PESHAWAR, March 18: Pooling maximum resources to finance mounting recurrent expenditures and dispose of huge financial liability left over by the previous MMA government in the development sector is the biggest challenge the next provincial government has to tackle.

Background interviews with officials suggested that the existing fragile resource base of the province would not allow the future provincial government of the ANP and the PPP to fulfil their commitment of improving social service delivery if long- and short-term steps were not taken for resource mobilisation.

Officials in the finance department said the federal government was not making fiscal transfers to the province according to its budgetary estimates.

The federal government cites mounting recurrent expenditures in the backdrop of growing oil prices and lower revenue collection as the reasons for downward revision of resources to the province.

The financial crunch at the federal level has equally impacted the resource base of the NWFP government, as by the end of the second quarter of the current fiscal year 2007-08, its fiscal deficit had climbed to Rs4.174 billion because of lower than budgeted revenue transfers from the centre, they said.

Besides, the officials said, the provincial government was not making any headway in increasing its own contribution to the revenue base.

It is evident from the fact that during the first six months of the current fiscal year, total tax and non-tax collection remained Rs3.471 billion, showing a one per cent decrease comparing to statistics for the corresponding period of the previous financial year.

The government’s overall expenditures on administration and development sides are also on the higher side because during the first six months of the current fiscal year, expenditures climbed to Rs41.107 billion, which include Rs26.552 billion as recurrent and Rs14.555 billion as development expenditures.

The officials said that at present the finance department was caught in a difficult situation where the province was facing less than budgeted revenue transfers from the federal government and its overall expenditures had gone beyond the projected limits.

The provincial government will need sufficient funding to finance operational and maintenance expenditures of several entities, which the former MMA government had build in education and health sectors during the last five years.

Also, its financial liabilities would increase because of new allowances to public sector employees granted by the caretaker government, the officials said.

The next provincial government, they said, would need to follow both short- and long-term strategies for resource mobilisation so that it could meet recurrent and development expenditures.

Settling down the longstanding issue of net hydel profit between Wapda and the Frontier government could be the main option that could be exploited as part of the short-term strategy, they added.

According to the officials, the next coalition government has to take several crucial decisions, left over by the MMA government, for resource mobilisation.

Most of the decisions were part of a multi-sector reform programme sponsored by the World Bank.

Early disposal of the pending businesses will enable the next government to receive a soft loan of over $100 million from the international lending agency in the next financial year.

The officials said adjustment of land-based Agriculture Income Tax (AIT) rates to income-based was one of the pending decisions.

The provincial government will need to levy AIT on income from land, which is currently collected on flat rates on the basis of size of land through the revenue department.

Another important decision, the officials said, pending before the next provincial government was land records’ settlement in Chitral and Lower Dir.