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Punjab on spending spree, others apply restraint

Punjab on spending spree, others apply restraint

ISLAMABAD: Amid tight expenditure control by three small provinces under an agreement with the centre to meet international commitments, the Punjab government continued with robust spending in first half of the current fiscal year.

A half-yearly report of fiscal operations released by the Ministry of Finance on Monday revealed that the country’s total fiscal deficit was limited at 1.7 per cent of GDP in first six months (July-December) of the current fiscal year mainly because of a Rs155 billion (0.5pc of GDP) cash surplus provided by all the four provinces and significantly higher windfall gain on declining oil prices.

The report disclosed that the government’s debt servicing cost was also on the rise, notwithstanding official claims that it was prolonging the debt maturity period. It said the market payments in first half of the year stood at 2.1pc of GDP (Rs632.4bn) against 2pc of GDP (Rs573bn) during the same period last year.

The government is required under the economic bailout programme of the International Monetary Fund (IMF) not to let the country’s annual fiscal deficit to go beyond 4.3pc of GDP this year. “To assure achievement of our fiscal targets in 2015-16 and beyond, the provincial finance secretaries have agreed in writing to increase provincial budget surpluses consistent with the programme,” Finance Minister Ishaq Dar told the IMF staff mission recently.

The finance ministry’s report said that the provincial government in Punjab maintained the fastest pace of spending in first six months of the year and provided the smallest of cash surpluses as percentage of expenditure among the four provinces. Punjab came up with a cash surplus of Rs43bn in first six months, accounting for 9.5pc of Rs454bn of its total expenditure.

Positive aspect of the Punjab government was that it spent Rs141.4bn on development in first half of year, highest among the four federating units. This was almost 31pc of its total expenditure that was apparently in line with Chief Minister Shahbaz Sharif’s focus on signature infrastructure projects.

The report also indicated that the PPP government in Sindh provided biggest chunk of cash surplus and was slowest among all in total spending. The finance ministry reported that Sindh’s cash surplus at Rs77.4bn that accounted for 36pc of its Rs215.6bn total expenditure in first six months of the year.

Sindh spent a total of Rs36.8bn on development projects, accounting for 17pc of its total expenditure and stood third in terms of the pace of development spending in first half of the year.

Khyber Pakhtunkhwa also volunteered a budget surplus of Rs16.4bn, accounting for 11pc of its total Rs148.6bn expenditures in six months to earn reward from the federal government for low spending instead of improving social and living standards of the people. It spent Rs32.1bn on development schemes that stood at 21.5pc total spending and secured second position in pace of development spending.

The development-starved Balochistan province also did not stay behind. It offered Rs18.4bn financing surplus that accounted for about 24pc of its total expenditure at Rs77.8bn. It spent only Rs11.8bn or just 15 of total expenditure.

The federal government also contained its development spending at Rs155.8bn in first six months which was 11.3pc of its total expenditure and slightly higher than Rs125.5bn spent on development in same period last year.

The report said the government collected almost 45pc higher amount through just three indirect taxes on oil and gas like Gas Infrastructure Development Cess, Gas development Surcharge and Petroleum Levy. These three taxes contributed Rs129bn in first half of the year to the national kitty this year against Rs89bn at the same period last year.

Interestingly, these collections did not include general sales tax on petroleum and natural gas which was increase in some cases to over 50pc from standard 17pc GST rate during the year as international prices plummeted. The government did not disclose the amount of GST it collected on oil and gas products but put total GST collections at Rs591bn in first half of 2015-16 against Rs514bn in the same period last year.

The report said the country’s defence expenditure slightly decreased to one per cent of GDP (Rs303bn) this year against 1.1pc of GDP (Rs329.6bn) of same period last year. As a consequence, the country’s total expenditure also fell to 8.2pc of GDP (Rs2.5 trillion) this year compared to 8.3pc (Rs2.4tr) last year.

On the other hand, the country’s total revenues improved to 6.5pc of GDP (Rs2tr) this year against 6pc of GDP (Rs1.75tr) in first six months of last year. Tax revenue also increased from 4.7pc of GDP in the first half of last year to 5.3pc of GDP this year.

Published in Dawn, February 16th, 2016

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