The four provincial budgets had four elements in common with each other as well as with their own previous budgets: a heavy reliance on federal releases to provinces identified by the federal government (based on an overly optimistic Gross Domestic Product growth rate), ignoring for yet another year the under-taxed rich landlords inordinately represented in the four provincial assemblies, giving a raise to the civil servants almost double the rate of inflation - a trend set by the federal budget and last but not least a praiseworthy annual development programme that is slashed when resources fall shortfall of expectations rendering it unrealistic year after year.
First off one must give the benefit of the doubt to the newly appointed Punjab Finance Minister Ayesha Ghous Pasha, the wife of eminent economist Hafiz Pasha, for taking the obviously flawed data of the federal budget at face value. Her supporters may point out that she has no independent knowledge of the data being flawed and thus is compelled to rely on data released by the Pakistan Bureau of Statistics (PBS), under the administrative control of Finance Minister Ishaq Dar; yet her critics may point to the think tank headed by her husband that has consistently challenged the PBS data. Supporters and critics alike must acknowledge though that federal and provincial finance ministers are subject to political constraints, more severe in instances where a technocrat like Ayesha Ghous Pasha has been appointed, which impede an honest appraisal of not only claims by the federal finance minister but also claims by their own predecessors. As long as data for the forthcoming fiscal year sets more realistic targets and formulates policy decisions accordingly there is a need to overlook blind acceptance of claims made by the federal government - a condition specific to Punjab as the other three provinces are not under the administrative control of the PML-N.
The finance ministers of Sindh and the Khyber Pakhtunkhwa lamented what they claimed were considerably smaller releases by the federal government than was budgeted. In this context it is relevant to note that as per federal budget 2015-16 the budgeted total transfers to provinces in 2014-15 were estimated at 1904.6 billion rupees while revised estimates placed the figure at 1688.4 billion rupees - or a shortfall of 216 billion rupees with poor collections under the divisible pool accounting for 104 billion rupee shortfall. The other major contributor to the shortfall was project loans/grants to provinces budgeted at 103.5 billion rupees with 61.8 billion rupees released by the end of the year.
So how much was the lower outlay adjusted in releases to each province? Punjab was budgeted 812.7 billion rupees revised downward to 751.4 billion rupees or a shortfall of 61.3 billion rupees; Sindh was budgeted 464 billion rupees revised downward to 413.5 billion rupees or a shortfall of 50.4 billion rupees; KPK was budgeted 283.6 billion rupees (including one percent for war on terror) revised downward to 254.7 billion rupees or a shortfall of 28.9 billion rupees and Balochistan was budgeted 159 billion rupees revised downward to 154.9 billion rupees or a shortfall of 4.7 billion rupees. While clearly the largest shortfall was witnessed by Punjab yet a more interesting result emerges with respect to the percentage of the shortfall in relation to the budgeted amount: Punjab fares the best with 0.007 percent, Sindh is second with 0.01 percent, KPK third with 0.1 percent and Balochistan fared the worst with 0.4 percent. This lends credence to complaints by Sindh and KPK that favouritism was at work with Punjab disbursements.
In the forgoing context for the provinces to take at face value their share of the divisible pool as highlighted in the federal budget and on relying heavily on federal transfers for the bulk of their revenue reflects a mind set that needs an urgent revisit. The federal budget 2015-16 envisages total transfers to provinces of 1992 billion rupees with an estimated 1746 billion rupees from divisible pool taxes, 102 billion rupees of straight transfers to provinces (in 2014-15 the shortfall between budgeted and revised estimates was a whopping 40 billion rupees). Punjab's share is budgeted at 894.6 billion rupees, Sindh's at 484.8 billion rupees, KPK's at 300 billion rupees and Balochistan's 171 billion rupees. These are unrealistic figures and a shortfall of around 150 to 200 billion rupees is projected based on precedence set in past years which would negatively impact on provinces' ambitious development budgets and the jury has already delivered its verdict that annual development programmes of provinces are designed to impress on the constituents the commitment of the ruling party to infrastructure and social sector development - a commitment that year after year is mercilessly cut to keep the budget deficit within sustainable levels.
In addition the status quo parties have over time perfected the tendency to disburse massive funds for projects that were not components of the development plans - federal or provincial. The Metrobus service is a case in point - a disbursement that forms a part of the supplementary grants. In short these development plans are only indicative of possible projects.
All provinces also ignored the levy of farm income tax - not on the gross but on net income which would take account of rising input costs - at the same rate as that levied on the considerably poorer salaried class. This is unfortunate and the focus of all the provinces on generating higher revenue from their own sources (though reliance on federal transfers remained the same in percentage terms) was from the goose that began to lay the golden eggs only recently namely sales tax on services. Balochistan, unlike the other three provinces that have set up their revenue boards, envisages the setting up of a revenue authority in the forthcoming fiscal year's budget which implies that the Federal Board of Revenue will continue to collect this sales tax at a fee of 2 percent on its behalf till the authority is set up and running.
And finally the raise in salaries and pensions more than double that of the 4.6 percent prevailing rate of inflation (the rise has been estimated at 7.5 percent by the centre; however, given the rise in allowances the centre maintains that the impact would be around 11 percent) baffles economists given the severe resource constraints facing not only the federal government but also all four provincial governments. This implies that political and not economic compulsions reign supreme, with a satisfied bureaucracy considered a vital component of maintaining good relations with the establishment and civil servants satisfaction is supposedly guaranteed through handouts - be they higher wages or awarding of state land at retirement. Unfortunately, this has implied that the single largest budget component under current expenditure, which is nearly 70 percent of the total budget, is salaries and pensions. It is high time that sacrifices be made by all - government and private sector employees alike.
To conclude, none of the four provincial budgets were a game changer though one must support the emphasis of all to education and health this time around with the lead taken by Khyber Pakhtunkhwa. But one would have to wait and see what was actually disbursed for this deficient sector by the end of the year.