New plans for the new fiscal year

The PTI government in Punjab is working on comprehensive developmental action to shift its economy into a higher gear during the last two years of its rule in the province, claims its finance minister Makhdum Hashim Jawan Bakht.

“We are preparing a growth-centric budget for the next fiscal year,” Mr Hashim said in an interview with this correspondent. “This year has remained promising in spite of the Covid-19 crisis and the economy has picked steam. Now we feel that we have a very good platform to start a shift towards development growth.”

He said the provincial government had spent the first three years (2018-21) cleaning up the economic mess left by the previous PML-N government, stimulate the economy and provide relief to the people to protect them from the adverse impacts of the global pandemic. “But now onwards we feel that we will have enough room to boost growth over the next two years (ahead of the 2023 elections),” the minister argued.

The provincial government is expecting a substantial jump in its share from the federal divisible pool next year as the federal tax target is being set close to Rs6 trillion. Additionally, the province is making efforts to greater mobilise its provincial tax and non-tax income. “We think we will have enough funds to support our growth-centric socio-economic development stimulus next year and the year after that. There will be no shortage of funds and we plan to frontload our ongoing and new schemes from the beginning of the new financial year,” he contended.

It is estimated that the government will have to boost development stimulus to Rs850bn by 2022-23 to push the provincial economic growth rate to 7pc

Punjab is targeting development expenditure of Rs337 billion on socio-economic infrastructure during the present fiscal year. Given the public resource constraint, the government had arranged significantly large foreign funding as well as implemented a plan to leverage private investment in infrastructure projects under the public-private partnership (P3) framework. The original estimates of the annual development programme (ADP) for 2020-21 carry almost two-fifth of the total uplift allocations in the shape of foreign loans, including a Chinese loan of Rs40.8bn.

Similarly, the provincial government is expecting a private investment of Rs25bn in different P3 road infrastructure development schemes in the province during the current year. However, it is anticipated to miss the target with a wide margin. The P3 schemes are slow to take off and the tight fiscal position of the federal government is keeping the province from spending the cash it has.

Ever since coming into power in 2018, the PTI government is struggling unsuccessfully to increase its development allocations to the levels of its predecessor. The decreasing allocations are now showing up in the shape of the increasing development gap in the province.

The Usman Buzdar administration drastically cut the development allocations in its first year in power to Rs238bn from original estimates of Rs635bn in the previous fiscal year, citing resource constraints as a reason, and ended up spending Rs212.5bn. Last year, it increased its ADP allocations to Rs308bn but ended up spending Rs214bn with a massive revenue gap of Rs581.4bn — including a shortfall of Rs473.6bn in the federal transfers to Punjab and Rs103.9bn in the province’s own tax source — in the originally projected income of Rs1.989tr owing to the difficult macroeconomic environment, which was worsened by the countrywide Covid-19 lockdown.

“My effort is to raise the next year’s development stimulus by more than a third of the original estimates for the present fiscal year. We will have a decent amount of money to spend,” Makhdum Hashim responded to a question. “We will also move towards a better planned ADP with the maximum possible number of approved new schemes as part of public finance management reforms underway in the province.”

In order to meet the pandemic challenges, the government last year rolled out the Public Investment Strategy — Responsive Investment for Social Protection and Economic Stimulus. The new strategy argued that the government needs to spend heavily on development to grow the provincial economy and create jobs. It estimated that the government will have to boost development stimulus to Rs850bn by 2022-23 to push the provincial economic growth rate to 7 per cent.

In the absence of enough increase in the public development investment stimulus or private investment in large-scale uplift schemes, according to the strategy, the provincial economy is projected to grow by just 3pc by the end of the PTI’s term in spite of the recent recovery.

Some observers insist that the provincial government will have to struggle hard to catch up with the ‘development momentum’ of the past unless the Federal Board of Revenue improves its performance to raise the tax to GDP ratio from the existing 10pc to 15pc to help cut the federal budget deficit and increase provincial share in terms of absolute transfers to them.

Makhdum Hashim said the tax relief for the businesses and people at large will continue next year as the third wave of the pandemic continues to grip the province. The Punjab government had given significant tax relief of Rs56bn to the businesses hit adversely by the Covid-19 pandemic to save jobs and ensure that such enterprises continued to operate. Additionally, the tax cuts and rebates for taxpayers announced in the 2020-21 budget aimed at digitising the economy, ease of doing business, documentation of certain sectors of the economy and promotion of construction and tourism industries.

“Let me say the next two years will be different from the previous one. You will see the development curve steepen with a full focus on social development. There will be a substantial shift in human development indicators in the province in the next two years,” the minister claimed.

According to him, the province plans to focus on education, health and district development in the next budget. For example, it plans to roll out the large-ticket universal health insurance NJinitiative covering the entire population of the province by the end of December this year.

Further, at least 20,000 primary schools — out of a total of 55,000 schools in the province — will be upgraded next fiscal to the elementary level to arrest the dropout ratio and bring 4 million out-of-school children back into the system. Additionally, 12 new hospitals will be constructed and the needs of higher education met substantially. Districts will get sufficient money for the development and rehabilitation of social and economic infrastructure like roads, colleges, etc.

“The Covid-19 impact is there on the economy. Our efforts and finances are so far geared towards managing the pandemic. We approved supplementary grants of Rs60bn this year to spend on health insurance in Sahiwal and Dera Ghazi Khan and Sahiwal divisions and purchase ambulances for the rescue services. We will continue with the measures to fight the pandemic as we have to now live with it. But we will also upscale our other development investments from next fiscal,” the minister concluded.