Punjab, Sindh budgets

Punjab and Sindh presented their budgets this week. Punjab’s total outlay was Rs2.24 trillion, backed by a 13% improvement in provincial tax collection. The province is also providing a Rs56 billion tax relief to businesses to help cope with Covid-19. Tax rates on over 20 services would be cut from the present 16% to just 5%. These include smaller hotels, wedding halls, catering, IT services, tour operators, gyms, property dealers, and car rental services. Sales tax on health insurance, doctor’s fees and hospital fees are also being slashed. In an interesting effort to digitise the economy, the Punjab government is proposing maintaining the 16% sales tax on restaurants and beauty parlours for cash payments, but cutting it to 5% for electronic payments. The development budget has been set at Rs337 billion, and sales tax for public-private partnerships has been cut to zero for five years to attract investment. The education budget is Rs391 billion, and the health budget is Rs284 billion, which includes Rs13 billion for Covid-19 pandemic response.

The Sindh government, meanwhile, prioritised the health sector in its Rs1.24 trillion deficit budget. No new taxes have been added, and government salaries have risen by up to 10%. Some 1,414 new government employees will also be hired. The development budget has been set at Rs232.9 billion, down 18% from last year. The increase in non-development spending was attributed to ‘Covid-related pro-poor’ social protection and economic sustainability spending of Rs34.2 billion, a Rs19 billion rise in health spending, and an additional Rs22.9 billion for education. One of the other positives was a Health Risk Allowance equal to one month’s basic pay for all health personnel, including postgraduate and house job officers, who have been working on Covid-19 patients.

While both budgets for the country’s two richest provinces have their strengths and weaknesses, it is clear that one focuses on economic recovery from Covid-19, and the other on saving lives.

Published in The Express Tribune, June 19^th, 2020.

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