Punjab to ensure mammoth surplus

All provinces will have to avoid deficit this year, with Punjab to account for more than half of Rs242b surplus target

LAHORE: Even as the provinces reel under economic pressure from the novel coronavirus pandemic, the federal government has agreed with the International Monetary Fund to set a surplus target of Rs242 billion.

More than half of it – Rs125 billion to be precise – will have to be achieved by Punjab, which was already facing a financial crunch even before the Covid-19 outbreak. Sindh has been given a surplus target of Rs59 billion while K-P and Balochistan have been set a target of Rs35 billion and Rs22 billion respectively.

According to finance ministry officials, the finance departments of all provinces have incorporated the aforementioned targets in their budgets. They said provincial governments have instructed concerned departments to not incur any additional expenses, as no supplementary budget will be issued in the next fiscal.

No province has reported a deficit in the outgoing fiscal year, the officials said. Punjab had the largest pool of unutilised funds at Rs89 billion, reflecting money not spend on development in 2019-20.

“This time around, all provincial governments will have to utilise their budgets keeping in mind the surplus targets. In order to avoid deficit, they will have to exercise great care even as they tackled the Covid-19 pandemic,” a finance ministry official said.

Speaking to The Express Tribune, economist Dr Salman Shah said the surplus targets are aimed at reducing the country’s fiscal deficit. He pointed out the provincial budgets in Pakistan are never fully utilised in the first place.

Financial expert Anam Naeem, meanwhile, said the agreement on surplus targets with the IMF would prompt provinces to manage their budgets in the systematic manner. With supplementary budgets discouraged, provincial governments will have to spend within targeted limits, enabling better budgetary results.

On the other hand, the Federal Board of Revenue (FBR) has set a Rs4.1 trillion revenue target. According to officials, Rs2.9 trillion of this will be distributed among the provinces under the National Finance Commission award, but only if the target is met. Any provinces that fail to meet revenue targets will have their share cut down accordingly, they said.

The revenue target has already been criticised by observers and analysts as unrealistic given that the government fell short of the outgoing fiscal’s target by Rs750 billion.

That said, if the targets are met, provinces should receive 19 per cent more revenue than the last fiscal year, officials said. According to them, Punjab should get more than Rs1.4 trillion from the centre while Sindh, K-P and Balochistan should get Rs742 billion, Rs477 billion and Rs296 billion respectively.

Published in The Express Tribune, June 23^rd, 2020.