Zafar Iqbal
Provincial budgets play a crucial role in a federation by outlining the financial plans and priorities of each provincial government for the upcoming fiscal year. These budgets are important for several reasons.
Firstly, provincial budgets determine how financial resources will be allocated among different sectors within each province. This allocation has a direct impact on the delivery of public services, infrastructure development, education, healthcare, and social welfare programs. By delineating the planned spending for various sectors, provincial budgets help in prioritizing areas that require attention and investment, thereby contributing to the overall development of the province.
Secondly, these budgets reflect the autonomy and decision-making authority of each province in managing its finances. They enable provinces to address their specific economic, social, and developmental needs based on their unique circumstances. The ability to tailor budgets to local requirements is fundamental for effective governance and enables provinces to respond to the diverse needs of their populations.
Moreover, provincial budgets also contribute to inter-governmental relations by outlining the financial interactions between the federal government and the provincial governments. They address issues related to fiscal transfers, revenue sharing, and coordination on matters of mutual interest. This fosters collaboration and cooperation between different levels of government, ensuring a more harmonized approach to financial management and public service delivery.
Additionally, provincial budgets provide transparency and accountability in the use of public funds at the provincial level. By detailing how public money will be spent, these budgets enable citizens to hold their provincial government accountable for its financial decisions and performance. This transparency helps in building trust between the government and the public, promoting responsible governance and efficient allocation of resources.
Furthermore, provincial budgets are essential for economic planning and development within each province. They guide investment in key economic sectors, support job creation, and promote overall economic growth and stability. By articulating the province’s financial commitments, these budgets provide clarity to businesses, investors, and other stakeholders, thereby contributing to a conducive economic environment.
In summary, provincial budgets are essential for managing public finances, delivering public services, ensuring fiscal accountability, and promoting socio-economic development within a federal system. They form the cornerstone of effective governance by enabling provinces to plan, allocate resources, and address the needs of their residents in a structured and transparent manner.
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The provincial budgets for the fiscal year 2024-25 were announced with Khyber Pakhtunkhwa (KPK) leading the way on 25 May, followed by the federal budget on 12 June, Punjab on 13 June, Sindh on 14 June, and Balochistan on 21 June. The timings of these announcements may have reflected prevailing political considerations. However, it is notable that all provincial budgets, similar to the federal budget, showed minimal deviation from their previous budgets.
The 2024-25 budget’s revenue and expenditure thrust in KPK and Sindh mirrored the previous budgets tabled by the Pakistan Peoples’ Party’s (PPP) Sindh government and the Pakistan Tehreek-e-Insaf (PTI) administration in KPK. This similarity can be rationalized by the fact that these two parties have held power in these provinces since 2013.
Balochistan operates within its own unique political dynamics, and there is a critical assessment of the performance of the first-time chief minister, Maryam Nawaz Sharif, who is widely believed to be the political heir of PML-N supremo. This assessment, however, is not being applied as uniformly as in other provinces, highlighting the intricate relationship between politics and budget formulation.
One common feature of all four provincial budgets is the continuation of heavy reliance on federal transfers, with little attempt to raise own revenue. These transfers, based on the Finance Bill which outlines the federal government’s revenue and expenditure plans, and amended in case of any subsequent change in taxes levied or withdrawn, will be distributed as per the 2010 National Finance Commission award, a mechanism for distributing federal revenues among the provinces.
The provincial budgets indicate that Punjab’s budget formulators are heavily reliant on federal transfers, with 79 percent reliance, followed by KPK with 77 percent, Balochistan with 76 percent, and Sindh exhibiting a relatively refreshing 62 percent reliance. Sindh’s lower reliance on federal transfers can be attributed to increasing revenue from sales tax on services.
Furthermore, the lack of politically expedient measures to levy taxes on the income of the rich and influential landlords has been evident across the provinces. The landlords’ heavy representation in national and provincial assemblies has contributed to the inability to amend the constitution and implement taxes on their income, underscoring the urgent need for tax reforms and revenue generation.
In terms of expenditure, KPK budget envisages a 10 percent increase in salaries and pensions, while other provinces have followed varying patterns in salary and pension raises.
In conclusion, the provincial budgets, similar to the federal budget, did not introduce any significant out-of-the-box policies in terms of expenditure or revenue generation. This lack of significant policy changes may have implications for the provinces’ fiscal health and their ability to address pressing issues. Therefore, the overall assessment reflects a continuation of existing budgetary patterns across the provinces.
