-Editorial

WEB DESK: It is a matter of great satisfaction that fiscal operations of the provincial governments continue to be in a satisfactory state. According to the latest quarterly report of the SBP, consolidated provincial revenues have posted a hefty growth of 27 percent during July-March, 2016, compared to 6.6 percent in the corresponding period of last year.

Consolidated surplus of the provinces also soared to Rs 221.2 billion compared to Rs 194.0 billion during July-March, 2015. Another healthy aspect was that development spending rose considerably to reach Rs 372.1 billion during July-March, 2016, from Rs 291.5 billion in the same period of last year.

Among the provinces, surplus of Punjab came down from Rs 78.2 billion last year to Rs 57.4 billion in July-March, 2016, but the encouraging aspect was that development expenses rose significantly by 48.4 percent. Sindh's surplus, however, increased to Rs 91.0 billion - the highest among all provinces - compared to Rs 63.0 billion last year.

One of the salient features of Sindh budget was a highly significant cut in development expenditures which declined from Rs 74.5 billion to Rs 65.6 billion, denoting a sharp fall of 12 percent during July-March, 2016. The surplus of KPK shot up by about three times from Rs 21.7 billion to Rs 66.2 billion during July-March, 2016, despite a growth of 24.4 percent in its development outlay. The profits from hydro-electricity which added Rs 9.1 billion continued to be a prime source of non-tax revenues.

Balochistan's surplus, nonetheless, fell from Rs 31.1 billion to only Rs 6.6 billion. With the growing emphasis on health and social services together with the need for infrastructure, development expenditures rose by 27 percent to Rs 28.1 billion while current expenditures increased from Rs 83.3 billion to Rs 104.3 billion during July-March, 2016.

While the budgets of provincial governments would appear to be an ordinary affair, their performance is of vital importance for certain crucial parameters of the economy and show the preferences of each province in the federation. A positive contribution of the provincial budgets is the excess of revenues over expenditures and the generation of surpluses by all the provinces which serves to reduce the overall budget deficit of the country, promotes price stability, contains indebtedness of the country and helps improve the balance of payments position. However, provincial governments on their own do not appear to be striving towards mobilisation of resources and continue to rely on the federal government.

For instance, in line with the distribution of resources under the 7th NFC Award, net transfers to provinces were estimated at Rs 1938.2 billion during FY16. As a consequence, major contribution in revenues came from federal transfers which accounted for 81.0 percent of provincial revenues during FY15.

On the other hand, provinces' own revenue receipts contributed only 10.8 percent in total revenues during the period under review. We feel that in light of fiscal decentralization, provinces need to make extra efforts to explore new avenues to generate resources. Seen from the size of surplus of the provinces, it is also apparent that effective utilisation of available resources has also become quite difficult for some of the provinces.

While Punjab is spending a great deal of resources on development expenditures and has reduced its surplus during July-March, 2016, Sindh's development spending has actually declined and its surplus risen sharply over the year. This may suggest higher spending on visible projects in Punjab and a greater need for planning and effective utilisation of resources in Sindh.

A cut in development expenditures in Sindh is particularly disturbing when we see the crumbling infrastructure and no visible projects worth the name to improve the quality of citizens living in the provincial territory. The increase in surplus in the KPK and a substantial decline in Balochistan also narrate the same story. Overall, provincial governments may be able to get a higher level of resources under the next NFC Award, but they also need to mobilise more resources through their own efforts and increase their absorptive capacity by efficient and optimal use of the available resources.

Source: Business Recorder