Punjab’s financial conundrum

Published: January 28, 2012

PML-Q’s Mohsin Leghari is an astute parliamentarian who believes in legislature’s supremacy over the executive.

Over the last nine years or so that he has been a member, he has established himself as someone who takes business of the House seriously and is taken seriously by the Treasury and the Speaker.

Yesterday he found himself in a ridiculous situation. He had submitted an adjournment motion regarding the province’s overdraft, which he said was spiralling out of control. Debate on the motion was on the day’s agenda since there was not much else.

However, as soon as the official business ended and Leghari was preparing to introduce the motion, PPP’s Faiza Malik rose from what appeared to be a deep slumber and pointed out the quorum. Her move killed what would have been an excellent opportunity for Leghari to force a serious debate.

A determined Leghari requested that the motion be included in Monday’s agenda. The law minister was gracious enough to accept the request.

The MPA shared some of the statistics with the media regarding the financial health of the province while at the cafeteria.

According to him, in 2005-06 – the last year of the Pervaiz Elahi-led government – the province had liabilities worth Rs162 billion. In 2008-09 – the PML-N’s first year – province’s debt, foreign and domestic, rose to Rs304 billion. Out of this Rs253 billion was foreign debt. Leghari said that in 2009-10, the overdraft increased further to Rs387 billion, of which Rs340 billion was foreign debt; in 2010-11 the total debt was Rs485 billion, Rs416 billion of which was owed to foreign financial institutions; and in 2011-12, the debt rose to a whopping Rs492 billion, out of which Rs416 billion was foreign debt.

Now consider this: last year’s provincial budget was Rs455 billion. The debt is thus 75 per cent of the total outlay. The money spent on mark-up and interest on loans would be Rs53 billion. 80 per cent of the resources will be supplied by the federal government from the federal divisible pool under the NFC award but the government would still need money to finance wheat procurement and payment on development works.

The Punjab government says that the centre delays the release of the payment and that is why the province has to borrow so much. This is partly true. The federal government, on the other hand, says that there are procedural delays in receipts and that sometimes when it releases funds they are  not spent. The Centre says that this shows that the province does not have a good plan when it comes to spending.

The foreign debt component currently stands at Rs416 billion. This shows that the chief minister – who talks about not needing foreign aid – has over the past four years, done exactly that. Most of the province’s money comes from donors like the World Bank, the USAID, the DFID and the JICA because they offer lower interest rates compared to the domestic institutions.

Published in The Express Tribune, January 28th, 2012.

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