The state of public finances in Balochistan has been substantially changed in 2011-12 and 2012-13 compared to that in 2010-11. It is an outcome of a conclusive 7th NFC Award and the phase-wise devolution of some key ministries under the 18th Constitutional Amendment. While the former caused a sizeable increase in revenues, the latter caused an increase in expenditures for the Government of Balochistan (GoB).
After the 7th NFC Award, which disproportionately benefited Balochistan by giving it a big increase in the divisible pool share and allowing the release of much demanded Gas Development Surcharge (GDS) arrears, it was expected that the province would align its budget priorities to meet MDG targets, where it is far behind compared to other provinces. It was anticipated that the provincial government would focus more on socio-economic development by investing large amounts of money in development budget to increase the pace of socio-economic development in the province. However, the budget 2012-13 portrays a dismal picture by envisaging a decline of around Rs 10 billion in development budget compared to the revised estimates of 2011-12.

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Table 1: Balochistan Government's Overall Budgetary Position
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                                           In Billion of Rupees
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                                         2011-12        2012-13
                                    Budget    Revised    Budget
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RESOURCES
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Federal Transfers & Straight Transfer 110.2     112.4     131.1
Provincial Tax Receipts                 1.3       1.4       1.4
Provincial Non-Tax Revenue              3.5       3.7       3.8
Grants from the Federal Government                0.8       0.9
GDS Arrear                             12.0      12.0      12.0
Development Revenue Receipts            2.1      10.1       2.6
Net Capital and Public
Accounts Receipts                     -12.2      -9.9      -5.9
Total Resources                       117.0     130.5     145.8
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EXPENDITURES
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Current Revenue Expenditures           90.6      85.3     107.3
Development Expenditure                31.4      45.7      35.8
Total Expenditures                    121.9     131.0     143.1
Fiscal Balance                         -4.9      -0.5       2.7
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Resource Picture
An analysis of provincial resources portrays a rosy picture. First of all, the revised estimates for 2011-12 show that the federal divisible pool and straight transfers were higher than what was anticipated at the time of Budget 2011-12 (see table 1). Moreover, Budget 2012-13 shows a further increase of Rs 19 billion (a growth of around 17 percent) under this head.
Similar to the previous year, Balochistan will get additional Rs 12 billion as a GDS arrears in 2012-13. While, there is marginal increase in non-development grants from federal government in 2012-13 compared to revised estimates of 2011-12, there is a decline in development revenue receipt of the province. The development revenue receipts are the sum of foreign project assistance and development grants from the federal government. Due to poor law and order condition and other challenges in implementing development projects, Balochistan has the lowest share in foreign project assistance compared to other provinces.
Negative amount under Net Capital and Public Accounts Receipts indicates that provincial policy makers presently are focusing more on retiring capital liabilities due to better resource picture. As a consequence of all these, budget estimates indicate a growth of nearly 25 percent in provincial resources; an increase from Rs 117 billion in 2011-12 to around Rs 146 billion in 2012-13.
Expenditure Priorities
As per economic classification, allocations in budget can be divided into current (non-development) and development expenditures. In a broader sense, this distinction of non-development and development expenditures is referred to as consumption and investment. Higher share of development expenditure similar to other investments may generate higher employment opportunities and provides greater scope for socio economic growth and poverty reduction.
The analysis of non-development/current expenditures indicates that the growing priority in 2012-13 is given to expenditures for economic affairs as its share has increased from 15.8 percent in the revised estimates of 2011-12 to more than 21.4 percent of non-development budget in 2012-13. Similarly, there is more than 3 percentage point increase in the share of general administration, which increases from 16.7 percent as per revised estimates of 2011-12 to more than 20 percent of non-development budget in 2012-13.

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Table 2: Priorities in Current Revenue Expenditures
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                                        2011-12         2012-13
                                     Budget   Revised    Budget
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General Administration                19.0%     16.7%     20.1%
Law and Order                         12.7%     14.9%     12.6%
Community Services                     7.8%      8.9%      8.2%
Social Services                       36.0%     36.0%     34.6%
Economic Services                     17.0%     15.8%     21.4%
Debt Servicing                         7.5%      7.7%      3.1%
Total                                100.0%    100.0%    100.0%
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While the social sector is still the top priority of the GoB as reflected through the highest share, it depicts a decline of 1.4 percentage points in its share in non-development priorities. This decline is an outcome of more than 15 percent decline in share of education budget in non-development priorities. It is astonishing to note that despite security challenges and poor law and order condition, the share of law and order has also declined from 14.9 percent in 2011-12 to 12.6 percent in 2012-13.
An alarming feature of this budget is a decline of more 20 percent in development expenditures compared to the previous fiscal. As a result, in Balochistan the development expenditure constitutes only 25 percent of total expenditures in 2012-13, while in Sindh, Khyber Pakhtunkhwa and Punjab, it constitutes 42.3 percent, 33.7 percent and 31.9 percent respectively. Given the nature and extent of underdevelopment, it appears that Balochistan development needs are still neglected.
At the same time, despite large increase in resources, development priorities have not changed significantly. More than 50 percent of all development expenditures have been consistently assigned to economic affairs over the past two years. Among social sector development, education, health, and social protection have received a share of only 6.6 percent, 3.7 percent and 3.3 percent respectively.
Conclusion
Balochistan's budget for 2012-13 is a surplus budget of roughly Rs 3 billion. It indicates that the province has more resources than its expenditure liabilities. However, given the status of socio economic development, position of Balochistan in achieving MDG targets, and poor state of law and order condition this planned budget surplus is astonishing.
Moreover, social development is being compromised by the allocation of relatively low share of resources to social sectors; in terms of both current and developmental expenditures. This indicates that Balochistan is not reaping the gains in resources from the 7th NFC Award properly. It is time for Balochistan to use these resources for the betterment of its people by focusing more on socio economic development of the province.