OUTDOING the federal government, Chief Minister Sindh opted to throw caution to the wind to present a populist Rs2.2 trillion tax-free provincial budget, eyeing elections later this year.

Evading the commitment to pitch its share of the collective Rs750 billion provincial surplus, the Sindh budget posted a deficit of Rs37.7bn. The federal government has based the lower fiscal deficit numbers in the budget on recovering a portion of resources disbursed to provinces through surrendered surplus by all four federating units.

In negotiations with the International Monetary Funds (IMF) to revive the programme, the Pakistan team cited a signed memorandum of economic and fiscal policies confirming provinces’ intent to collectively post a Rs750bn cash surplus.

Chief Minister Murad Ali Shah, who also holds the finance portfolio, did not even attempt to broaden the provincial tax net by roping in the undertaxed sectors (agriculture, services, and real estate) or improving the weak documentation of Sindh’s economy.

The federal government is tasked to raise resources while the provinces can focus on expenditure strategies

He did, however, increase the development spending by 72 per cent over the last year to Rs700bn with a primary focus on the rebuilding of the infrastructure devastated and rehabilitation of 12.5 million people uprooted by 2022 floods. The proposed Sindh development spending is 31pc of the total budget outlay.

He also hiked the salaries of civil servants by 30-35pc and pensions by 17.5pc in the province. Against the federal budget proposal of Rs32,000, he raised the minimum wage to Rs35,500 from Rs25,000. He set aside Rs324bn for subsidies, grants, and loan write-offs.

Chief Minister Shah, who has been heading the provincial hierarchy for over seven years, the second longest period historically, has made a mark — the management of the Covid vaccination drive, proactively dealing with floods and rehabilitation, management of the recent cyclone Biparjoy threat — but did little to harness the huge development potential in Sindh.

He did not visibly succeed in identifying and facilitating development agents to broaden the base of the provincial economy or curbing the patronage culture to alter the perception of weak governance here. His initiatives to revive the broken public transport infrastructure are commendable, but the pace of work, transparency and commercial viability of these projects is questionable.

The lack of focus on the documentation of the huge provincial economy under his watch has deprived even his party of verifiable evidence of improvement in service delivery in the social sector in Sindh, the only province where the PPP enjoys the decisive support of the constituents.

The funds spent on running jarring media campaigns highlighting the Sindh government’s performance are often dismissed as propaganda. Had the Bureau of Statistics Sindh been strengthened, it would have improved not only the quality of planning and effectiveness of interventions but provided verifiable credible data to support claims of the provincial government’s performance. It might have revised up Sindh’s low placement compared to Punjab and Khyber Pakhtunkhwa on the Human Development Index.

Sindh has a sizeable pool of talented youth and is the biggest industrial and commercial hub in the country. Little has been done to improve the employability of youth by developing linkages of education institutions with the employment market. The Sindh government, despite leading the country in public-private partnership, has yet to win the confidence of the business class that perceives it to be a party of landed aristocracy with a rural bias.

Asghar Memon, Chief Economist, Sindh planning department, shared a very detailed note on the budget arguing in favour of the government and concluded: “The government has been working on all fronts to ensure that the provincial budget functions as a truly transformative instrument to effectively mobilise resources for economic recovery, inclusive growth, balanced development, and resilient recovery for the province that has suffered its worst climate catastrophe in history.”

Asad Ali Shah, an accounting professional and a leading commentator on Sindh affairs, found the provincial budget to be the same as the earlier ones. “The whole exercise is input based without any relationship with outcomes,” he said.

“The lack of innovation is not confined to Sindh, though it’s universal,” he said, hitting at federal and other provincial budgets. “Major difference is that the federal government is tasked to raise resources, utilising all local and overseas avenues whereas provinces can focus on expenditure strategies as their income grows over the years, thanks to the National Finance Commission award.”

He also commented on the budget deficit in Sindh as the federal budget reflects provincial surpluses. He cast doubts on the government data. He said his work projected a budget deficit of 14pc of GDP against 7pc claimed by the federal government in revised estimates for the outgoing year.

The budget documents show that Sindh hopes to receive 31.5pc higher inflows of Rs2,210bn over the current year from the federation against the proposed budgeted expenditure of Rs2,247bn during FY24 starting in July.

The receipts include Rs1,353bn in revenue assignment, Rs64bn straight transfers, and Rs34bn grants to offset losses of the abolition of octroy and Zila tax. It also includes Rs203bn provincial tax receipts, Rs235bn sales tax on services, Rs32bn non-tax receipts, Rs6bn current capital receipts, and Rs30bn bank borrowing.

Published in Dawn, The Business and Finance Weekly, June 19th, 2023