KP budget: more of the same
THE last budget of the Khyber Pakhtunkhwa ruling coalition government is not different from the previous four ones but for a string of measures focused on the coming elections.
No doubt the total budget outlay has been increased along with the provincial annual development programme, yet the basic question remains: how all these measures will help revive the sinking industrial base and create enough jobs.
The total KP budget 2012-13 outlay at Rs3.3 trillion earmarks Rs97 billion for the provincial ADP.
However, the key challenges facing the province have either been ignored or a nominal amount has been allocated for them.
No attempt has been made to broaden the provincial tax net. Jubilant finance minister Engineer Humayun Khan announced on the floor of the assembly that the budget for the year 2012-13 was tax-free. Actually, the provincial government has not taken any measure in the past four years to expand the tax net to sectors with huge incomes but paying no or very little taxes.
Unfortunately, the KP government has once again taken no measures for tapping revenues from agriculture, real estate and other under-taxed sectors because of strong resistance of provincial elites including cabinet members.
The province’s reliance on the federal resource transfers has increased manifold in the past few years. Over 92 per cent of the revenue comes from the federal divisible pool as a result of the 7th NFC Award and 18th Amendment.
From the federal divisible pool, KP will receive Rs183.68 billion in 2012-13 as against Rs159 billion in 2011-12 as share in federal taxes, an amount of Rs22 billion as special grant for the war on terror in 2012-13 against Rs18.02 billion in 2011-12; Rs9.88 billion as GST on services in 2012-13 as against Rs10.03 billion in 2011-12.
The province will also receive the capped mount of net hydro profit of Rs6 billion along with Rs26 billion expected as arrears.
This is just a projection as the province did not receive the projected amount in this fiscal year.
While transfers from the federal divisible pool increased manifold, the funds were not utilised properly to revive economic growth in the province.
The revenue from the provincial taxes has been projected at Rs7.8 billion for 2012-13, which is almost similar to the amount estimated for the current fiscal year. This year has witnessed a shortfall of Rs2 billion, indicating that the next year’s target will not be achieved easily. The budget unveils no plan for reforming the decades old outdated tax structure of the province.
On the development side, the KP government has allocated Rs1.45bn for agriculture whose main beneficiary would be land owning elites but government is not willing to collect the taxes from them in return for such a huge investment.
Consequently, the low provincial tax collection has also reduced the capability of the provincial government to bear the much of the needed development expenses while the spending on law and order is mounting.
The provincial debts surged to Rs130.53 billion in the year 2012. Of these, the foreign debt component increased to Rs121.37 billion. Another Rs7.42 billion has been added to the total debt of the province in just one year. As a result, the provincial government’s debt serving cost will go up, reducing the fiscal space for carrying out development programmes in the province.
Over the past five years, the provincial development spending has increased manifold but that did not help in reviving the sinking provincial economy. The provincial ADP at over Rs97 billion for 2012-13 is up from just Rs28.36 billion in 2008-09.
While ADP allocation has increased, actual spending is much below the target. Untill May this year, only 50 per cent of the spending on development projects had been carried out. In other words, the KP government will only complete 296 projects in the outgoing fiscal year as against total projects of 1035 announced in the budget 2011-12.
Aside from this, in the federal PSDP the government has allocated Rs60.13 billion for 171 ongoing projects and five new ones for next year. Of this, an amount of Rs46 billion has been earmarked for the energy and irrigation related projects. Only Rs4.13 billion has been allocated for construction of badly needed highways and roads in the province.
The huge allocations both at provincial and federal levels, were mainly channeled towards non-productive sectors. Instead of focusing on reviving the sinking industrial sector of the province, the KP also followed the path of Punjab government to distribute 25000 laptops among students next year at a cost of Rs1 billion. The scheme is targeted to oblige youths who are highly inclined towards Pakistan Tehreek Insaf in the province. Aside from political consideration, the scheme is also open to corruption.
The budget document claims adding 200MW electricity next year by constructing five small dams in the province at a cost of Rs1.13 billion. Again this seems to be a lip service as it is not possible to complete these dams in such a short time. The budget claimed credit for establishment of 100 more primary schools, 100 tube-wells but it lacks strong commitment to improve the quality of education.
There is some news for industrialists as the government announced to give up to Rs50 million loans for investment at a mark up rate of seven per cent. This amount will be returnable within a period of eight to 10 years. However, no fund has been earmarked for this purpose. Also it is not clear whether this loan will be available across the board or confined to few sectors.
Also, it was announced to establish small industrial estates in Malakand, Haripur, Mansehra an Abbotabad No specific amount is mentioned in the budget for the proposal.
As the election is close, the government has allocated an amount of Rs2.5 billion for wheat subsidy in the budget. At the same time, it is proposed to create 8000 new jobs. It is not clear from the budget documents how these new jobs will be created.