Centre complains about spending spree by provinces

ISLAMABAD: While clearing arrears of Rs141 billion for all provinces, the federal government formally raised complaints about rampant spending spree undertaken by the provinces and cited example that Balochistan spent almost 76 per cent development funds just in last June of the fiscal year 2016-17.

On the last day of the budget on June 30, 2017, provinces had spent Rs200 billion, so they did not throw any surplus resulting into contributing in a major way for hiking the budget deficit up to 5.8 per cent of the GDP in last fiscal year 2016-17. 

Although, there was shortfall on account of both the FBR and non-tax revenues, but the provinces inability to generate revenue surplus also played havoc with escalation of the deficit target. 

The provinces have also demanded of the Centre for enhancing limits of ways and means for obtaining overdraft in an election year so that they could spend more in months ahead. Keeping in view such prevailing situation on the ground, the Centre proposed establishment of fiscal coordination forum under the Council of Common Interest (CCI) led by the Prime Minister and comprised of all chief ministers of the provinces.

The Finance Ministry had recently held deliberation with four finance secretaries of the provinces in order to dwell upon the proposed a public financial management (PFM) strategy, going to be implemented over 10 years. 

All the provincial representatives requested that releases on account of arrears of the last fiscal year may be made at the earliest.  Federal Finance Secretary Shahid Mehmood informed the meeting that once the reconciliation of data between the FBR and the account offices concerned was completed, the releases on this account would be made in due course of time. 

One top official of the Finance Ministry told The News on Thursday that the Finance Ministry released the arrears amount to the tune of Rs141 billion related to last fiscal year. The Finance Ministry had released Rs429 billion to the provinces on account of federal divisible pool for first three months of the current fiscal but after releasing of arrears the total amount had gone up to Rs570 billion.

The Punjab raised the issue variations between the budget estimates, revised estimates and actual transfers to the the provinces arguing that it caused damage to their whole planning and execution of the budget every year. 

He informed that during the last financial year, the Centre kept on assuring the provinces that the revenue target would be achieved, but it could not be eventually achieved.

He said that such a situation not only creates problems for maintaining financial discipline, but it conveys wrong signals to the political leadership of the provinces.  However, the Finance Ministry explained that they had timely informed the provinces about the shortfall in the revenue collection. 

He also shared the details of huge provincial expenditure in the last quarter, particularly in the last week of the FY 2016-17. Only on the last working day of the previous financial year, an amount of Rs200 billion was spent by the provinces, in the case of Balochistan, he informed that about 76% of the development budget was spent in June 2017.  He maintained that as the provinces could not provide the desired cash surpluses, the federal government had to face difficulties in maintaining overall fiscal deficit.