Slow moving economic wheel

Money, much like energy, mostly changes form and hands. When the economy slows down, it has a cyclical impact on other aspects of cash flow as well. Punjab is now feeling the pinch of the national economy slowing down. On the one hand, the federal government has not fully paid the province its dues under the federal divisible pool owing to a shortfall in tax collection while on the other, the revenues of Punjab itself have declined due to a court-mandated suspension on collecting telecom tax and lower development spending in the province.

The cumulative impact of this is that Punjab is struggling to meet its target of maintaining a surplus budget of Rs148 billion. Moreover, it also means that going into the next fiscal year, the government will be spending less money on development projects, which will, in turn, result in a lower stimulus for the province’s economic cycle.

The hard realities of a weakening economy as they are, they also offer a warning for the future. Punjab Finance Minister Makhdoom Hashim Jawan Bakht has disclosed that Punjab, the country’s largest province by population and the agricultural hub of the country, is over-reliant on telecom tax revenues which account for almost a third of all tax revenues of the province. Hence, the ban on collecting telecom tax for the province was particularly tough on its finances.

This speaks of the poor economic planning of the past governments. The incumbent PTI government in the province, though, is hoping to introduce innovative methods to increase revenues and perhaps even to lean towards the road opted by Khyber-Pakhtunkhwa – which is lowering dependence on the Centre. By any means, it is a tough road ahead. Even though the PTI government prefers a focus on health and education, it will have to find a way to better balance it with development projects to keep the economy going. Perhaps, the PM’s low-income housing scheme can prove to be the stimulus.