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KP Government Decides Against Employee Salary Cuts Amid Financial Strain

In a recent decision, they have approved an expenditure budget of 529 billion 118 million rupees for the upcoming four months.
by TNN Editor - 26 Oct, 2023 1611

Muhammad Faheem

The Khyber Pakhtunkhwa government has opted not to reduce employee salaries at this time, despite facing a financial crisis. In a recent decision, they have approved an expenditure budget of 529 billion 118 million rupees for the upcoming four months. Nevertheless, the provincial government is grappling with a deficit of more than 79 billion 11 crore rupees during this period.

The Caretaker Cabinet presided over by Caretaker Chief Minister Muhammad Azam Khan, convened to address the financial concerns. The meeting included Caretaker Cabinet members and government officials. During this session, the oversight cabinet approved the four-month expenditure plan and urged the implementation of austerity measures to tackle the financial crisis effectively.

As outlined in the documents, the estimated expenses for the upcoming four months amount to 529 billion 118 million rupees. This budget represents a 14% increase compared to the previous four months. However, the provincial government anticipates an income of 450 billion 45 lakh 50 thousand rupees to cover these expenditures, leaving a deficit of 79 billion 11 crore rupees to contend with.

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The total budget estimate for the eight months of the financial year stands at 992 billion 55 million rupees, marking a 12% increase from the previous financial year's first eight months. Within this, the ongoing expenses from November 1 to February 29 are projected at 417 billion rupees. Of this, 366 billion 298 million rupees are designated for scheduled districts, with the remaining 50 billion 70 million 20 million rupees allocated for tribal districts.

In the development program for the next four months, 112 billion 118 million rupees have been set aside. This budget allocation includes 91 billion 855 million rupees for scheduled districts and 20 billion 263 million rupees for tribal districts.

Federal Arrears Cross the 3 Trillion Rupee Mark

The outstanding arrears owed by the federal government to Khyber Pakhtunkhwa have now exceeded a staggering 3 thousand billion rupees. The provincial government remains hopeful that the federal government will provide the much-needed assistance. Following a cabinet meeting, Caretaker Information Minister Feroze Jamal Shah Kakakhel emphasized the immense challenges of running the province under such difficult conditions. More than 15 letters have been sent to the Federation addressing this issue. The caretaker chief minister, in particular, has written multiple letters, and this matter has been raised in meetings with the caretaker Prime Minister. The Chief Secretary has also engaged with the Federation on numerous occasions. There is optimism that these arrears will be resolved promptly.

Caretaker Finance Minister Ahmed Rasool Bangash, speaking on the occasion, acknowledged the extremely challenging financial situation. Despite these difficulties, the government continues to meet its expenses. Under the AGN Qazi formula, arrears related to hydropower, for which the federal government holds responsibility, have surpassed two thousand billion rupees. Furthermore, an outstanding 100 billion rupees per year have remained unpaid to the tribal areas for the last six years, and 233 billion rupees are due to the federal government for various purposes, including subsidies for affordable flour and flood relief. When considering all these dues, the total arrears of the federal government to Khyber Pakhtunkhwa amount to a significant 3 trillion rupees, making their payment an essential priority.

Significant Reduction in Development Program

In response to its ongoing financial crisis, the Khyber Pakhtunkhwa government has enacted substantial cuts, amounting to over 69%, on the proposed development program. The caretaker provincial government had originally outlined a development program budget of Rs 112 billion 898 million for the first four months of the fiscal year, covering the period from July to October.

Khayyam Hasan Khan, the Secretary of Development and Planning, addressed the media and reported that during these initial four months, more than Rs 34 billion 99 crore from the development fund have been utilized. This spending allocation was distributed as follows: Rs 18 billion 25 crore was spent in scheduled districts, Rs 8 billion 90 lakhs in tribal districts as part of an accelerated development program, and Rs 2 billion 65 crore under the development program for merged districts. Over these four months, approximately Rs 6 billion was expended with the support of foreign aid organizations.

Of the originally proposed budget of Rs 112 billion 898 million for the development program, Rs 34 billion 99 million has been spent, accounting for 69%. This drastic reduction of more than Rs 77 billion 99 million signifies the impact of the ongoing financial crisis on the development program.

Budget Reduction Amid Financial Challenges

Faced with a severe financial crisis, the Khyber Pakhtunkhwa government has made substantial cuts, totaling over Rs 158 billion, in the proposed expenditure for the initial four fiscal months. The caretaker government had originally approved an expenditure budget of Rs 462 billion 399 million for the period spanning July to October.

To meet this budget, the provincial government had expected to receive Rs 292 billion 24 billion 43 lahks 90 thousand from distributable income, Rs 28 billion 35 crores 74 lakh 30 thousand as net profit from hydropower, Rs 28 billion 33 crores 33 lakh 33 thousand from the province's resources, Rs 51 billion 15 crores 14 lakh 90 thousand from other sources, and Rs 42 billion 26 crores 36 lakh 30 thousand from the federal government as tribal funds.

In total, the provincial government had anticipated revenues of Rs 442 billion 35 crore 2 lakh 80 thousand. However, during a recent briefing, Finance Secretary Amir Sultan Tareen revealed that the province had received only one installment of Rs 3 billion and the second installment of Rs 2 billion in hydropower net profit. In addition, the province received Rs 262 billion in distributable revenue and Rs 28 billion in tribal district funds, resulting in total earnings of Rs 295 billion from the federation.

During the first four months, the provincial government is expected to spend Rs 260 billion in scheduled districts and Rs 44 billion in tribal districts. In comparison to the initial government estimates of Rs 462 billion 399 million, the projected expenses for the provincial government over the same period will amount to approximately Rs 304 billion. This reduction of more than Rs 158 billion represents a necessary budget cut in response to the financial constraints.