Sindh presents Rs739.3 bn deficit budget

KARACHI: Sindh Minister for Finance Syed Murad Ali Shah on Saturday presented a deficit budget with no new taxes and a total plan outlay of Rs739.3 billion for the financial year 2015-16.
Shah increased pensions, provincial employees’ wages, cut local sales tax, planned to create thousands of new jobs, increased spending on education and unveiled plans to issue a $200 million Islamic bond to fund development and infrastructure projects while also providing a range of handouts.
“This budget has been prepared with a focus on the overall prosperity of the people through optimal utilisation of resources to achieve targets of socio-economic development,” Shah said, while presenting the budget speech on the floor of the Sindh Assembly.
The minister estimated provincial revenue receipts at Rs 726 billion while the total expenditures was pitched at Rs739.3 billion, showing a budget deficit of around 1.72 percent or Rs12.72 billion.
Shah said an amount of Rs162 billion has been allocated for the provincial Annual Development Plan (ADP) for fiscal year 2015/2016, which is 28 percent higher than the revised downward estimated figure of Rs126.5 billion in 2014/2015.
The key priority areas of the Sindh government for the next fiscal year included: development of social service sectors of education and health; economic sectors of energy, communications and irrigation; and social protection sectors of empowerment of women and protection of minorities and children.
“Our aim is the empowerment of people through policies and programmes that can facilitate growth and development; and help us move towards medium and long term economic growth, a growth which is not for the few but for the many,” Shah said.
He announced the creation of 14,480 new jobs in the next fiscal year, which would cost the provincial government around Rs 2.4 billion.
On the taxation side, the rate of sales tax on services was reduced to 14 percent from 15 percent. The target of revenue collection from sales tax on services for the next fiscal year has been fixed at Rs61 billion, around 25 percent higher than the estimated collection of Rs49 billion for the outgoing fiscal year.
The finance minister announced 10 percent ad hoc relief allowance on running basic pay for all employees of the provincial government with effect from July 1, 2015. Further ad-hoc increases of 2011 and 2012 will be merged in the pay scales. Besides, medical allowances of all government employees will be enhanced by 25 percent.
“This reflects the government’s resolve to bring significant improvement in the life of the common man by focusing on the short-term and long-term development of the province,” he added.
Giving the details of total receipts of the province for 2015-2016, Shah said that those were estimated at Rs727 billion, as against the budget estimate of Rs672 billion for the current fiscal year, showing overall increase of 8.2 percent.
The finance minister criticised the federal government for transferring grants to Sindh and said the provincial government was largely dependent on Islamabad for revenue, as federal receipts, including revenue assignments, straight transfers and the OZT grant, constitute 77 percent of the combined federal receipts and provincial tax and non-tax receipts.
“It has been seen in the past that the actual transfers to the government of Sindh in a fiscal year always fall short of the estimates provided, as the Federal Board of Revenue falls short in the collection of its set targets,” Shah said. “With the unpredictability of these fiscal transfers from the federal to provincial government, budget preparation becomes cumbersome as the projections of non-development expenditure and the development portfolio are largely based on these estimates.”
Receipts from the federal government on account of revenue assignment, straight transfers and grants are estimated at Rs494 billion, which constitute 68 percent of total receipts of the province. It is an increase of 4.2 percent, over estimates of Rs474 billion last year.
However, Shah said that the budget estimates of straight transfers for the next fiscal year have decreased substantially by 26.5 percent to Rs61 billion from the budget estimates of Rs83 billion of current fiscal year.
Receipts of Federal PSDP are estimated at Rs10 billion. Receipts on account of Foreign Project Assistance (FPA), budgetary support loans and grants are estimated at Rs47.5 billion. Receipts from the province’s own sources on account of tax and non-tax receipts are estimated at Rs144 billion, which constitute 19.8 percent of total receipts.
On the expenditure side, the finance minister said the current expenditure of the province is projected at Rs525 billion, which includes current revenue expenditure of Rs 503 billion and current capital expenditure of Rs22 billion.
The development expenditure of the province is estimated at Rs214 billion which includes provincial ADP of Rs162 billion, Foreign Project Assistance (FPA) of Rs. 27 billion, federal PSDP of Rs9.6 billion and development financing of Rs15 billion through Viability Gap Fund.
He lamented the federal government’s role in allocation for Sindh in the PSDP share and said that federal PSDP for the outgoing financial year was Rs22.457 billion.
“For the next year this allocation has been reduced by the federal government to Rs9.6 billion as proposed in the PSDP, which is around 57.2 percent. Never in the past have the allocations for development been slashed by such a humungous amount,” Shah added.
Presenting the performance of the outgoing fiscal year, he said total provincial receipts fell short to Rs617 billion from the budget estimates of Rs672 billion. Federal receipts witnessed a decrease of 10.7 percent over budget estimates of Rs74 billion of 2014-15. The revised estimates of straight transfers have reduced substantially by 28 percent to Rs60 billion from the budget estimates of Rs83 billion.
He said that total expenditure for 2014-15 has been revised at Rs631 billion, as against budget estimates of Rs686 billion, showing a decrease of 8 percent.