Provinces agree to sign MoU to generate revenue surplus of Rs750bn

ISLAMABAD: To comply with the IMF condition, all the four provinces have agreed to sign a Memorandum of Understanding (MoU) for generating a revenue surplus of Rs750 billion in the current fiscal year for curtailing the budget deficit at 4.9 per cent of GDP.

“The Ministry of Finance has shared the draft MoU with all the four provinces and after the federal government’s guarantees to remove the objections raised by each province, all of them have agreed to sign the MoU to comply with the IMF condition,” top official sources confirmed to The News here on Wednesday.

The federal government undertook fiscal consolidation to slash the budget deficit and bring it down to 4.9 per cent of GDP at the federal level with the help of a provincial revenue surplus of Rs750 billion or more than 1.1 per cent of GDP during the ongoing fiscal year 2022-23. It remains to be seen how much revenue surplus was generated by the provinces in the last fiscal year 2021-22 ending on June 30, 2022. The fiscal accounts for the last financial year 2021-22 will be firmed up by the end of the ongoing month.

The IMF has asked Pakistan to present an MoU with the signature of all four provinces whereby they agreed to generate a revenue surplus of Rs750 billion during the current fiscal. Initially, the PTI-led government of Khyber Pakhtunkhwa had expressed reservations about signing the MoU at the initial stage, however, KP’s Minister for Finance held a meeting with Federal Minister for Finance Miftah Ismail on Tuesday whereby both sides agreed to remove the stumbling block. This scribe contacted KP’s Finance Minister Taimur Khan Jhagra and inquired about the province’s stance on signing MoU for generating revenue surplus, he confirmed that the Centre had agreed to resolve its difficulties on account of Net Hydel Profit (NHP) and increasing its shares in the aftermath of the FATA’s merger into the KP province. The KP CM, Mehmood Khan, approved signing of the MoU. He said the KP government would sign this MoU tonight or tomorrow.

The official sources said that the Ministry of Finance assured the KP government that their problems of Net Hydel Profit and increased share in the NFC would be addressed. After the guarantees, the provincial government decided to sign the MoU for fulfilling the IMF condition.

However, the KP’s government also raised objections over Punjab’s decision to waive off electricity billing of 100 units which, according to their estimates, will require a subsidy of Rs148 billion. The provinces also raised objections to the federal government raising salaries and pensions of public sector employees without consultations with the provinces as the education and health sector workforce largely existed in the provinces. The federal government’s decision increased the salary bill of the provinces manifold and left them with no space to undertake other expenditures on important subjects.