The budget season3 min read

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Budget
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The Sindh government inexplicably and in marked deviation from prevalent practice, has announced its budget for the remaining nine months of the ongoing fiscal year before the federal government has amended the April 2018 budget raising serious questions about its implementability with respect to expenditure allocations and available revenue. Repeated statements by members of the federal cabinet, including Prime Minister Imran Khan and Federal Finance Minister Asad Umar, leave no doubt as to their belief that the budget announced by the Abbasi-led government in April was unrealistic both in terms of expenditure allocations and revenue generation measures and, therefore, it would be revised soon – a belief endorsed by independent economists. Additionally, Prime Minister Imran Khan after his recent one-day visit to Karachi categorically stated that PTI will prepare a master development plan for the city which the provincial government may deem politically expedient to invest its resources in.

There is intense speculation in the federal capital that the federal Public Sector Development Programme expenditure allocations are likely to be trimmed by a couple of hundred billion rupees for the ongoing fiscal year due to inadequate resources as well as due to markedly different sectoral development priorities of the Pakistan Tehreek-e-Insaf (PTI) government in comparison to the previous Pakistan Muslim League-Nawaz administration.

Also Read: Sindh cuts development budget by Rs24b

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The Sindh government appears to have also given no thought to the fact that subsequent to the 18th Amendment, which was spearheaded by the PPP-led coalition government, the federal government discusses/negotiates with the provinces on the amount of provincial surplus for the ongoing year which, since the amendment was approved by parliament in 2010, has become an integral exercise in budget formulations of both the federal and the provincial governments. There have been no reports of any meeting between the Sindh and the federal finance ministers and it is unlikely that this vital aspect of the budget has been discussed between the two.

The revenue measures contained in the April federal budget were termed unrealistic not only by independent economists but also by the Federal Board of Revenue (FBR) which maintained that the proposed tax measures would lead to a 91 billion rupee revenue loss rather than the 13.2 percent increase in tax revenue (compared to the year before) as envisaged in the budget documents. At this stage, it is unclear if the Khan administration would simply announce fire fighting measures, required given the state of the economy, which may delay reforming the unfair and anomalous tax structure by widening the tax net instead of raising taxes on existing taxpayers as, unfortunately, was the norm during the PML-N administration. However, even if tax reforms are a part of the amended finance bill, the revenue from the divisible pool that provinces mainly rely on for their annual revenue stream may differ considerably from what was envisaged in the April budget or from any projections made by any provincial government. Thus it would certainly have been advisable for the Sindh government to delay announcing the budget for the current fiscal year till after the federal government announced its budgetary amendments.

The other three provincial governments have not indicated any ongoing exercise with respect to announcing their budgets for the rest of the current fiscal year. Given that the PTI has formed the government in Punjab and Khyber Pakhtunkhwa and is a coalition partner in Balochistan, Sindh’s decision is being dubbed not only as inappropriate but also partisan.

(This news/article originally appeared in Business Recorder on September 18th, 2018)

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