Punjab hit by crumbling revenues
By Nasir Jamal  

Incompetent. It might not be the first word that springs to mind when we discuss the management of Punjab’s economy by the Shahbaz Sharif government. But the reality is that it is no better than its predecessor, if not worse. At least that is what its performance during its first year in power has led many to believe. 

As the fiscal 2008-09 closes, the provincial government is set to miss many of its the budgetary targets for the year. 

The provincial tax revenue, according to finance minister Tanvir Ashraf Kaira, is feared to fall short of the budgeted target of Rs40 billion by a hefty 40 per cent to around Rs24 billion. The non-tax revenue is projected to drop to Rs35 billion or less against the target of just below Rs60 billion. 

The huge shortfall of almost 40 per cent in the provincial tax and non-tax revenue means the development of the province would suffer badly. 

The financial crunch facing the province is exacerbated by the projected cut in the federal transfers from the divisible pool under the National Finance Commission (NFC) owing to shortfall in the tax collection by the Federal Board of Revenue (FBR). The province is projected to receive up to Rs17 billion fewer than its estimated share of Rs285 billion this year. 

Because of the shortfall in its revenue receipts, the provincial government is running an overdraft with the State Bank of Pakistan for the first time in several years. 

Mr Kaira, a Pakistan People’s Party minister in the coalition cabinet, blames the slowing economy, falling industrial output, and an obsolete tax administration for the shortfall in the provincial receipts. 

Why couldn’t the province’s finance managers see this coming at the time of making budget? Many would ask. 

Mr Kaira will be required to do a lot of explanation before the provincial legislature for missing the tax collection and the overall revenue targets for the outgoing fiscal in his second budget speech for the next year on Tuesday. 

In his maiden budget speech, he had criticised, though only mildly, the previous government of Chaudhry Pervaiz Elahi in the province, for what he called as fudging figures in the budget for 2007/08 and its unrealistic estimates of revenue receipts to dupe people. 

Mr Kaira will have a hard time defending the government’s failure to even come closer to achieving some targets in case of criticism from the opposition.After all, the incumbent government too had set unrealistic targets for itself. Or did it fudge the numbers for political gains? 

“The situation at the time of budget-making was not as bad as it later turned out to be,” a Punjab finance department official tells Dawn. 

“We expected the economy to slow down a bit but never saw it crumbling like it did,” he adds. He says the provincial government or its finance team is not to be blame for present crunch. 

He argues that the provincial tax and non-tax collection always fell short of the target. “In the past years, however, the shortfall in the provincial resources was usually covered by additional money coming from the federal divisible pool as the FBR collection far surpassed its tax target. 

So we always had enough money to meet our development targets and the province’s failure to collect its own taxes went unnoticed,” he insists. This time the FBR too failed to meet its collection target on account of deteriorating economic conditions, he says. 

As a consequence of the financial constraints, the annual spending on the development in the province, according to Mr Kaira, is likely to be cut to Rs130 - Rs135 billion from the budgeted amount of Rs160 billion for the outgoing year. Some insist that the actual development fund utilisation could be lower than expected by the minister. 

Mr Kaira says the government had utilised more than half of the development budget during the first there quarters of the financial year to March. Others acknowledge that the development fund utilisation remained very low during the first nine months. 

“We had spent something like 22 per cent in the first half of the year to December. The utilisation was further slowed down because of political uncertainty that gripped Punjab in the wake of imposition of governor’s rule following the removal of the Shahbaz Sharif government towards the end of February,” says the finance department official. 

He says the uncertain political conditions in the province wasted at least two precious months. “The development priorities were reset after the imposition of governor’s rule. And when the political government returned it reprioritised its preferrences. It took time and little work could be executed during this period of upheaval in Punjab,” he says. 

He is hopeful of utilisation of maximum funds by the end of the year on June 30. “The thing is that the fund utilisation rises in the last quarter when the contactors are paid their bills on the basis of actual work done,” he says. 

A Punjab Planning & Development Department official agreed to the argument of his colleague from the finance ministry. But, he points out, it is not only the political uncertainty that kept the pace of development work slow in the province in the last one year. 

“Many departments like education do not have the capacity and expertise and enough technical manpower to execute development schemes. Likewise, the private sector also lacks the capacity, equipment, technical expertise, etc to deliver quality work within the stipulated time framework,” he says. 

Yet, he argues, the huge and continuous administrative changes in the bureaucracy have been a major snag in the way of implementation of this year’s development programme. 

“We need some kind of administrative stability and continuity in government departments to execute development schemes. That stability has been missing during the past one year,” he insists. He adds that the provincial tax collectors might have performed better if there were some kind of administrative stability in the province. If the previous government could reach very close to its provincial revenue and ADP utilisation targets why couldn’t the present one?, he wonders. 

The difference between the two governments, he says, lies in administrative stability. “Chaudhry Pervez Elahi chose his finance and planning team and reposed his trust in it. It delivered,” he says. 

Additionally, the planning & development official says, the provincial government, particularly chief minister Shahbaz Sharif, has posted most officials against important posts in violation of seniority-cum-fitness rule because our politicians, having a feudal mindset, look for and seek personal loyalty from bureaucrats. 

A person who gets job on these grounds just cannot take any decision. That is exactly what is happening in Punjab at the moment. Unless the decision-making process is expanded and the cabinet is taken on board, and unless bureaucrats are chosen on the basis of their seniority, experience and their ability to take decisions, you will continue to miss targets in future even in favourable economic conditions. One-man show, as being run by Mr Sharif in Punjab, has never delivered in the past nor would it deliver in the future,” the official argues.
DAWN: Monday, 15 Jun, 2009