KARACHI, May 30: A medium-term fiscal framework (MTFF), which stipulated Sindh government’s three-year revenue and expenditure projections from 2007-08 to 2009-10, has been thrown out of gear in the first year of its operation, mainly because of impact of international and national economic turmoil on the provincial budget.

With no full-time finance minister in the cabinet, Sindh Chief Minister Syed Qaim Ali Shah is looking after the financial affairs of the province.

Mr Shah has no time to explain the strategy of overcoming the impact of national and international economic turmoil on the current fiscal year’s budget of his province.Top officials of the finance department, including special secretary who is daughter of the chief minister, are finding no time to offer any explanation as to how shortfall of Rs14.5 billion in federal transfers is being overcome in the current fiscal year.

On April 24, the provincial finance secretary gave a detailed briefing to Syed Qaim Ali Shah after he secured a vote of confidence for the office of the chief minister.

The secretary informed the CM that there was a shortfall of Rs14.5 billion in federal transfers in a budget that was delivered in June 2007 with a built-in deficit of Rs12.3 billion.

The budget for 2006-07 showed total receipts of the province at Rs223.8 billion as against a revenue expenditure of Rs236.1 billion, indicating a deficit of Rs12.3 billion.

The total amount of federal transfers was indicated at Rs130.9 billion plus Rs20.4 billion grant for district support.

The shortfall in federal transfers has come from an indicated decline in the recovery of federal taxes which were projected at Rs1,025 billion initially but were now being estimated at Rs990 billion.

Final tax collection figures for 2006-07 will come sometime in the first week of July which are feared to be less than revised estimate of Rs990 billion and would further reduce inflow of resources from Islamabad to provinces.

No one is blaming the government for budgetary projections slipping out of control because the budget for 2006-07 was prepared when oil price was $60 a barrel and was now being quoted at around $130 a barrel.

The commodity prices are going haywire. But what is irritating many financial analysts is the intriguing silence of bureaucrats on this issue.

The MTFF proposed an average of 14 per cent annual increase in federal tax transfers while the federal grants and subventions were expected to show an annual growth of 10 per cent.

There is no official word whether the proposed growth tempo in revenue was maintained or not, officials in the government, other than finance, are convinced that it was not so.

There are, therefore, doubts of the stipulated aggregate revenue growth of 13.5 per cent in 2006-07 and also in the coming year.

While the revenue budget has been totally upset because of shortfall in flow of funds from Islamabad, officials in the Sindh government claim of implementing a Rs50 billion development budget in the current fiscal and are confident of proposing a Rs60 billion development budget next year.

How would the Sindh government meet the challenge of a reduced inflow of funds from Islamabad and still come up to the expectations of over 40 million people of the province who are desperately looking for jobs, a little improvement in quality of their lives and above all an improvement in law and order is a question that political leadership has not adequately addressed.

“Except Sindh, all other provinces are in red with the State Bank of Pakistan,” a source close to top Sindh government officials informed.

He said that Sindh maintained a very prudent book-keeping in the last seven years during which it paid back Rs11 billion SBP loan, retired prematurely more than Rs15 billion outstanding loans and have built up about Rs25 billion reserve funds for pensions of employees, insurance and provident fund, besides a Sindh Social Fund.

There are indications that the PPP-MQM coalition is all set to provide more than 40,000 jobs in the coming days. Of these more than 23,000 are to be absorbed in the education department as more than 7,500 school buildings have been constructed which are without teachers and furniture.

Similarly, the health department is said to be in the need of more than 6,000 doctors, paramedical staff and others while the police force is expected to be strengthened with 10,000 more persons.

With a workforce of more than half a million, the Sindh government is paying roughly Rs60 billion every month as wages. More than Rs5 billion goes towards pensions.

Over Rs18.5 billion is being paid towards services and commodities, Rs9 billion as interest on outstanding loans, about Rs3.5 billion goes towards maintenance and repairs where the development budget outlay is Rs50 billion.

“Bulk of development funds are being spent on bricks and mortar,” a senior officer had explained of spending on construction which gives an ample room for leakage of funds for contractors who are mostly cronies of politicians and bureaucrats. “The rule of thumb is that as you increase development fund investment, you have to see critically at your revenue budget to meet the rising cost that would come from delivery of service and maintenance,” a retired bureaucrat explained. This explains why 7,500 constructed buildings of schools are vacant in the province.