ISLAMABAD: In an apparent setback to the Centre’s efforts to balance the national budget, the combined budget surplus of provinces from July to December remained at Rs20.5 billion or 16.4 per cent of annual estimate.
Though Punjab ran a deficit, other three provinces managed to save Rs20.5 billion in the first half of the current fiscal year, according to a consolidated summary of the central and provincial budgetary operations prepared by the Ministry of Finance.
Total savings for the year are estimated at Rs125 billion and any shortfall may push the budget deficit beyond the revised target of 4.7 per cent of gross domestic product (GDP).
The cash surplus is also Rs79.5 billion or 387 per cent less when compared to savings of Rs100 billion in the corresponding period of the previous fiscal year, said the finance ministry.
Under the 7th National Finance Commission Award, the central government transferred 10 per cent additional resources to the provinces that have brought the finance ministry under pressure and it looks towards provinces to save money to keep deficit at manageable levels.
“In recent meetings of finance secretaries, the provincial secretaries assured us again that they will be able to throw Rs125 billion cash surplus by the end of June and we have to rely on their assurances,” said Abdul Wajid Rana, the finance secretary.
Statistics show that despite their spending spree, three provinces managed to generate cash surpluses but Punjab slipped into the red zone due to a significant increase in development spending.
The tight fiscal control the Punjab government exhibited during the last fiscal year lost momentum in the first half. As against savings of Rs16.7 billion in the first half of the previous fiscal year, the PML-N-led government suffered a deficit of Rs8.3 billion, said the finance ministry.
Punjab earned more than last year with earnings jumping from Rs210.9 billion to Rs248.6 billion, but its expenses rose by a third, from Rs191 billion to Rs256.8 billion.
However, the spokesman for Punjab’s Finance Department contested the figures. “The province is in surplus as the central government did not consider revenues of Rs15.2 billion that Islamabad withheld and released on January 1,” said spokesman Faisal Rasheed.
Though Sindh generated a cash surplus of Rs4.2 billion, it was lower than savings of Rs13.7 billion in the first half of previous fiscal year. Sindh’s earnings grew to Rs158.8 billion compared to Rs135.2 billion while expenses stood at Rs154.6 billion compared to Rs121.7 billion, up 27 per cent.
Khyber-Pakhtunkhwa saved Rs10.2 billion against Rs39.8 billion in the corresponding period of previous year. The savings dropped because of less earnings and high expenses.
Against an income of Rs107 billion last year, the provincial government’s revenues slipped to Rs97.6 billion. Contrary to that, its expenses increased from Rs67.3 billion to Rs87.4 billion.
Balochistan’s income remained stagnant at Rs64 billion but its expenses rose from Rs34.2 billion to Rs41.2 billion, leaving it with a surplus of Rs14.5 billion. In the first half of last year, the provincial government recorded a surplus of Rs30 billion.
Published in The Express Tribune, February 29th, 2012.
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"Assurances" from the province will not get you a modicum of fiscal discipline. As reported in the recent IMF report, there must be BINDING commitments. The provinces can give all the assurances they want in the NEC but there is nothing to BIND them. There must be penalties if they violate their mandates. Otherwise, the NFC award will quickly dissolve into a fiscal free-for-all with each province in a competitive race to spend.
In the US, for example (I am sure this stricture exists in other federations), the states must balance their budgets by law. That is what should have been an integral part of the award.
But, perhaps, with that condition, there would have been no award to begin with.
In that case, we have to live with the dangerous consequences.