June 29 - July 5, 2009

Balochistan government on June 20 presented a Rs 74.247 billion tax-free budget with an overall deficit of Rs 8.332 billion for the fiscal year 2009-10. The budget envisages development programme of Rs 18.536 billion, including Rs 5.107 billion of foreign project assistance and with a current budget of Rs 53.081 billion. The budget proposals project total revenue receipts for the next fiscal year at around Rs59.054 billion and expenditures at Rs53.081 billion, showing a surplus of Rs5.972 billion.

Balochistan's finances are expected to witness improvement in the next fiscal year, as the federal government has taken the liability to pay the province's Rs.17.4 billion overdraft with the central bank. So far the province has been in the vicious circle of loans both emanating from the central bank as overdraft and the federal government as cash development loan (CDL).

Like previous many budgets, it is also a deficit budget. The province plans to meet the deficit amounting to Rs 8.332 billion from promised grants of Rs 3 billion by the federal government set for budgetary support, Rs 3 billion set for public representative programme (PRP) and remaining deficit of Rs 2.332 billion would be met be enhancing province's own resources.

The center has allocated a record amount of Rs50 billion for the province from its Public Sector Development Programme (PSDP) for the next fiscal year. Moreover, the unspent PSDP allocation of Rs21 billion for the outgoing year will also be carried forward into the next year. This will raise the total federal development spending in the province under the PSDP to Rs71 billion.

The province showed a poor budgetary performance in the outgoing fiscal year largely due to the non-availability of funds for its development schemes. The growing amount of throw forward of development schemes has been a major issue for the province. The throw forward amount, which was brought down to Rs35 billion a few years ago from Rs35 billion, has been the disturbing trend of the budgets of last three years. The amount continued to grow due to increasing prices of construction material, which enhanced the cost of development projects.

The provincial government made current revenue savings of Rs1.413 billion during the outgoing year, despite creation of two new departments and restoration of divisional commissioners. It also recovered its share of Rs170 million from the National Accountability Bureau and "dug out an amount of Rs3 billion lying in dormant private bank accounts" of various departments.

Major initiatives proposed in the budget include an increase in food subsidy (on wheat) to Rs1 billion from Rs600 million and continuation of Rs2 billion annual subsidy on agriculture tube-wells for another year. In order to provide relief to pensioners, the government raised minimum pension to Rs1,000 from Rs150 and to Rs2,000 from Rs300. It will cost the provincial kitty an additional Rs400 million a year. The government employees and pensioners will also receive a 15 per cent ad hoc increase in their salary and pension in line with a decision by the federal government. The provincial government also announced separating the Levies force from police in phases. The provincial government has transferred an amount of Rs22 billion, including 2.5 per cent GST, to local governments under the Provincial Finance Commission award.

The major revenue expenditures include Rs5.558 billion for improving law and order situation in the province, Rs5.174 billion for social services, Rs5.683 billion for economic services, Rs1.742 billion for debt servicing, Rs10.132 billion for general administration, and Rs1.791 billion for community services. Separately, the provincial capital account is projected to incur as a deficit of Rs943 million as capital expenditure is estimated to be around Rs2.629 billion against an income of Rs1.685 billion. The capital account deficit will be financed from the revenue surplus, slashing the net budgetary surplus for the next year to Rs5.029 billion.

Under utilization of funds has also come to surface as an important issue related to the economic development of the province. Another issue is the law and order situation, which is essential to continue and complete a development program in the province. The development amid tight security arrangements brings an idea of development at gunpoint.

The under-utilization of the development budget in the past has been a reflection of poor fiscal planning and management due to lack of institutional and human capacity. Fiscal and physical targets did not match. Unfortunately, the concerned institutions have failed to grasp the constraints and snags impeding the development process in the province. The key role of the Planning and Development Department (P&DD) cannot be denied in the process. The development planners in the province have been unable to lay foundations of their plans on sound footings. Non-existing or lack of infrastructure such as, roads, means of communication, water supply prove that there has been no proper planning for the socio-economic development in Balochistan in the past five decades.

Although Gwadar port has officially been declared operational, and copper and gold is being mined from Saindak project for the past four years, it is vague what the province has gained in terms of its financial health? These mega projects have not yet strengthened the fiscal base and widened the revenue base of the province.

The province needs to find new and dependable sources of income to reduce dependence on federal divisible pool. It has no effective administrative control over its natural resources. The federal agencies control production, transmission, distribution, and revenue generation of natural resources in province. The province has repeatedly expressed its serious reservations about the federal government's method of calculating wellhead cost of gas. One sign of how dependent the province is on the largesse of the centre are Rs51.52 billion receipts in the Rs71.19 billion provincial budget for outgoing fiscal year, the bulk of which was to come from the federal government under various heads. For the outgoing fiscal year, the province's own revenue generation was estimated at Rs3.47 billion, of which Rs2.50 billion is non-taxable income and only Rs972.16 million is expected to be collected as taxes.

The Baloch nationalist parties have strongly been demanding the ownership and effective administrative control over natural resources of the province. A need is also felt for restructuring of those federal agencies that control production, transmission, distribution, and revenue generation of natural resources in provinces.