Punjab to take centre’s loan offer to pay salaries

Amount will be used to pay four weeks’ worth of salaries, pensions

LAHORE:

The novel coronavirus pandemic has left all provincial governments scrounging for cash. With no overdraft facility available from the State Bank of Pakistan, the federal government has decided to loan a total of up to Rs160 billion to all federating units so that they can pay four weeks’ worth of salaries and pensions. The only catch is that the provinces will have to pay the actual markup according to the Karachi Interbank Rate.

Provinces used to be able to avail an overdraft facility from SBP until the federal government decided any extra funds would only be released with the approval of the finance ministry. Under the centre’s loan offer, Punjab can get up to Rs77 billion in the form of four weeks’ worth of salaries and pensions. Sindh can get up to Rs39 billion while Khyber-Pakhtunkhwa can borrow as much as Rs27 billion. Balochistan will be able to borrow up to Rs17 billion.

Speaking to The Express Tribune, sources in the Punjab finance department said they have no option but to take up the offer from the centre. “Punjab economy has been stagnant for the last three months due to Covid-19 and we are facing a severe shortage of funds,” said one official. “To meet expense, the government has slashed funds for various departments in this year’s budget, but even then it has been difficult to pay salaries and pensions of government employees,” he said.

According to another finance department official, Punjab has demanded National Finance Commission arrears for previous years, but has only received Rs3 billion so far. “We demanded Rs173 billion from the centre, but the latter has been unable to release the amount since tax targets were not meant,” he said, adding all other provinces have also received less than their share.

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In particular, Punjab has been seeking the release of Rs48 billion in net hydel profit arrears, but the federal government simply lacks the resources to do so. A tax adjustment worth Rs20 billion between the Federal Board of Revenue and the Punjab Revenue Authority has also been left hanging on account of the finance crunch. Despite several negotiations, the FBR has not disbursed Rs5 billion the National Bank of Pakistan sent to the former instead of PRA. Punjab has also demanded a refund for a Rs10 billion subsidy on wheat exports that was paid by the food department.

Punjab also provided Rs5.3 billion a few years ago for the construction of the Metro Bus service in Rawalpindi and Islamabad, but despite several letters, the centre has not paid the amount back. Similarly, Punjab also provided Rs13.79 billion to the centre for a lady health workers programme, which the latter still hasn’t returned.

Published in The Express Tribune, August 8^th, 2020.