Punjab to borrow $304m from World Bank

CDWP approves concept clearance paper for tax reforms in Punjab

Shahbaz Rana September 17, 2020


In total disregard to the growing external public debt, the federal government on Wednesday allowed the Punjab government to borrow $304 million (Rs50 billion) in the name of tax reforms in the province.

The Central Development Working Party (CDWP) approved a concept clearance paper for the Punjab Resource Improvement and Digital Effectiveness Programme (PRIDE) worth $304 million (Rs50 billion), according to a statement of the Ministry of Planning.

It was observed that the provincial government of the Pakistan Tehreek-e-Insaf (PTI) used 2017-18 figures from the Pakistan Muslim League-Nawaz’s tenure for getting approval for the concept clearance paper instead of using latest figures of fiscal year 2019-20. The government of Chief Minister Usman Buzdar did not mention tax performance of his two years in power.

The Punjab government’s documents showed that Punjab’s tax-to-gross domestic product (GDP) ratio increased from 0.4% in 2009-10 to 1.2% in 2017-18. The Punjab government followed in the footsteps of the federal government that also acquired a loan of $400 million from the World Bank in the name of tax reforms.

Former Federal Board of Revenue (FBR) chairman Shabbar Zaidi was not inclined to take the World Bank loan for tax reforms. Pakistan’s public debt-to-GDP ratio increased to an unsustainable level of 87.2% of GDP by the end of June 2020 - an increase of almost 15% in two years of PTI rule.

The government of Punjab plans to initiate efforts to increase its tax collection by including the potential untapped areas, according to the project documents.

The $304 million in loan has been sought from the World Bank to “make taxation more progressive, broaden the tax base, reduce interaction between taxpayers and tax collectors and facilitate taxpayers to improve the ease of doing business,” the papers said.

Out of the $304 million, the provincial government is keen to get $30 million in grant but terms are not final yet.

The proposed concept includes multiple dimensions like business process re-engineering, revision, change of rules and regulations, development of comprehensive automated systems, the introduction of e-services and institutional capacity building. All these functions do not need any foreign money, rather it requires political will to enhance the narrow provincial tax base. The concept clearance paper also used 2014 statistics to highlight the tax gap - the difference between the potential and actual tax collection by the province.

In return of the loan, the WB has imposed conditions of reducing “un-budgeted fiscal risks including unfunded pension liability of the government of Punjab, and reduce variance between original and actual budget expenditures”, according to provincial government documents.

Other decisions

The CDWP meeting, presided by the Planning Commission Deputy Chairman Mohammad Jehanzeb Khan, approved four projects worth Rs12.25 billion and recommended two projects worth Rs33.4 billion to Executive Committee of the National Economic Council (ECNEC) for consideration. The Rs50 billion Punjab concept clearance paper is in addition to these projects.

The CDWP approved the Women’s Income Growth and Self-Reliance project worth Rs7.1 billion. The objective of the project is to establish a sustainable government-led system to be established for the transition of extremely poor women from social protection to sustainable livelihood and poverty reduction. Productive inclusion and economic empowerment of women is the main objective of this initiative.

The women empowerment project, partially financed by British taxpayers, is aimed at the transition of 63,000 extremely poor women from social protection to a sustainable livelihood.

These beneficiaries include 54,000 women with disabilities through livelihood support. The programme activities will be spread over in nine districts, Vehari, Chiniot, Sargodha, Pakpattan, Khanewal, Okara, Multan, Sheikhupura and Rawalpindi.

The irony is that Rs11.6 million of UK grant money will be used for the purchase of vehicles in the name of extremely poor women. Out of Rs7.2 billion, an amount of Rs985 million or 13.8% will be used for other than livelihood activities.

The Basol Dam Project worth Rs18 billion was referred to ECNEC. The Basol dam is located at 54 km in the North West of Ormara Town, Gwadar district of Balochistan.

Published in The Express Tribune, September 16th, 2020.

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