Covid budget

Since the beginning of the Covid-19 pandemic, it has been Chief Minister Mahmood Khan’s endeavour to ensure that the people of Khyber Pakhtunkhwa are provided with an honest appraisal of what the situation is, what it is likely to be in the coming days, weeks and months, and what the cost of the pandemic will be. The chief minister approved the annual budget on the basis of the one test that our leader Prime Minister Imran Khan and the PTI leadership demands of us: what does it do for the people?

We have tried to answer this question through a wide array of budgetary measures, but there are five that I believe will help illuminate our approach.

First, this is a Covid-19 budget. We have therefore made the biggest investment in healthcare in the history of the province. What Covid-19 has exposed is the vulnerability of our society to disease. A well-funded, efficiently-run, and evenly-spread public healthcare system is the only way to mitigate against future outbreaks. We will redouble our efforts to build a world class routine immunization programme, so our kids can be stronger from the very start. Perhaps our most important initiative in health will be the roll out of the universal health insurance programme, making Khyber Pakhtunkhwa the first province in the country to offer such protection.

Second, this budget creates a Rs15 billion Covid-19 emergency fund, in addition to, and separate from the overall health budget. The priority in this fund will be to protect our frontline health workers by ensuring a steady and consistent supply of essential PPEs for all of them. We will expand our bed and ventilator capacity, and strengthen the medical and healthcare supply chain in the province. Our testing capacity has already increased significantly since the start of this pandemic, and it will be further buttressed through this fund.

Third, and I feel obligated to acknowledge this, the chief Mmnister has been extremely clear that the development budget is where our economic stimulus comes from, so it was not to be corroded by any other expenditure area, particularly recurring costs. The trade-off is simple. Recurring costs cannot create new jobs, or new infrastructure, and they cannot expand or enhance existing state capability. Despite fiscal constraints, and escalating costs, the PTI is pushing ahead with a development agenda focused on creating opportunity and expanding capability. Our Rs318 billion development expenditure allocation is larger than Sindh’s and almost as big as Punjab’s despite our constraints and much smaller population. Perhaps most importantly, due to prudent fiscal management, we have a manageable debt profile, and will use this space to make targeted borrowing decisions to help stimulate the economy.

Fourth, we have chosen to eschew new taxes. The budget contains no new taxes, no increase in tax rates, and includes the most innovative and ambitious package of tax reforms and relief in our province’s history. We have removed tax duplicity by removing overlapping and redundant taxes. Sales tax on services (STS) has been reduced for over 27 categories. This is an all-encompassing reduction for sectors where the economic activity has dampened and directly impacted cash flow and liquidity. These sectors include business support services, local restaurants, oil and gas exploration services, hospitality sector, bargain centres, beauty parlours, manpower services, online and digital platforms etc. The local government department has already eliminated taxes on around 200 small businesses and has transferred the onus of their registration from the business to the department.

The Excise Department is also withdrawing provincial taxes completely in a number of areas where double taxation was occurring. There will be zero bed tax for hotels, and zero professional tax for 18 categories of professionals, provided they register with KPRA. There will also be zero professional tax on all medical professionals and services. The entertainment tax is being permanently abolished. Motor vehicle re-registration will now be free.

Fifth, and perhaps most importantly for our province’s immensely young population is our effort to create a fiscal future in Khyber Pakhtunkhwa that enables us to spend our limited resources on those that need it most. This means a significant set of reforms in the current budget. We are cutting costs, identifying savings, and reinvesting those resources within the budget to be able to achieve better service delivery from across the whole of government. We have done away with the traditional practice of budgeting salary for vacant posts. We initiated long overdue and urgent pension reforms (including increasing the retirement age) that could have generated an extra Rs20 billion in savings – enough to single-handedly fund our emergency Covid-19 fund. We have reduced non-salary expenditure like POL and utilities budgets, and we have rationalised wasteful expenditure that is racked up under TA/DAs, and other non-essential allowances.

This is perhaps the most important area of reform in Pakistan in years to come. This requires us to be bold and fearless: qualities we associate with our leader, Prime Minister Imran Khan. Our job is to serve the 92 percent of the labour force and the 99 percent of the citizens that are not in government. Government exists to serve the people, not the other way around. Rearranging the fiscal priorities in how we spend, allocate and account for recurring expenditure is at the heart of this struggle.

Of course, the budget has weaknesses. There are many areas that we would have liked to allocate more funds to. But in the current Covid-19 generated public health and economic crisis, we have tried to make tough choices with the overarching principle of our purpose: to serve the people. To survive this crisis will require governments that operate at a speed and urgency that is a departure from business-as-usual. This holds true all over the world and it holds true for Khyber Pakhtunkhwa. As we continue this fight against Covid-19, we expect to be held to a higher standard than our political opponents are used to. In this journey, we do not expect the support of all our people, but we request an understanding of the challenges we are up against, and an acknowledgement of the sincerity with which we are trying to tackle them. I look forward to feedback, including fair critiques of our budget in the days and weeks to come.

The writer is minister for health and finance in Khyber Pakhtunkhwa.

Twitter: @Jhagra