Khyber Pakhtunkhwa (KPK) budget presented by Finance Minister Muzaffar Said tacitly acknowledged the political efficacy of developing a mass transit system in major cities and allocated a whopping 82 billion rupees for bus rapid transit (BRT) for Peshawar. The budget indicates that the project has received 29.4 billion rupees from foreign donors as grant and in common with the Punjab Chief Minister’s Metrobus in several cities opted to borrow the remaining cost of the project - 52.2 billion rupees. While the Punjab government relied on loans from foreign companies the KPK government would rely on a loan from the Asian Development Bank. However, unlike the Punjab government which allocated a larger amount for the Orange Line relative to the education budget, the KPK government budgeted to allocate 127.9 billion rupees for education which includes 115.9 billion rupees for primary and secondary education and 11.9 billion rupees for higher education. Given that the total KPK budget outlay for 2017-18 is estimated at 603 billion rupees allocation for Peshawar BRT accounts for 13.5 percent of the total and on education 21.2 percent accounting for nearly 35 percentage of total outlay on two items.
Health was budgeted to receive 49.27 billion rupees, around 8 percent of total outlay while law and order, which remains more of an issue in KPK than in other provinces is budgeted to receive 49.8 billion rupees or 8.2 percent of total outlay – however, the police department’s budget has been enhanced by 21 percent.
And significantly KPK budgeted 28 billion rupees, 22.2 percent of the Annual Development Programme, for local government and even though the Local Government Act 2013 required KPK to allocate not less than 30 percent yet this is by far the highest percentage amount allocated for this item by any province for the budget for fiscal year 2017-18.
What however is untenable in the KPK budget is the massive increase in salaries of government servants and pensioners; the latter to account for 53 billion rupees – 30 percent higher than in the current year. No doubt, the justification provided by the KPK government for raising salaries, like the federal and other provincial governments, is that the existing low salaries account for pervasive corruption as incomes, by and large are insufficient to meet household expenditures yet a rise in income further fuels inflation. Be that as it may, once the federal government announces a raise in salaries and pensions the damage has been done and provinces are compelled to follow suit.
Unfortunately, however, with respect to revenue generation the KPK government envisages relying heavily on funds from federal transfers to the tune of 70.5 percent while reliance from its own resources is projected to be no more than 7.4 percent. In the first 10 months of the current fiscal year, the actual realization of the own budgeted revenue was no more than 42 percent and doubts are raised as to the ability to generate the own revenue budgeted estimate of 45.2 billion rupees for 2017-18. Foreign project assistance is double the reliance on own resources at 13.5 percent for 2017-18.
Professional tax, or tax on services including on traders, a major source of the rise in revenue for the Punjab and Sindh governments, was budgeted to be payable at the rate of 330 rupees by those with an income between 10,000 and 20,000 rupees per month with tax gradually rising with a rise in income. An amount of 1000 rupees would be payable by those earning 200,000 to 500,000 rupees per month. It would be advisable for the Finance Minister to do his math and make the tax more equitable as anyone earning 10,000 rupees would pay 3 percent in tax while an individual earning 2,000,000 rupees would pay only 0.5 percent of his income as tax.
To conclude, the KPK government deserves praise for making a difference in the priority other provinces have begun to allocate for education and in the current year it contained its expenditure; however, it performed particularly badly in terms of increasing reliance on own resources.
