PUNJAB ON THE WAY OF IMPROVING FISCAL MATTERS

KANWAL SALEEM
(feedback@pgeconomist.com)

Dec 5 - 11, 20
11

The Punjab government under the able leadership of chief minister Punjab Mian Shahbaz Sharif is using†all out resources for the speedy development of the province and prosperity of masses while special attention is being paid to poverty alleviation and elimination of unemployment.

With Pakistan's economy in a grip of acute energy shortages, heightened security challenges, persistent inflationary trends, limited capital inflows, a general slowdown in the economic activity is inevitable. However, Punjab province is progressing, although not at a desired level but it is ahead of other provinces.

Massive floods in the year 2010 took a heavy toll on agriculture and infrastructure while energy crisis coupled with decline in foreign direct investment dampened business activity during FY 2010-11.

Floods not only wiped out about two percentage points from the growth but also inflicted a colossal damage of approximately Rs860.0 billion on the country's economy including a loss of Rs219.0 billion in Punjab.

As many as 20 million people were rendered homeless throughout the country, over six million of which were in Punjab's eleven affected districts.

To cope up with the natural catastrophe of this magnitude and scale, Punjab government responded promptly by providing immediate relief to the affected people in terms of food, basic amenities, medicines etc. followed by a well organized rehabilitation and reconstruction program.

This, however, meant a re-alignment of provincial finances and diversion of the allocations of some part of development budget towards more pressing needs relating to relief, rehabilitation, and reconstruction.

On the expenditure side, Punjab through its prudent fiscal consolidation measures during 2010-11 not only provided additional resources of Rs10 billion for flood relief/rehabilitation program but also protected the allocations of essential social services, pro-poor initiatives and special infrastructure development projects.

Through implementation of the austerity measures, functional review of provincial/district government departments culminating into merger/abolition of different departments and abolition of large number of posts, savings of approximately Rs6 billion were materialized during the year.

On the revenue side, provincial government put in place an affective monitoring regime under the chairmanship of chief secretary whereby monthly review of the trends of provincial own receipts was carried out throughout the year. Resultantly, a growth of 20 per cent in tax revenue and five to six per cent in nontax revenue has been witnessed in 2010-11 in comparison to the actual revenue realization for 2009-10.

While greater degree of resource transfer was anticipated with an increase in the provincial share under 7th NFC Award, the actual realization of revenue resources during the year from the federal divisible pool has been appreciably less than anticipated.

With the passage of 18th Constitutional Amendment Act 2010 and the omission of concurrent legislative list, 47 new subjects have been transferred to the provinces. This development in itself presents a formidable challenge for the province, as transfer of these functions is likely to intensify the spending pressures on the provincial government without the corresponding resource transfer by the federal government.

Despite difficulties, the Punjab budget for the FY12 was prepared in a manner which besides ensuring macroeconomic stability will provide a platform for growth, job creation and improvement in quality of life of the ordinary people. Emphasis in the development spending was on promoting growth and enhance productivity through targeted employment schemes; providing basic amenities for general public; creating new physical infrastructure; developing agriculture with a special focus on small farmers; launching skill development schemes; expanding and improving the coverage and quality of health services; and promoting education through a special emphasis on technical education.

According to a spokesperson of finance department, the provincial governments do not borrow funds from state bank of Pakistan to meet its expenditures. As a matter of fact, the provinces are only allowed an overdraft facility in accordance with State Bank Act, 1956. The overdraft facility has been provided to enable provincial governments to control the temporary mismatch between their receipts and expenditures.

He reiterated the provincial governments do not borrow funds from SBP to finance their expenditures. He said it is a well known fact that over 80 per cent of the resources of the provincial governments come from the federal transfers. These transfers are received at the end of every month whereas bulk of the expenditures of the provincial governments e.g. salary payments, debt servicing etc. are frontloaded.

To enable provinces to manage their payments, SBP has allowed overdraft limits to all provinces. The limit for each province has been fixed equivalent to its pay and pension cost for a period of six months, the spokesperson said.

According to him, the cash balance position of Punjab was positive at the beginning of the financial year 2010-11 and also on the first day of the month of November 2011. The balance would further strengthen on receipt of arrears of divisible pool transfers pertaining to first four months of the ongoing financial year, which are likely to be received at the end of the month of November.

Budget estimates under debt management and allocations for pensions for the FY12 are pitched at Rs59,402.545 million against the provision of Rs49,184.980 million in FY11. In this classification, expenditures on debt servicing including payment of interest on foreign and domestic debt, general provident fund and interest on blocked loan of government of Punjab payable to SBP are included.

