In Khyber-Pakhtunkhwa budget, PTI lays out a strong start

Finance Minister Sirajul Haq may have delivered the address, but the Khyber-Pakhtunkhwa budget had Pakistan Tehreek-e-Insaf economic wizard Asad Umar’s fingerprints all over it. The message from the PTI appears to be clear: they meant it when they said they planned to focus on governance.

Budgets in Khyber-Pakhtunkhwa have historically been a litany of complaints against the federal government, followed by a recitation of numbers that, frequently, even the provincial finance ministers found tedious, boring and difficult to understand. Not this time: the PTI-led Khyber-Pakhtunkhwa government delivered their first governing document and made sure to lay out their strategy for the development of the province and connect it to their spending decisions, as laid out in the numbers.

When the numbers were first revealed, it immediately became clear why the PTI was unwilling to share the education portfolio with its coalition partner, the Jamaat-e-Islami. Education has the lion’s share of the provincial budget, about 30% of total spending. The Rs102 billion that Peshawar will be spending on education is substantially higher than last year, though the increase appears especially exaggerated due to an accounting change brought about by the new administration. Salaries of public school teachers were previously counted as part of the “general public service” budget and have now been counted as part of the education budget.

Public safety gets the second-highest allocation, at nearly Rs38 billion, no surprise in a province that has faced the onslaught of a brutal militant insurgency. The third highest allocation went to healthcare, just over Rs29 billion.

The PTI-led administration’s budget is a sharp contrast to the money bills presented by their predecessors, the Awami National Party, which had a tendency to try to blame all the ills of the province on a lack of federal cooperation. The PTI’s budget, by contrast, appears to mostly ignore the aspects that the provincial government cannot control – militancy, the tribal areas, etc – and chooses to focus on service delivery in areas that are directly under its jurisdiction: education, health, infrastructure, etc.

So, for instance, the provincial government nearly doubled the budgeted amount for urban and regional infrastructure, including drinking water and sanitation infrastructure, to Rs26 billion. Much of this spending will be financed with the assistance of foreign donors, who have allocated a total of Rs35 billion for aid to Khyber-Pakhtunkhwa.

On the revenue side, however, the provincial budget remains disappointing. There has been little increase in what Peshawar expects it can collect in revenues on its own. The province’s own revenue-generating activities (aside from hydroelectric power) account for just 4.4% of the total revenue available to the government. This, perhaps, should not come as a surprise, since tax policy was among the weakest segments in what was said to be an otherwise well-crafted manifesto.

The single biggest chunk comes in the form of various transfers from the federal government, which taken together account for about three-quarters of the budget. Profits from hydroelectric power generation, little of which is done by the provincial government itself, account for another 10%, with foreign aid accounting for the remainder of Peshawar’s financial resources.

Nonetheless, the 2014 budget document was also a major step forward in terms of transparency: the Khyber-Pakhtunkhwa government provided an unprecedented level of detail in its figures, breaking out, for instance, how much it spends on government salaries versus how much goes towards other portions of its expenditure. It provided an exceedingly useful record of historical data, and it provided all of the numbers in an easy-to-use, and even easier-to-analyse Microsoft Excel files.

Whether all of these measures will translate into improved lives for the citizens of Khyber-Pakhtunkhwa is an open question, but the effort appears to be significantly above what the province has lived with so far.

Published in The Express Tribune, June 18th, 2013

Farooq Tirmizi

CEO, Elphinstone

Farooq Tirmizi is the founder and CEO of Elphinstone, the financial services firm that operates SmartRupee.

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