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EDITORIAL: The Punjab 2022-23 budget envisages a 125 billion rupee surplus which, if delivered by the end of next fiscal year when elections would be looming large on the horizon subject to parliament being allowed to complete its tenure, would still imply a shortfall of 675 billion rupees in the federal budgeted revenue of 800 billion rupees under the head of provincial surplus.

It is relevant to note that the envisaged contribution of Punjab in the federal provincial surplus would have been considerably higher than the 16 percent that the province’s budget surplus indicates and, disturbingly, further highlights the fact that while setting the federal provincial surplus the finance ministry in general and the Federal Finance Minister Miftah Ismail in particular may not have engaged in meaningful consultative discussions with provincial finance ministers including in Punjab where the Prime Minister’s son and his unconditional supporter is the chief minister.

The total budgeted outlay for next year is 3,226.4 billion rupees and in a marked deviation from earlier PML-N budgets the allocation for infrastructure development takes a distant second place at 216.68 billion rupees (8 percent of total) to social sector development budgeted at 1.083 trillion rupees (34 percent of total outlay), perhaps indicative of the changes wrought in the political narrative by the Khan administration. Production sector is budgeted at 127.32 billion rupees or 4 percent of total outlay.

Punjab has budgeted current expenditure at 1,711.9 billion rupees out of which 190.58 billion rupees has been earmarked for subsidies (11 percent of total current expenditure) with 100 billion rupees alone defined as a flagship initiative for social protection initiative (Utility support programme), followed by free medicines of 39.9 billion rupees, transport 17.89 billion rupees, agriculture 17.32 billion rupees, environment challenges 6 billion rupees and subsidy on ghee 5 billion rupees.

One would not be remiss in assuming that the International Monetary Fund would have serious reservations at the high priority accorded to subsidies, especially as these appear to be largely untargeted. However, true to form the PML(N)-led Punjab government allocated the highest-ever to Annual Development Programme (ADP) — 685 billion rupees — a tradition that is as evident in federal budgets as in provincial budgets though lack of fiscal space due to a reduced divisible pool collection by the Federal Board of Revenue (FBR) that, in turn, is distributed as per each province’s share under the National Finance Commission award leads to slashing the ADP.

Flagship initiatives in the Punjab budget also include: (i) 31.5 billion rupees for sustainable development of southern Punjab, an allocation that reflects the growing political relevance of this largely underdeveloped region, with 58.5 billion rupees earmarked for sustainable development programme for the entire province though it is unclear whether the allocation for southern Punjab is subsumed in this total; (ii) correctional facilities have been budgeted 5 billion rupees, perhaps after the sorry state of our facilities became apparent to PML-N leadership which spent considerable time in jail during the Khan administration; (iii) laptops 1.5 billion rupees (a continuation of Shehbaz Sharif’s initiative as chief minister Punjab); and (iv) 9 billion rupees for road rehabilitation programme with, one hopes, priority given to those roads that urgently require maintenance rather than those that are used by the elite.

In addition, salaries have been raised by 15 percent, above the Consumer Price Index of 13.8 percent year-on-year in May 2022, while pensions have been raised by 5 percent, well below the CPI — a discrepancy that is inexplicable given that utility and food prices, the major budget item of a pensioner, have risen by over 20 percent.

The Punjab government envisages raising tax collections by Punjab Revenue Authority from 155.9 billion rupees in the outgoing year to 190 billion rupees next fiscal year — a 22 percent rise in spite of the continuation of reduced sales tax on services for 30 plus sectors and a 44 percent raise in revenue collected by the Board of Revenue, the controlling authority in all matters pertaining to property, that includes enhancement of rates of luxury houses from 1 July, enhancement of stamp duty from 1 to 2 percent in urban areas, and harmonization of PRA procedures with FBR and other revenue authorities (a long pending demand of domestic business community as well as multilaterals).

Austerity measures include a ban on purchase of new cars, a ban on purchase of air-conditioners exceeding 5 million rupees next year, ban on medical treatment abroad, ban on air travel through government funding, ban on workshops/seminars and ban on upgradation of posts — good optics but one wonders how much of the budgeted current expenditure would be contained by these measures.

It is evident that the Punjab budget, like the Sindh budget, does not support the federal budget’s economic priorities, particularly in terms of creating fiscal space, a factor that would have negative economic implications on the people of the country.

Copyright Business Recorder, 2022

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