In the category of interest payments, an amount of Rs18,867.298 million has been provided against the budget estimates of Rs21,284.980 million in FY11. Decrease on this account is primarily attributable to reduction in the amount of blocked account payable to SBP. The estimates of expenditure on pension during FY12 have been pitched at Rs40,535.247 million compared to Rs27,990.494 million in the last financial year, thereby, showing an increase of 44.8 per cent. The higher allocation for pension has been made on the basis of the projected expenditure for the FY12 and increase in the pension at 15 to 20 per cent announced in the federal budget for the year 2011-12.

The current capital expenditure in Account No.II increased in 2011-12 on account of repayment of commercial bank loans and state trading/procurement of wheat secured for record commodity operations in 2009-10 in view of bumper crop in that procurement season. Resultantly, there is an increase in the liability of the outstanding loan. Government of Punjab intends to discharge the outstanding liability of subsidy in FY12 besides requesting federal government to clear the outstanding dues to be picked by the federal government against the strategic reserve being maintained by food department on behalf of the federal government.

The growth strategy is required to be adopted with the set targets. If things move ahead as per estimates, Punjab is all set to take a lead.

National Nutrition Survey 2011 Launched

About 58 per cent of the households are food insecure in the country and among them 28.4 per cent are food insecure without hunger, 19.8 per cent with moderate hunger and 9.8 per cent are food insecure with severe hunger.

In urban areas, about 48 per cent are food secure while 52 per cent are food insecure compared with rural areas where 39.4 per cent of households are food secure and 60.6 per cent are insecure.

This was the finding of the national nutrition survey 2011 launched in Lahore for Punjab province.

As per the findings of the survey, in urban areas of the households that are food insecure (48pc), 26.5pc are food insecure without hunger, 17.7pc are food insecure with moderate hunger, and 8.2pc are food insecure with severe hunger.

In rural areas of the households that are food insecure (60pc), 28.3pc are food insecure without hunger, 20.7pc are food insecure with moderate hunger, and 10.5pc are food insecure with severe hunger.

The survey reveals that in Punjab about 40.5pc of the households are food secure while 59.5pc are food insecure. Among those that are food insecure (40.5pc), 32.2pc are food insecure without hunger, 18.5pc are food insecure with moderate hunger, and 08.8pc are food insecure with severe hunger.

In Sindh about 28pc of the households are food secure while 72pc are food insecure. Among those that are food insecure (72pc), 21.1pc are food insecure without hunger, 33.8pc are food insecure with moderate hunger, and 16.8pc are food insecure with severe hunger.

In Khyber Pakhtunkhwa, about 68.5pc of the households are food secure while 28.2pc are food insecure. Among those that are food insecure (28.2pc), 21pc are food insecure without hunger, 6pc are food insecure with moderate hunger, and 4.5pc are food insecure with severe hunger.

In Balochistan, about 36.5pc of the households are food secure while 63.5pc are food insecure. Among those that are food insecure (63.5pc), 33.9pc are food insecure without hunger, 18pc are food insecure with moderate hunger, and 11.5pc are food insecure with severe hunger.

In FATA, about 41.6pc of the households are food secure while 58.4pc are food insecure. Among those that are food insecure (58.4pc), 27.4pc are food insecure without hunger, 8.4pc are food insecure with moderate hunger, and 5.8pc are food insecure with severe hunger.

In Azad Jammu and Kashmir, about 42.9pc of the households are food secure while 57.1pc are food insecure. Among those that are food insecure (57.1pc), 31.2pc are food insecure without hunger, 21.6pc are food insecure with moderate hunger, and 4.3pc are food insecure with severe hunger.

In Gilgit Baltistan, about 60.2pc of the households are food secure while 39.8pc are food insecure. Among those that are food insecure (39.8pc), 09.2pc are food insecure without hunger, 21.5pc are food insecure with moderate hunger, and 4.3pc are food insecure with severe hunger.

The food security data of national nutrition survey 2011 has shown no signs of improvement since the last food insecurity assessment done by the United Nations.

The survey figures do not portray any good sign on the nutrition status of the Pakistani population, as it raised the number of the households that are food insecure from 51 to 58 per cent. This has serious implications on the nutrition, growth, and health of the population.

As per the findings, the level of chronic malnutrition among children rose to 39 per cent in 2011 from 32.5 per cent in 2001 in Punjab, which shows two out of five children are under malnutrition for which sustained efforts are needed.

According to the country's representative Unicef Pakistan, Dan Rohmann, the rise in malnutrition is a matter of concern, as if children remain malnourished, they are at risk of various diseases.

Malnutrition emerged as a problem for child and maternal health in Punjab in the wake of the devastating 2010 monsoon floods that took a particularly heavy toll in the province.

The rate of acute malnutrition is about 14 percent, which is very high. As per a report, the children are at high risk of mortality and susceptible to disease even life-long stunning and cognitive impairment if children remain malnutrition. There are gains in iodine deficiency but anemia and other deficiencies, including vitamin 'A', remain unchanged since last survey of 2001. Vitamin 'D' deficiency is major public health problem in Punjab.