EDITORIAL: KP (Khyber Pakhtunkhwa) chief minister’s advisor on finance Himayatullah Khan presented a Rs462.4 billion spending plan for the first four months of the new fiscal year the other day, roughly a quarter of which will go to development projects.
Also, in line with the federal budget, salaries and pensions have been increased by 35 percent and 17.5pc, respectively.
The tax structure has been directly adopted from the outgoing fiscal’s budget, of course, since the caretaker setup “could not impose taxes,” as Mr Khan duly explained. The total expenditure of Rs462.4b against revenue of Rs442.6bn implies an expected deficit of Rs19.8bn.
This, then, is a typical caretaker budget, a stop-gap arrangement till the next election produces a government with the people’s mandate; to plan and present the budget according to its manifesto.
Yet whichever party forms the next KP government would do well to calculate the potential of much larger revenue streams that are lost to the province’s thriving, smuggling- and corruption-driven black economy. With the right mix of carrot and stick, implementing the law and offering intelligent tax incentives, it shouldn’t be too hard to block big leakages and formalise much of the north’s illicit trade.
Mr Khan also made a point to mention that despite very difficult circumstances, the provincial government “still did not resort to borrowing from SBP (State Bank of Pakistan).”
The July-October spending plan gives Rs112.4bn to development – Rs92.1b to settled districts and Rs20.3bn to merged districts. Of total receipts of Rs442.6bn, Rs249bn are expected from federal taxes, Rs29.9bn from 1pc of the divisible pool for the war against terrorism, Rs13.2bn from straight transfers, Rs10bn in net hydel profits (NHP), and Rs18.3bn in NHP arrears.
The province also expects to raise Rs28.8bn of its own revenue, Rs18.8bn from taxes and Rs9.5bn from non-tax sources, at a time when the economy is experiencing the worst production and employment statistics in its history; putting a question mark on its ability to meet its own target. But since this budget was a mere formality, which is why it carried no major announcements or so-called signature programmes that would ordinarily have generated public interest, the province’s fiscal direction will not become clear till after the election, when a formal budget for the remainder of the fiscal year is presented.
It is feared that KP is going to need additional funds for security as incidents of terrorism have started increasing again. But with the Centre’s hands tied fiscally and the province struggling to raise finances on its own, this particular part of policy will remain vague at least till then.
The short duration of this budget, just four months, also puts the spotlight on the next election. A budget, however limited, was not even the last thing on the agenda when the caretaker government was sworn in.
It became necessary only because of the extraordinary circumstance of the temporary setup overstaying its constitutionally mandated term of 90 days. That is why it is troubling that there is still chatter about a possible further delay in the polls.
Such things cause unnecessary uncertainty at a time when the country is already struggling to avoid default.
Therefore, the sooner the election schedule for the Centre and all provinces is announced, the better for all parties, especially governments that have to work out where the money is going to come from and how it is going to be spent over the next fiscal year, especially if efforts to revive the IMF (International Monetary Fund) bailout programme fail.
Copyright Business Recorder, 2023