Punjab: Development has to wait

As opposed to the spending spree of PML-N in its later years ruling Punjab, the PTI government has been holding its fire, courtesy the different circumstances. With the FY20 budget, the party now has the first real shot at realizing its social-sector priorities in the largest province. But it won’t be without challenges, of both fiscal and structural nature.

After accounting for Rs233-billion provincial surplus, the Punjab government has budgeted for spending an overall sum of Rs2.06 trillion next fiscal. The Rs350 billion development budget – outlined under the Annual Development Plan (ADP) – accounts for 17 percent of that budget. The share of development budget is higher than 12 percent estimated for this fiscal. But it is notably lower than the PML-N government’s average of allocating over a quarter of budget for development.

In effect, the Punjab’s development budget in FY20 is back to FY16 level. What matters more is how much actually gets spent in the end. In its last year in office, the PML-N Punjab government spent close to Rs500 billion on development projects. In its first year in office, the PTI Punjab government is set to spend less than half of that figure (Rs228 billion), after a significantly chopping down the FY19 ADP.

Taking those low ADP numbers in FY19 for a start, “development” in Punjab may be branded as a growth story from here on, so far as numbers are concerned. For instance, the social-sector component in the FY20 ADP has grown by 33 percent to Rs125 billion, accounting for 36 percent of the pie. In reality, this number is markedly lower than social development spending in the PML-N’s later years (see chart).

For infrastructure development, the Punjab government has budgeted Rs88 billion, which is about a quarter of the ADP. The PML-N government was indeed high on infrastructure spending, but even under them this sort of spending had come down to less than 30 percent of the ADP in later years, with more of the resources going towards the social-sector development projects.

This is not to minimize the PTI’s focus towards social sector development. In reality, though, Punjab’s development priorities had started shifting towards social sector in recent years. The PTI government should be able to accelerate that process, but it might encounter difficulties delivering on its idea of development. On top of a significant reduction in provincial development budget (to recent years), more spending cuts next fiscal could lead to further erosion of spending efficiency.