The financial managers of the provincial government understated its liabilities by Rs47 billion and left it struggling to find its balance when the actual amount (Rs 77 billion) was revealed.
The government received Rs 20 billion in taxes and carried forward a balance of Rs 40 billion on June 30.
The government exhausted its Rs 27 billion overdraft facility with the State Bank of Pakistan (SBP) using it to pay salaries and pensions in the first week of July. To ensure that the overdraft limit was not exceeded it was forced to transfer funds from autonomous bodies.
For two years now, the government has been functioning with a permanent current account deficit. It is almost out of funds with an overdraft cushion of just Rs2 billion. As soon as that money is consumed, the cheques issued by the Punjab government will no longer be honoured by the bank.
Aware of the looming financial crisis, the government’s advisors have decided to halt payments.
The government has not been entertaining payment requests by contractors since July 5, 2010. It is not clear when they will be paid.
The Punjab government is currently banking on receiving its installment (Rs20 billion) of the National Finance Commission (NFC) award on July 17. But financial experts say that it is unlikely to improve the current situation.
“The NFC award payment will not change much since the government will have new payments next month. If anything the financial squeeze will be aggravated in the coming months,” a senior official of the Finance Department told The Express Tribune.
“The only hope for the government is to cease payments entirely,” he added.
Most of the development projects have been stopped and the current ones have been slowed down owing to the lack of funds.
The Sasti Roti scheme and the recently announced increase in the salaries of government employees have drained the provincial accounts. The miscalculation by the financial controllers also made it difficult to manage the liabilities. Finance Secretary Tariq Mehmood Pasha and Finance Minister Tanveer Ashraf Kaira were not available for comment.
Published in The Express Tribune, July 12th, 2010.
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