PUNJAB'S FISCAL WOES

PROF. DR. KHAWAJA AMJAD SAEED
(feedback@pgeconomist.com)

Dec 5 - 11, 20
11

A country clambers on the ladder of success on the back of political, political, economic, social, and technological achievements.

There should be a democratically elected government in a country with the mission to serve the common person. There should be an economic progress and prosperity widespread across the board. There should be social stability in a country with little crime, less social tensions and rising standard of living. There should be a breakthrough on the technological front as well.

Pakistan is floundering on the path to success. We can only wish that Pakistani government stepped in a right direction to make marks in above prerequisites to ensure well-being of people as guaranteed in Article 38 of 1973 Constitution of Pakistan.

Sense of urgency is needed to get up from the Rip Van Winkle sleep and let the sleeping giant of Pakistan get up and meet the challenges, which we are facing.

We have untapped resources which can turn Pakistan into one of the most prosperous countries of the world. We need to tap these resources as part of encouragement emanating from the guidelines of Quaid-e-Azam Muhammad Ali Jinnah, father of the Nation, who said that Pakistan has come into being and it is for us now to tap all resources to ensure that we maximize the benefits to the people in Pakistan.

PUNJAB - THE GREAT

Total population of Punjab is around 60 per cent of national population. On the agriculture front, it is performing magnificently by serving as a prime springboard for major crops namely wheat, rice, cotton and sugarcane (on an average of 60 per cent - 65 per cent). Punjab also produces various types of minor crops including fruits.

Even after many months 18th Amendment was inserted in the 1973 Constitution, the functionaries in the government of Punjab have still to develop economic strategies for clearly spelling out the directions in which Punjab should be heading. Under the inspirational leadership of its chief minister, structural changes in the educational and health sectors are taken place. However, a holistic approach is needed to tackle the burning problems, which the province is facing.

Infrastructure needs a considerable improvement to avoid wastages of vegetables from farm to main roads. Old roads need to be strengthened. Provincial energy needs to be met through establishment and construction of small dams. Its gas resources need to be tapped.

Yield of crops need to be substantially increased. The federal government ought to develop logistic infrastructure to ensure that full capacity is allowed to be utilized. A long way is needed to build the economy of Punjab.

Punjab government is formulating an investment strategy for growth and development, but has still to develop an economic strategy for a breakthrough to ensure that an accelerated socioeconomic development does take place in the province for the prosperity of the downtrodden, underprivileged and for strengthening federation.

PUNJAB FISCAL POSITION

Pakistan Federal Budget 2011-12 is a source of great disappointment. The federal government has not even succeeded in developing a current revenue framework to even finance the current expenditure for 2011-12. Its net federal revenue forecast is Rs1.53 trillion and its forecasted expenditure for the above period is Rs2.3 trillion.

Accordingly, the deficit in the revenue budget is Rs787 billion. This will be the highest deficit in the history of Pakistan.

Consequently, hardly anything is available for financing Annual Development Plan for 2011-12. In fact, there is a negative contribution of federal revenue budget to the ADP, which is primarily dependent on uncertain foreign external assistance and heavy bank borrowings and to a little extent on budget surpluses.

When the provincial government announced it did not need a begging bowl, the announcement was well in line with the budget preparation.

Punjab Budget for 2011-12 is estimated to have revenue receipts of Rs655 billion against the forecasted revenue disbursements of Rs435 billion - generating a revenue surplus of Rs220 billion. Eighty two percent (82 per cent) of its general revenue receipts (Rs540 billion) are forecasted to be received from federal government as part of 7th NFC Award. These constitute 82 per cent of total provincial general revenue receipts.

The remaining 18 per cent is forecasted to be collected from provincial tax revenue (14 per cent) and provincial non-tax revenue (0.4 per cent).

It is high time that the government of Punjab must ensure that Rs540 billion is, under all circumstances, collected from the federal government and on the internal front Rs115 billion is collected in the province as tax revenue and non-tax revenue.

The collection machinery must rise to the occasion and deliver the goods in a befitting manner. They must focus on expanding the tax basis and accelerate efforts to collect more and more income tax from the agriculturists.

Forecast for revenue disbursements has been carefully worked out. Three sectors namely general public service (56 per cent), public order and safety affairs (16 per cent) and economic affairs (14 per cent) constitute 86 per cent of the total forecasted revenue disbursements.

Education (14 per cent) and health (6 per cent) have been allocated 20 per cent. The challenge is to test all the above sectors across three Es namely economy, effectiveness, and efficiency. Awareness in this respect is the need of the hour.

A sum of Rs188 billion has been allocated to core programs and Rs32 billion has been earmarked for other development expenditures, which consist of Danish School System, Punjab Education Fund, Punjab Education Foundation, TEVTA, DLIS for MDGs, low income housing, population welfare and companies. Core Program has been spread over six programs: social sector (32 per cent), infrastructure development (27 per cent), production sector (5 per cent), services sector (5 per cent), other sectors (3 per cent) and service programs/packages (13 per cent).

The challenges include:

1) Timely completion of projects.

2) No cost overruns.

3) No time overruns.

4) Proper and timely funding of projects.

5) Appointment of well-educated project managers.

6) Proper project monitoring.

Eventually, the emphasis should be total utilization of funds and transparency in respect of benefits generated from the investment in ADP through input - output budget technique.

CONCLUSION

It is high time that the contributions of Punjab on several fronts e.g. agriculture, industry and infrastructure are properly projected and highlighted so that its due role is respected. Both the federal government and provincial government are urged to play a positive role in the interest of strengthening socioeconomic frontiers of Pakistan.

The writer is Principal Hailey College of Banking and Finance, University of the Punjab, Allama Iqbal Campus, Lahore.