Amid Hope And Fear
Sindh's revenue and expenditure estimates for the next
fiscal seem to be realistic
By Salman Siddiqui
It would not be incorrect to say that the recently
presented Sindh Budget for the next fiscal is a
reflection of the Federal Budget 2008-09, because more or less similar
announcements have been made in the two documents. For example, the province
followed the Centre in providing huge incentives to the agriculture sector,
giving tax relaxation to the stock market for another two years, increasing
government employees' salaries and pensions by 20 percent, allocating big chunk
for development programmes, and recognising
the importance of health and education sectors by substantially increasing
allocations for them.
A major challenge for the province, however, will
be to convince the Centre and the other three provinces to agree on the
National Finance Commission (NFC) Award formula proposed by it. Sindh wants revenue collection and backwardness as the
basic criteria for allocating funds to the provinces under the NFC Award, while
It is important to mention that in the outgoing
fiscal, Sindh failed to spend the original allocation
of Rs236.2 billon and the amount had to be revised downwards to Rs234.5
billion. This leads to only two possibilities: either the province had initially
allocated more funds than it actually required or it did not finish work on
some of the development projects due to be completed by June 30.
On the positive side, Sindh
has increased allocation for the Annual Development Plan (ADP) despite being faced
with financial constraints. For the next fiscal, the province has earmarked an
amount of Rs89.3 billion for the ADP, which is 23 percent higher than the
revised estimate of Rs72.3 billion for the outgoing fiscal. Announcing the
ADP's outlay during his budget speech, Sindh Chief
Minister Qaim Ali Shah -- who also holds the
portfolio of finance -- said: "Despite fiscal constraints, we have decided
not to cut down the development spending, because we must provide services and programmes that can facilitate urgent relief and help us
move towards long-term economic consolidation and growth."
Sindh's development outlay includes Rs55 billion for the
provincial ADP, Rs12 billion for district governments, Rs2.73 billion for the Sindh Development Social Services Programme,
Rs2 billion for the Sindh Cities Improvement Programme and Rs510 million for the Drought Emergency
Relief Assistance. Besides this, there are foreign-aided projects of Rs4.35
billion and federal grants worth Rs12 billion for development purposes.
In the ADP, the biggest amount (about Rs9 billion
or 13 percent of the total) has been earmarked for the transport and
communication sector, as the Sindh government accords
utmost priority to it. Most of this amount would be used for the construction
of roads linking farms to markets. Similarly, a hefty amount of Rs4.87 billion
has been earmarked for the agriculture sector, including livestock and
fisheries. This amount is 36 percent more than the allocation of Rs3.5 billion
for the agriculture sector in the outgoing fiscal.
The construction of dams, including that of the Nai Baran dam on a fast-track
basis over an area of 30,000-40,000 acres; promotion of flower and fruit
nurseries; establishment of an agro export processing zone at Karachi; training
of women in cotton-picking; upgrading of hospitals and rehabilitation of health
training institutions; strengthening and developing of social sectors; and
youth development programmes are also included in the
schemes to be executed under the provincial ADP in the next fiscal.
However, the Sindh
government might face some problems as far as the revenue collection estimates
are concerned. The slowdown in the overall national economy amid corrective
measures being taken by the State Bank of Pakistan (SBP), the Ministry of
Finance (MoF) and the Federal Board of Revenue (FBR)
might create some hurdles in the way of provincial revenue collection.
The increase in the SBP interest rate to more than
12 percent from 10.5 percent, effective from May 23, and another likely
increase of 50-100 basis points in the monetary policy to be announced shortly
are preventing the circulation of money in the market. This step would
definitely help control the all-time high inflation, but at the same time it
would also narrow down the demand and supply of commodities, which in turn
would have negative effects on the growth of industry.
The Sindh government has
already kept the agriculture sector out of taxpayers' net, while slowdown in
industries and services performance is also expected to embarrass the
provincial government on revenue collection side. Moreover, the Sindh chief minister has also announced withdrawal of 0.1
percent stamp duty levied in the 2006 Finance Bill on par value of each
electronically transferred share in the Karachi Stock Exchange (KSE). According
to an estimate, Sindh would lose Rs6 billion under
this head alone.
However, an increase of 0.3 percent in
infrastructure cess would help generate more revenue
for the province. The levy is currently 0.5 percent on imported goods. The
Finance Bill stipulates various slabs for infrastructure cess
on imported goods. Therefore, Sindh has set the
target of revenue receipts for the next fiscal at Rs207.8 billion, which is
17.5 percent higher than the revised estimate of Rs176.9 billion for the
outgoing financial year.
Moreover, capital receipts have been estimated at
Rs14.5 billion for the next fiscal. Compared with the revised estimate of
capital receipts for the outgoing financial year, Rs4.5 billion, they are more
than three times higher. The estimated current capital receipts for the next
fiscal comprise Rs3.7 billion in local payments, Rs345 million from the Sindh Development Social Services Programme,
Rs6.75 billion from the World Bank, Rs1 billion from the European Commission
and Rs2.7 billion from the Asian Development Bank (ADB).
The capital expenditure for the next fiscal has
been estimated at Rs9.5 billion, against the revised target of Rs8.5 billion
for the outgoing financial year. The overall revenue and capital receipts for
the next fiscal have been estimated at Rs222.3 billion, against the estimated
revenue and capital expenditure of Rs190.5 billion, thus a surplus of Rs31.9
billion.
The current revenue expenditure has been estimated
to increase by Rs17.1 billion to Rs181 billion in the next fiscal. Similarly,
the provisional expenditure is estimated to increase by Rs12.7 billion to Rs103
billion in the next fiscal, as compared with the revised target of Rs90.3
billion in the outgoing financial year.
Courtesy: The News