Financing Islamabad the beautiful
A long-term financing vision is required for the city, the assets sale bonanza is not going to last forever.
This is the golden jubilee year of Islamabad, a city whose rural residents keep wondering about the bounties that a ‘federal village’ might bring. Article 1(2) of the Constitution mentions Islamabad Capital Territory (ICT) as a separate entity in the territorial definition of Pakistan. But it is not a province, which means it has no share in the National Finance Commission. Nor is it an area like Fata, whose financing needs are taken care of by a federal ministry. The interior ministry controls the ICT administration, which performs the traditional functions of a district and division. The rural area lies in its domain. The urban area is managed by the Capital Development Authority (CDA). It derives its charter, powers, duties, functions and responsibilities from an ordinance issued on June 27, 1960. The city fathers consist of a chairman and six members. Islamabad has never been considered fit for local democracy. Not surprisingly, a story in this paper described it as “the undemocratic seat of democracy.”
In 2009-10, the CDA had a revenue deficit of Rs2.8 billion. In 2010, it had a deficit of Rs2.9 billion.
In spite of this, the CDA budgeted to spend Rs26.1 billion in 2009-10 and Rs22.7 billion in 2010-11. How could the CDA spend beyond the revenue? In 2009-10, the deficit was reduced by the federal government maintenance grant of Rs1.3 billion to Rs1.5 billion. In 2010-11 again, the deficit was reduced by a federal government maintenance grant of Rs2.2 billion to Rs0.7 billion. So the deficit continues. Grants from the Public Sector Development Programme of Rs2.5 billion in 2009-10 and Rs1.6 billion, expected in the current year, helped cover it. While it is planning to float a municipal bond of Rs3 billion, sale of assets continues to be the largest source of sustenance. This figure was a whopping Rs21.3 billion in 2009-10 and is expected to be Rs11.4 billion this year. Total receipts from all sources stood at Rs28.9 billion in 2009-10. Against this, the total expenditure was Rs26.1 billion, leaving a surplus of Rs2.8 billion. Total receipts in the current year’s budget are shown as Rs22.7 billion. This is a mistake, as the Rs3 billion expected from the municipal bonds sale is also included under receipts. For the same reason, the overall surplus of Rs2.8 billion shown in the budget is also a mistake. Actually, there is a deficit of Rs3 billion.
Good financial management requires concerted action in a number of directions. Greater efforts need to be shown in collecting tax revenue, especially property taxes, to eliminate the revenue deficit. User charges should cover a greater proportion of the cost. The asset base should be exploited for greater finance from the market. A long-term financing vision is required, as the assets sale bonanza is not going to last forever.
As for total expenditure, 70 per cent was allocated to development last year. This has come down to around 60 per cent this year. Within self-financed development, the engineering wing is the major claimant. In the current year’s budget, its share is 47 per cent. Expenditure under this head relates mainly to roads and other physical infrastructure. The next largest item of expenditure, with a share of 22 per cent, is related to estate management and development of sectors and plots. Add another 12 per cent for planning and design and nothing really is left for the people.
Published in The Express Tribune, December 10th, 2010.
In 2009-10, the CDA had a revenue deficit of Rs2.8 billion. In 2010, it had a deficit of Rs2.9 billion.
In spite of this, the CDA budgeted to spend Rs26.1 billion in 2009-10 and Rs22.7 billion in 2010-11. How could the CDA spend beyond the revenue? In 2009-10, the deficit was reduced by the federal government maintenance grant of Rs1.3 billion to Rs1.5 billion. In 2010-11 again, the deficit was reduced by a federal government maintenance grant of Rs2.2 billion to Rs0.7 billion. So the deficit continues. Grants from the Public Sector Development Programme of Rs2.5 billion in 2009-10 and Rs1.6 billion, expected in the current year, helped cover it. While it is planning to float a municipal bond of Rs3 billion, sale of assets continues to be the largest source of sustenance. This figure was a whopping Rs21.3 billion in 2009-10 and is expected to be Rs11.4 billion this year. Total receipts from all sources stood at Rs28.9 billion in 2009-10. Against this, the total expenditure was Rs26.1 billion, leaving a surplus of Rs2.8 billion. Total receipts in the current year’s budget are shown as Rs22.7 billion. This is a mistake, as the Rs3 billion expected from the municipal bonds sale is also included under receipts. For the same reason, the overall surplus of Rs2.8 billion shown in the budget is also a mistake. Actually, there is a deficit of Rs3 billion.
Good financial management requires concerted action in a number of directions. Greater efforts need to be shown in collecting tax revenue, especially property taxes, to eliminate the revenue deficit. User charges should cover a greater proportion of the cost. The asset base should be exploited for greater finance from the market. A long-term financing vision is required, as the assets sale bonanza is not going to last forever.
As for total expenditure, 70 per cent was allocated to development last year. This has come down to around 60 per cent this year. Within self-financed development, the engineering wing is the major claimant. In the current year’s budget, its share is 47 per cent. Expenditure under this head relates mainly to roads and other physical infrastructure. The next largest item of expenditure, with a share of 22 per cent, is related to estate management and development of sectors and plots. Add another 12 per cent for planning and design and nothing really is left for the people.
Published in The Express Tribune, December 10th, 2010.