KP budget: an appraisal

Budget projections must be based on the past trajectory of revenue and expenditure as well as future realistic forecasts. If estimates are close to reality, the planning for the year will be executed efficiently, leading to good governance and financial discipline. Conversely, if the projections are unrealistic and hypothetical, the planning for the year will be flawed and public service delivery poor.

The distribution of resources in the annual development programme (ADP) should be inclusive and equitable. If it is discriminatory, discretionary and directionless, it will lead to a vicious cycle of exploitation, regional inequalities, clientelism and nepotism.

The Khyber Pakhtunkhwa Budget 2020-21 offers revealing insights. The total budget outlay for FY 2020-21 is Rs923 billion. Of this, Rs739.1 billion has been allocated for settled districts and Rs183.9 billion for newly merged areas. Current revenue expenditure is projected at Rs605.2 billion while development expenditure is Rs317 billion, of which the share of settled areas is Rs221.9 billion and that of merged areas is Rs95.9 billion.

Compared to the figures for the last year, the KP government has drastically revised its projections, and for the worse. The ADP for FY 2019-20 was originally Rs108 billion and revised at Rs95 billion. The share of merged areas in the ADP for FY 2019-20 was Rs 83 billion and revised to Rs48 billion, although reportedly only Rs12 billion has been spent, which speaks volumes about the government’s inefficiency. The ADP spurs growth and generates economic activity if it is inclusive and equitable. Given the yawning gap between the original estimates, the revised estimates and the actual utilization, the performance of the KP government has been dismal.

The last two years’ trajectory of the KP budget shows that ‘federal transfers’ have drastically reduced. The share of KP revenues from the federal divisible pool has hugely decreased. Straight transfers have also dwindled from Rs25.5 billion to Rs22.2 billion (12.9 percent). The share of revenue on account of the war on terror has been revised from Rs54.5 billion to Rs38.3 billion (29.7 percent). A whopping figure of Rs36 billion (64.63 percent) has not been transferred under the ‘net hydel profit’. This is highly unjust but the KP government is not fighting for this right of the people of the province.

The trajectory of foreign project assistance projection, revision and actual expenditure always sees drastic reduction. In FY 2019-20, Rs82 billion was projected in foreign project assistance but revised to Rs48 billion. The government has not reflected actual expenditure in the white paper. The estimates for FY 2020-21 are hypothetical and unrealistic. The government met a cumulative shortfall of Rs161 billion last year when economic activity was smooth till March.

How is the KP government going to achieve its ambitious targets amidst the negative growth forecasts by international financial institutions for FY 2020-21? It sounds all the more intriguing given that out of the Rs923 billion budget outlay, only Rs49 billion (11.5 percent) will come from the province’s own sources. Moreover, for years the KP government has been working on output budgeting with the help of development partners, but unfortunately budget-making is still mostly following the conventional incremental model.

The allocation of Rs24 billion for the Covid-19 emergency fund is not based on scientific analysis and statistical projections, even when it is feared that the number of Covid-19 affectees will continue to rise in the next few months with enhanced needs for ‘Testing, Tracing and Isolation (TTI)’ which would in turn require additional inputs, processes, ventilators, beds and oxygen cylinders. The government claims to have achieved universal health coverage through the Sehat Insaf Card but sadly this scheme could not make a difference as most of the expenditure went to administrative costs coupled with profits of private insurance companies and health services by the expensive for-profit sector. In fact, the private health sector has been indirectly subsidized, that too for unnecessary services, making the public sector further under-utilized and inefficient.

A good ADP is always predictable and sets a minimum time frame for completion of projects. The KP government has a huge through-forward of Rs773,045 million this year, which is 45.61 percent more than the figure of Rs 420,416 million last year. This huge through-forward will delay the completion of schemes beyond five years. It will also lead to thinning of resources. Ideally through-forward should not be more than two and half years. The MMA and PPP-ANP coalition maintained this threshold.

Importantly, the ADP 2020-21 is against the spirit of the Peshawar High Court judgment titled Akram Khan Durrani and others vs Chief Minister of Khyber Pakhtunkhwa. The judgment says, “All the elected members of the provincial assembly have equal rights to the allocation of funds”. The court had directed the government to frame rules for allocation of schemes, umbrella schemes etc, so as to protect the rights of all individuals and elected representatives. Though rules have been framed on the directive of the court for the 70 percent provincial share, they are against the spirit of the court decision and a huge space is still available for discretion.

A huge number of umbrella schemes have again been included in ADP FY 2020-21. The thrust of the mega projects and schemes are in a few selected districts which are already relatively more developed than others in KP. Even allocation in ongoing portfolios is hugely discriminatory. Despite the court’s directives, the distribution of block allocation last year was arbitrary as members from opposition benches were ignored. Even in treasury benches the lion’s share went to powerful figures within the cabinet. How can one hope that block allocation this year would be distributed judiciously, equitably addressing regional disparities?

The PTI was voted to power by the people of KP to bring change, and end clientelism and patrimonial politics. Sadly, its budget for FY 2020-21 may further strengthen the culture of discriminatory politics and clientelism.

The writer is a member of the Khyber Pakhtunkhwa Assembly.

Email: Inayatullahnwfp@gmail.com Twitter: Inayat01