The provincial governments have allegedly violated their commitment to the federal government to ensure a certain level of budget surplus. As a result, the country faces a widening budget deficit of Rs6.5 trillion or around 7.7 percent of the Gross Domestic Product (GDP) for the outgoing fiscal year (FY23).
According to official documents seen by The Friday Times, the provinces were supposed to ensure a combined budget surplus of Rs459 billion in the fiscal year 2022-2023. However, excessive spending, in what was their last year in power, political parties in the respective provinces left a budget surplus or unspent budgetary allocations of just Rs154.6 billion.
All provinces reported receiving a major portion of their revenues in the form of federal transfers under the National Finance Commission (NFC) award. The provinces had earmarked expenditures from these revenues in the development sector. Such expenditure could have contributed towards generating economic activities and employment generation, thus countering the impacts of inflation and economic strife.
Data from the Finance Ministry showed that provincial governments received Rs4.223 trillion from the federal government under the NFC during the financial year 2022-23.
Meanwhile, the four provinces had collected taxes of just Rs650 billion. At the same time, provincial non-tax revenue collection was recorded at Rs165.9 billion.
On the other hand, provinces spent Rs5.144 trillion and returned Rs154.6 billion to the federal government to help restrict its budget deficit. The country’s expenditures were recorded at Rs16.2 trillion, compared to the revenues of Rs9.6 trillion, resulting in a deficit of Rs6.5 trillion or 7.7 percent of the Gross Domestic Product (GDP) during the outgoing financial year.
The primary balance, the difference between the government’s revenue and its non-interest expenditure, recorded a deficit of Rs690 billion or 0.8 percent of the GDP during the period under review, data from the Ministry of Finance showed.
Under the seventh NFC award, the federal government is bound to transfer 57.5 percent of the resources to the four provinces. Of this, Punjab gets 51.74 percent, Sindh 24.55 percent, Khyber-Pakhtunkhwa 14.62pc and Balochistan 9.09 percent of the transferred revenues.
Punjab
The most populous of the provinces, received Rs2.076 trillion from the federal government during the previous fiscal year.
The major chunk of the revenues came from the federal government under a divisible pool. The province also raised Rs297.4 billion in taxes. Non-tax revenues were recorded at just Rs81.8 billion.
Its total revenue in the last fiscal year was Rs2.425 trillion
The province ended up spending around Rs2.335 trillion in the outgoing fiscal year, recording a budget surplus of Rs90.067 billion.
Sindh
The province had a budget surplus of Rs50.4 billion, with expenditures recorded at Rs1.45 trillion.
Of the Rs1.501 trillion in revenues, the Sindh government received Rs1.046 trillion from the federal government under the NFC award during the period under review.
The Sindh government collected Rs285.119 billion in direct taxes and Rs33.2 billion in non-tax revenues. Federal loans and grants stood at Rs136.3 billion.
Khyber Pakhtunkhwa
Khyber Pakhtunkhwa had the smallest budget surplus of just Rs16.6 billion.
During the outgoing fiscal year -- half of which was spent under a caretaker set-up -- the province had expenditures of Rs892.8 billion. At the same time, it had revenues of Rs909.5 billion.
Tax collection in the province was recorded at Rs41.4 billion in the last fiscal year. Non-tax collection for the same period remained at Rs37.134 billion.
The province received Rs698.7 billion from the federal government under NFC during the last fiscal year.
Balochistan
Balochistan was the only province with a budget deficit of Rs2.524 billion, spending more money than it had available.
Balochistan expenditures for the fiscal year were Rs465.9 billion as compared to its revenues of Rs463.4 billion.
Balochistan’s tax collection was recorded at Rs25.7 billion, and non-tax collection at Rs13.7 billion.
Federal loans and grants stood at Rs22.33 billion, while it received Rs401.6 billion from the federal government under the NFC.