The federal government has reportedly offered interest payment to the provinces on their savings to generate budget surplus to deal with the growing challenge of fiscal deficit, it was learnt. An official told Business Recorder that for the first time provinces were offered interest payment by the federal government on their savings with the State Bank of Pakistan (SBP) to help the federal government achieve fiscal deficit target by generating budget surplus.

According to a statement, Finance Minister Ishaq Dar on Monday disclosed that the federal government had decided to pay Rs 175.4 million and Rs 296.9 million to Balochistan and Khyber Pakhtunkhwa governments, respectively, as a reward for generating surplus in the first quarter but did not mention that the amount was a mark-up on their savings.

Dar was chairing a meeting on National Finance Commission (NFC) award and stated that in a meeting of the Council of Common Interest (CCI), it was committed by federal government to give incentives to provinces if they showed surpluses. The payment, the Finance Minister said, should encourage other provinces as well. The meeting has also taken up the issue of payment of expenditure to Election Commission of Pakistan for the forthcoming Local Bodies General Elections. It was decided that the federal government would bear half of the cost while the remaining half would be borne by the provinces.

The meeting decided to constitute a committee under the chairmanship of Minister for Water and Power Khawaja Mohammad Asif on Federal Adjustor with the task to present its recommendations well before the next CCI meeting. The meeting noted that during the period January-June, 2013, FBR reported a tax collection of Rs 1, 025.5 billion. Out of this collection, the due shares of provinces (Punjab Rs 299.0 billion, Sindh Rs 141.9 billion, Khyber Pukhtoonkhwa Rs 94.6 billion and Balochistan Rs 57.1 billion) were disbursed to provinces.

For the entire financial year, FBR collected revenue to the tune of Rs 1887.3 billion. Based on this, due provincial shares of Rs 1099.8 billion (Punjab Rs 550.3 billion, Sindh Rs 261.1 billion, Khyber Pakhtunkhwa Rs 174.2 billion and Balochistan Rs 114.2 billion) were transferred to provinces. The above transfers for the Khyber Pakhtunkhwa include 1% for War on Terror which was Rs 10.2 billion during the period under review and Rs 18.7 billion for the entire financial year.

The NFC Award also guarantees that the share of Balochistan province would be based on the budgetary projections irrespective of the FBR tax collection and the amount over and above the share based on actual collection would be borne by the Federal Government. The above transfers for Balochistan as such include an additional Rs 4.6 billion during the period under review and Rs 17.5 billion for the entire financial year.

In addition to the above transfers out of the divisible pool taxes, the net proceeds of the royalties on crude oil and natural gas, gas development surcharge and excise duty on natural gas were also transferred to provinces. The quantum of the amount was: Punjab Rs 3.3 billion, Sindh Rs 26.7 billion, Khyber Pakhtunkhwa Rs 10.6 billion and Balochistan Rs 3.7 billion during the period under review ie January-June, 2013. For the entire financial year, the disbursed amounts were: Punjab Rs 7.3 billion, Sindh RS.46.4 billion, Khyber Pakhtunkhwa Rs 18.2 billion and Balochistan Rs 8.8 billion. NFC after thorough discussion approved the draft report subject to minor modifications proposed by the provinces.

All the participants expressed their satisfaction over the implementation of NFC Award and thanked the Federal Finance Minister for his support. Syed Murad Ali Shah, Advisor to Chief Minister Sindh on Finance, Siraj-ul-Haq, Finance Minister KPK, Mujtaba Shuja-ur-Rehman, Finance Minister Punjab, Khalid Langa, Finance Minister Balochistan, Khwaja Mohammad Asif, Federal Minister for Water and Power, Shahid Khaqan Abbasi, Federal Minister for Petroleum and Natural Resources and senior officials of the Ministry of Finance, Federal and Provincial Government also attended the meeting.

source: AFP