Over Rs2.4 tr Punjab budget on 15th

LAHORE: Punjab will likely to present over Rs2.4 trillion budget for fiscal year 2020-21 on 15th June with annual development outlay of Rs437 billion while reducing the Punjab Sales Tax on Service rate to 5 percent for majority of services and increase in salaries and pensions in line with the federal government decisions which is expected to 10 percent ad hoc relief. However, the final shape to the budget is yet to be given in accordance with the share of federal divisible pool from the federal government under National Finance Commission (NFC) transfers. But the provincial government has made estimates keeping the federal government revenue collection target of over Rs5 trillion in sight.

Due to Covid-19, the economic activities are not resuming in short to midterm so the government is considering reducing the Punjab Sales Tax on Service to majority of the services until December 2020 besides extending the tax exemption given to number of sectors in the backdrop of Covid-19 will also continue. Thus, the provincial revenue stream will be affected and the government is following the realistic approach fixing downwards revenue collection targets for fiscal year 2020-21.

Economic impact on the Covid-19 is going to expose in the forthcoming fiscal year so the government is fixing downwards revenue targets for the fiscal year 2020-21. Overall provincial tax revenue target is being fixed at Rs230 billion from last year Rs295 billion. The revenue target for the Punjab Revenue Authority is being fixed at Rs125.4 billion, Board of Revenue Rs65 billion, Excise and Taxation Rs32 billion since the car sales are sharply declined for the last fiscal year.

Similarly, provincial non tax revenue is estimated at Rs88 billion from the last year of Rs93.395 billion. However, the policy-makers are unable to get rid of non-implementable Public Private Partnership (PPP) projects and aiming unrealistic Rs100 billion projects for the fiscal year 2020-21 whereas not a single PPP project of Rs42 billion was materialised during ongoing fiscal year 2019-20. Thus, the total development outlay on the basis of the revenue generated from the indigenous provincial exchequer, federal divisible pool and foreign project assistance will be Rs378.25 billion. Further, the Punjab government is forecasting Rs30 billion worth development projects from the PSDP and almost Rs90 to 100 billion from the foreign funded projects.

The government is predicted controlling its current capital expenditures in the forthcoming budget with drastic estimated cut of 55 percent lowering it to Rs95 billion from Rs210.6 billion. However, 10 percent increase is forecasted in current expenditure reaching Rs1,427.6 billion and Account-II (food account used for wheat trade) estimated at Rs220 billion. Further, the government is estimating Rs365 billion allocation for the salaries budget, Rs260.7 billion for pension budget, Rs457.3 billion for Provincial Finance Commission (PFC), Rs24 billion for subsidies, Rs44.8 billion allocation for interest payments, and Rs276 billion for service delivery expenditures which is estimated an increase of around 22 percent from last year of Rs226.5 billion.

The province will witness an extra burden of Rs49 billion due to increase in salary budget of police of Rs16 billion following the new recruitment, Rs4 billion for the new posts created in health and food departments, Rs6 billion for corona incentive allowance, Rs1 billion for judges package, Rs2 billion for doctor’s package and Rs8 billion due to annual increments. The government is also decided to continue Sehat Sahulat Card with estimated funds of Rs12.5 billion, creating environment endowment fund of Rs8 billion, allocating Rs5 billion as block allocation for Covid-19. Further, the government is targeting an expense of Rs38.1 billion for procurement of medicines showing an increase of 57 percent from previous year of Rs24.2 billion.

Similarly, major spike in witnessed in the operating expenditures of the health department budget estimates. The increase of 136 percent is forecasted in primary and secondary healthcare with Rs11.8 billion allocation and 29 percent in Specialised Healthcare and Medical Education with allocation of Rs37.5 billion. On development side, other than Rs100 billion PPP projects, the government has fiscal space for Rs337 billion of ADP, out of which Rs130 billion will be allocated for ongoing development schemes, Rs40 billion for other development projects, Rs9 billion of the Punjab government component for foreign assistance projects, Rs10 billion for priority projects, Rs5 billion each for South Punjab Block and Chief Minister Special Package.