• 10pc raise in pay, pension of public servants
• Rs50bn tax relief to continue for businesses, consumers affected by Covid-19
• Tractor trade brought under tax net

LAHORE: The Usman Buzdar government on Monday rolled out its Rs2,232.7 billion fiscally expansionary, growth budget for the next financial year that doles out massive funds for the Pakistan Tehreek-i-Insaf legislators for execution of development projects in their constituencies under the district development package, proposes launching of a universal health insurance scheme and implementation of infrastructure projects across Punjab.

The provincial government has increased the size of its development spending for the next fiscal by more than 66 per cent to Rs560bn from the outgoing year’s Rs337bn to fund the three-year generous Rs360bn district development package that will be spent mostly on the schemes recommended by the PTI legislators to give their voters something to feel good about the economy before the next elections. Besides, the government has allocated Rs80bn for its health insurance scheme, covering the entire population of the province, which will be rolled out by the end of December, and Rs189bn for south Punjab development portfolio.

The expansionary budget presented by Punjab Finance Minister Makhdum Hashim Jawan Bakht amid loud shouts and hoots against the government by the combined opposition in the provincial assembly is in line with the federal strategy to give up its IMF-mandated, austere economic policies that have inflicted huge pain on the low-middle-income segments of the population over the past three years and push growth through public investments before the ruling PTI goes into the 2023 elections. The government hopes to support the poor, generate new jobs and put a bit of disposable income in the pockets of people through its development stimulus.

The fiscal stimulus will focus on social sector (education Rs54.22bn, health Rs98.01bn, water supply and sanitation Rs18.76bn, local government/community development Rs26.63bn), infrastructure development (roads Rs58.29bn, irrigation Rs30.78bn, urban development Rs30bn, public buildings Rs19.28bn), and production sectors (agriculture Rs31.49bn, livestock and dairy development Rs5bn, forestry Rs4bn; industry 12.2bn).

The government has also announced a 10pc raise in pay and pension of all public servants and a 25pc special allowance for the financially distressed employees. It has also decided to continue the provincial tax relief of above Rs50bn announced in the budget for the current year to help businesses and consumers affected by the Covid-19 pandemic.

The ‘flagship’ initiatives announced by the finance minister include five mother & child healthcare hospitals, upgrade of 8,500 schools in the first phase and establishment of 19 universities in the province. Besides, a sum of Rs86bn will be spent on rural water supply and sanitation schemes and Rs14.5bn put aside for emergencies and to combat the effects of the pandemic.

The province is expecting Rs1,683.70bn from the federal divisible pool as its share under the National Finance Commission (NFC) award based on the assumptions that the Federal Board of Revenue will successfully collect the targeted tax revenues of Rs5.83tn next year.

Additionally, the province is hoping to collect provincial tax revenue of Rs272.57bn, up by 23.39pc from outgoing year’s estimates of Rs220.89bn. It is targeting non-tax income of Rs132bn compared to this year’s estimates of Rs96.18bn, including net hydel profits of Rs25bn. The foreign project assistance flows next year are expected to rise to Rs65.20bn. Further, the capital receipts (loans and loan recoveries), including private investment of Rs25bn in P3 provincial infrastructure schemes, are estimated to be Rs79.2bn.

The size of the total provincial consolidated fund, which includes Rs420.34bn on account of loans purchased by the government for the state trading in wheat in addition to the current revenues and current capital account income, jumps to Rs2,653.01bn from Rs2,240.63 this year.

Major provincial spending consists of current expenditures of Rs1427.90bn on general public service (Rs835.10bn), law and order (Rs189.70bn), economic affairs (Rs123.40bn), health (Rs175.70bn), education (Rs77.20bn), debt repayments (Rs54.20bn), investments that include financing of the provincial pension fund (Rs40bn), repayment of wheat trading loans (Rs147.20bn) and development budget of Rs560bn.

The Buzdar government has estimated the provincial surplus next year to be around Rs125bn, up from the outgoing fiscal’s savings of Rs39bn, to finance the federal fiscal deficit to keep it from expanding beyond the target of 6.3pc.

Major new tax initiatives include withdrawal of the proposed motor vehicle tax relief on old vehicles and reduction in its rate by 75pc for electric vehicles to promote a cleaner environment. It, nevertheless, brought tractor trade under the tax net, triggering fears that this essential machine for agriculture will become dearer.

The finance minister said the Punjab government had decided to rope in all professionals (doctors, lawyers, services) who are assessed for the purpose of assessing income tax into a professional tax net. The entertainment services like cinema, theatres, concerts, circus, sports events, races, films, fashion and mobile stage shows are proposed to be brought under the purview of the Punjab Revenue Authority with introductory zero tax without input tax adjustment.

Makhdum Hashim began his speech by recounting the measures taken by the Imran Khan government to revitalise the broken economy it had inherited on coming into power in 2018 and successfully protected people and national economy from the adverse impacts of the pandemic. He said Punjab’s economic performance in spite of the pandemic was commendable. “We have grown our provincial tax and non-tax receipts by more than 13pc this year in spite of tax relief of over Rs50bn given to people to combat the negative effects of the pandemic,” he said.

He said the new budget had been designed with the ambition to sustain and accelerate the current economic growth. He said the provincial government had enforced a strict monitoring regime on expenditure with prudent spending. He said the government’s development priorities and its annual development programme are guided by the Punjab Growth Strategy 2023 and Punjab Spatial Strategy 2047.

“The government aims to accelerate growth momentum gained during the current year and, hence, its development investment is designed to push economic growth, create jobs and improve productivity. The guiding principles adopted for the next fiscal’s development programme include growth-led investment, inclusive and balanced regional development, transformation of agriculture sector, human development through skills development, enabling environment for the private sector resource mobilisation, and targeted investments in priority projects through the Economic Revival Programme. Focus on regional equalisation for the development of south Punjab will also support the development of the backward areas of the province. Some of the critical priorities for south Punjab include education and health, infrastructure linkages and connectivity, agriculture, industrial and urban development,” he added.

Published in Dawn, June 15th, 2021