Monitoring closely: Centre asks provinces to keep expenses in check

Federating units behind budget surplus target in first half of fiscal year.

Shahbaz Rana February 20, 2012


The federal government has asked provinces to restrain their soaring expenses, a trend – if it continues – that will result in the federating units missing the overall savings target of Rs125 billion for the current financial year.

Finance Secretary Abdul Wajid Rana confirmed to The Express Tribune that the provinces have remained behind the budget surplus target set for the first half (July-December) of the current fiscal year 2012. A meeting between the federal and four provincial finance secretaries was held on Monday.

Although, the target has been fixed in consultations with the provinces, the federal government has no powers to bind the provinces except pressing them hard during the secretaries’ meeting.

For the current fiscal year, the federal government set the national budget deficit target at 4% of Gross National Product which has now been revised to 4.7%, keeping in view that the provinces would save Rs125 billion or 0.6 per cent of GDP from their budgets.

Meanwhile, a scheduled meeting of the National Finance Commission has been postponed on the request of Balochistan. The meeting had been called for today (Tuesday) to discuss outstanding financial issues between the federal and provincial governments.

The provincial finance secretaries also agreed that they would beef up their efforts in generating provincial revenues, as the provincial receipts can hardly make 5 to 10 per cent of their budgets. Provinces have agreed to raise revenue from agriculture income tax, motor vehicle tax, property tax and sales tax on services, said the official.

To harmonise the agriculture income tax, the Council of Common Interests – the highest inter-provincial coordination constitutional body – has set up a committee of all provincial and federal finance ministers and agriculture ministers.

The meeting also decided to further fast-track the process of clearing outstanding dues of Pakistan Electric Power Company by the provincial governments. Sindh and Balochistan turned out to be the biggest defaulters on electricity payments, said the finance ministry official.

The federal government also sought working papers from the provinces in order to finalise a framework for allowing provinces to directly borrow from domestic and international markets, said the official.

Through the 18th Amendment in the Constitution, provinces have been allowed to directly borrow; however, broader parameters have yet to be decided by the National Economic Council.

Officials said Khyber-Pakhtunkhwa Finance Secretary raised the issue of delay in payments on account of net hydel profit by the Water and Power Development Authority (Wapda). Wapda is required to pay Rs6 billion annually in Rs500 million monthly installments.

An official of the provincial finance department said that K-P complained that Wapda was not paying an outstanding amount of Rs3 billion and has so far paid only Rs500 million in seven months. “Wapda has taken a stance that the Pepco was not clearing the dues thus it was unable to pay the outstanding amount of Rs3 billion,” official added.

The federal finance ministry official said that the government would soon convene a meeting to address the provincial government’s concern. The provincial government representative also raised the issue of delay in payment of Rs800 million on account of electricity sold to National Transmission and Dispatch Company.

Published in The Express Tribune, February 21st, 2012.


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