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ISLAMABAD: Khyber Pakhtunkhwa (KP) Revenue Mobilization and Public Resource Management Project (KPRMP) implementation helped in tax revenue collection increasing from a baseline $99.4 million in fiscal year 2019 to $216 million in fiscal year 2022 — a difference of more than the initial International Development Association (IDA) investment and surpassing the project’s target.

The World Bank result brief on the project stated that KPRMP has helped the government of KP to significantly increase tax revenue, allowing an expansion of public services to former FATA. It has increased transparency of public financial management, which has contributed to rebuilding the social contract in an area previously impacted by fragility and conflict.

During implementation, tax revenue collection increased from a baseline $99.4 million in fiscal year 2019 to $216 million in fiscal year 2022 — a difference of more than the initial IDA investment and surpassing the project’s target. Underpinning this achievement, the filing compliance of services sales tax has improved from the 51 percent baseline to 77 percent in the fiscal year 2022. Urban Immoveable Property Tax records of six cities have been updated, digitised, and linked with the GIS map, resulting in the expansion of the tax base by 54 percent.

This increase in revenue created the fiscal space for the GoKP to increase spending in priority areas like health. The health allocation in the provincial budget increased from $320 million in the fiscal year 2019 to $597 million, including a budget of 10 percent for the newly-merged districts in fiscal year 2023. This has supported the provision of universal health insurance through the Sehat Card Plus programme. Together with other projects, including the KP Spending Effectively for Enhanced Development Program, the KP Human Capital Investment Project, and the Asian Development Bank’s KP Health System Strengthening Programme, the project has supported health outcomes in the KP province through increased revenue collection. The increased amount of own-source revenue mobilised (the provincial taxes) also meant that the GoKP was able to sustain its operations as well as finance an emergency response during the Covid-19 pandemic and the flood crises of 2022.

The project has also helped strengthen public financial management by substantially reducing the allocation of resources to unapproved projects from 49 percent in the fiscal year 2018 to 22 percent in the fiscal year 2023.

Furthermore, 90 out of a total of 113 Tehsil Municipal Authorities (local government division authorities) are using the new Financial Management Information System to record revenue and expenditures, thereby, significantly boosting transparency in the stewardship of public finances.

This IDA-financed project was approved on June 13, 2019. The overall IDA contribution for the project is $118 million, of which, $100 million is dedicated to the Program for Results supporting areas related to enhancing revenue mobilisation and public resource management. Counterpart financing provided by the GoKP was $57 million, equivalent to 36 percent of the program expenditures. An additional $18 million from IDA is dedicated to support technical assistance and capacity building to enhance e-government functionality.

Copyright Business Recorder, 2024

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