The provincial government of Khyber Pakhtunkhwa has estimated an expenditure of Rs 325.9 billion for total provincial and district salaries (for settled districts) as well as pension and another amount of Rs 79 billion for meeting the current side expenditure of the newly merged districts (NMDs), said the White Paper of the KP government for financial year 2019-20.
The total expenditure for the financial year is estimated at Rs 855 billion for the entire province, which also includes the amount of Rs 526.3 billion as current revenue expenditure and Rs 319 billion as the total developmental expenditure.
The total expenditure of Rs 855 billion is 38.3 percent bigger than last year's budgeted figure of Rs 618 billion. However, in a like-for-like comparison, the expenditure for the settled districts of Rs 547 billion (excluding foreign project assistance) is 17 percent higher than the same figure.
The budget document states that the government expenditure represents its commitment towards meeting citizens' needs and has made conscious effort for its 2019-20 budget expenditure to be reflective of its commitments made with the people. However, it is also important to realize that the most difficult aspect of budget making is the balancing act between sharply contending needs and priorities of the people, particularly when the available resources are scarce.
In the wake of current financial challenges facing the country, the KP government has made efforts to reduce current expenditure and rationalize its development expenditure.
The White Paper said that despite the limited resources the provincial government plans to progressively enhance the share of education, health, roads, drinking water and sanitation, agriculture, tourism and mines and minerals each year in order to improve human development indicators and service delivery outcomes.
A worrying trend for the provincial government is the unsustainable increase in expenditure on current side resulting in a decline of the development expenditure. The current expense is being bolstered by the growth in salary and pensions bill at a pace that is higher than the increase of overall funds available for expenditure.
The current expenditure takes up over half of the provincial budget, and left unchecked will continue to eat up the development outlay in the province.
The salaries and pensions bill of the province was budgeted in at over 50 percent of the overall budget in 2018-19, up from around 40 percent a decade earlier. In short, the cost structure of the government is unsustainable and clear policy steps must be taken to make sure that further increase are sustainable.
The current government has taken the first step towards a comprehensive civil service reform by increasing in salaries and pension leaves little room for the provincial exchequer to set aside adequate funds for operation, maintenance and development sector. It is not only the development expenditure, but the operational budget for maintaining the existing service delivery network (like provision for medicines, classrooms consumables, repairs, agriculture inputs, utilities etc) that is declining in real terms while the salary and pension liabilities are rising at an alarming rate.