KP's Finance Minister Muhammad Humayun Khan presented the provincial budget amidst tight security bringing the province's serious ongoing security concerns to the forefront and thereby fully justifying the highest allocation in current expenditure for the forthcoming fiscal year for the police budget at 18.8 billion rupees (around 8 percent of the total expenditure).
In addition, the budget presented was a balanced one with a total outlay of 249 billion rupees, an element that reflects the growing fiscal concerns of the federal government that accounted for the Centre's exhortation to all the provinces to maintain fiscal discipline in their budgets and not exceed the consolidated budget deficit that was agreed with the International Monetary Fund. The KP budget outlay is 16 percent lower than in the current year as the government has not included borrowing from commercial banks for wheat and grain procurement as part of the estimates. Be that as it may, the KP government has kept its commitment with regard to balancing the budget on paper. However, one would hope that by the end of the year, these statistics are not significantly revised as happened this year.
The provincial budget envisages one-third allocation for the Annual Development Programme (19 percent higher than this year), and the rest two-thirds for current expenditure. The focus of the ADP would be on ongoing projects (632) with 403 new projects. Two notable schemes include the microfinance scheme envisaging 50,000 to 300,000 small loans to skilled people through the Bank of Khyber and 10,000 to 15,000 monthly stipends to outstanding students of matriculation and intermediate for two years. The current expenditure, a total of 149 billion rupees, would mainly be spent on debt servicing (11 billion rupees), police as aforementioned, health and education (13.1 billion rupees), and subsidies on wheat (2.5 billion rupees). However, by far the largest chunk of the current expenditure (50.8 billion rupees) would go to district salaries. As dictated by the federal government, second year in a row, this amount includes a 15 percent increase in salaries, coming in the wake of a 50 percent increase last year, an amount that neither the federal nor the provincial governments can justify based on their resources.
KP is targeted to receive 192 billion rupees as its share under the National Finance Commission Award in 2011-12. Considering that in 2010-11 the federal government did not release the entire amount that it had budgeted for (there was a shortfall of 3438 million rupees), due no doubt to the Centre's severe financial constraints one would hope that the federal government does release the entire amount to KP in the forthcoming fiscal year given the fact that this province has paid the heaviest price in terms of the ongoing insurgency and military action.
KP like the other provinces, performed poorly in terms of increasing its revenue through the imposition of new taxes, thereby relying mainly on the increased NFC Award to meet its expenditure allocation for the year. However, it did raise the rates of taxes, water cess and envisaged taxing private professional colleges. That the rich landlords of KP, like their counterparts in other provinces, once again successfully resisted the rise in collections under the farm tax was revealed by the Minister's statement that "the provincial government, however, proposed overhauling of the collection of the agriculture income tax and land tax as it was not achieving the recovery targets." No specifics were mentioned and there is little likelihood that any concrete measures would be undertaken to ensure that the farm tax collections become more meaningful.