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June 17, 2015

The KP budget


June 17, 2015

Amidst a boycott by three opposition parties, the Khyber Pakhtunkhwa government unveiled what it called a balanced annual budget of Rs487.9 billion for the next financial year. The headlines concentrated on the fact that no new taxes had been proposed by the government, but the impact of that on provincial spending was fairly clear with a limited development or reform agenda coming out in the budget proposal for the terrorism-affected province. With another provincial budget out of the way, it is becoming obvious that most governments are looking to make headlines without proposing serious fiscal reform. With the federal government setting the benchmark with a number of tax and customs exemptions for anyone looking to set up and conduct business in KP, all eyes were on the KP government to show its response to the proposals. However, none was forthcoming. One reason could be the lack of liaison between the centre and the province. KP Finance Minister Muzaffar Said, who belongs to the Jamaat-e-Islami, announced a development budget of Rs174.884 billion. The budget speech was interrupted numerous times by protests by the three opposition parties, the JUI-F, the ANP and the PPP, against the ruling PTI over alleged rigging in the recent local bodies election.
With a 21 percent increase over the last provincial budget, the new fiscal proposals include minor revisions in some provincial taxes. Said claimed that the budget would be balanced by an estimated provincial revenue receipt for the next financial year of Rs487.9 billion against the total expenditures of Rs487.9 billion but the figure does not appear to be realistic. Rs250.89 billion of the amount will come from the federal divisible pool while it would receive Rs30.146 billion as war subvention. It would also receive Rs.19.41 billion as royalty on oil and gas while Rs44 billion will be the money received as general sales tax. It was the inclusion of Rs51.8 billion as net profit from hydel generation from the

federal government that raised questions, since the federal government has not been paying the amount. This means that, in reality, the budget has a gaping Rs50 billion hole which the KP government has not felt the need to identify. The budget proposed a 10 percent increase in the salaries of employees while pensions were also increased by 10 percent. With the government claiming that over half the budget was spent on welfare, the figure could be contrasted with the fact that 71 percent of the budget is to be spent on salaries alone. Education remains a key priority with a Rs97.54 billion allocation. In many ways, this budget was a replica of the previous budget, with no specific allocation for the repatriation of refugees of the ongoing war against the Taliban in the province. While replicating a budget is not an issue in itself, much more was expected from the PTI-led provincial government after its vocal criticism of the federal budget.

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