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June 16, 2021

Punjab budget

 
June 16, 2021

The Punjab budget of Rs2683 billion for FY 2021-22 has a development outlay of just R560 billion. Though the Punjab government claims that no new taxes have been levied, it remains to be seen how far this promise of no new taxes is fulfilled. To a great extent, the Punjab government – just like other provinces too – receives a major chunk of its resources from the federal divisible pool. As much as Rs1683 billion will come from this source and only Rs272 billion the Punjab government plans to generate from provincial taxes. The fact that Punjab receives nearly 50 percent of the total federal divisible pool makes it equal to the total federal transfer that goes to the remaining three provinces combined. Non-tax revenues that should have been a major source of income for the provincial government are likely to generate just Rs132 billion. For a province as big as Punjab, the provincial government should have explored more non-tax revenue options. The same applies to the meagre sum of Rs25 billion coming from what the Punjab government calls ‘innovative financing’.

Then we have the 10 percent increase in pay and pensions. In this account, the Punjab government has followed the line taken by the government in the centre which has also increased 10 percent in pensions and salaries. If you look at the rising inflation during the past three years, this increase – though welcome – will only slightly reduce the burden on the salaried class. The Punjab government has also followed the centre in the minimum wage raise – which has been increased to Rs20,000 per month. The development budget of Rs560 billion is more than the amount allocated for development in the outgoing fiscal year, but for such a large province much more developmental amount is required to show some tangible results to its people. Another issue is that only Rs125 billion has been shown as surplus which may cause problems in the coming months. If there is a major shortfall in federal transfers, as has happened in the past too, it is the development outlay that gets a chopping. This shows a non-serious attitude towards development as per successive governments.

There should be a proper mechanism to finance the development outlay even if there is some shortcoming from the federal transfers. Ideally, all development projects should have full financing already calculated and provided for in the budget – irrespective of the likely fluctuation in the federal transfers in time. Already, opposition legislators and analysts have raised questions and asked how the IMF will accept the measures laid down in the budget. It is obviously welcome to the people that their needs in education and health and social welfare have been considered in the budget. But whether this can be turned into reality is something that people will be watching and waiting to see.