billion in FY17. The government has budgeted a growth of 13 percent in current revenue expenditure to reach Rs1,020 billion in FY18. The overrun is primarily in general public services including transfers to local governments and health; while economic affairs and education took the hit.

Same is the case of current capital receipts where revised estimates are up by 15 percent from budgeted to stand at Rs323 billion. The government is trying to reign the growth to restrict expenditure at Rs315 billion in FY18. The overrun primarily is repayment of loans to commercial banks and on trading of wheat.

The highlight of the budget is in Annual Development Plan (ADP) in an election year. Spending on infrastructure is the specialty of Shahbaz Sharif and he would not be shy of spending in his tenth straight year in the government. In the outgoing year, the ADP is revised down marginally from Rs550 billion to Rs533 billion. The government was eyeing foreign project assistance of Rs114 billion while in reality the grant is limited to Rs55 billion. Thus, expenditure, in essence has eaten other sources from the budget in FY17.

A growth of 19 percent is planned for FY18 at Rs635 billion, which is around 3.6 percent of Punjab’s GDP. According to the document prepared by Dr Aisha Pasha’s team, population planning, nutrition, science & technology and skill development are new focus areas of the ADP. On the contrary, around 15 percent of ADP is on one transportation project in Lahore. Yes, Orange Line funded by the Chinese is the single biggest component of ADP.

Anyhow, Dr pasha is spot on to focus on family planning - Punjab population was 47 million in 1981 and is expected to treble by 2025 (125mn) - bigger than UK and France combined. Although GDP per capita in the province is higher than country’s average, there are no two ways on controlling population and to nourish them well.

Almost one third of the ADP is aimed at social sector, while a little over one forth is on infrastructure and the rest is divided into services sector (16% mainly orange line), special initiative (14%) and production sector (8%). There is virtually nothing on environment protection or information and culture.