Wednesday, June 16, 2021

Punjab budget 2021-22: How will the government spend its money?

Punjab government announces a target to achieve provincial GDP growth of 5.2%

Punjab budget 2021-22: How will the government spend its money?

The Punjab government has announced its budget with a target to achieve provincial GDP growth of 5.2% during the coming financial year 2021-22. It has increased its development budget by a whopping 66% that will be spent largely on industry, agriculture, the social sector and infrastructure.

The Punjab government has also undertaken a Rs80 billion health insurance programme, which aims to provide health coverage to the entire population of the province by December 31.

Separately, over Rs300 billion has been allocated as a development package for 36 districts, where 3,800 new schemes will be introduced. These schemes will be executed over a period of three years, on the recommendations of the district, tehsil and village councils. Meanwhile, 34% of the annual development spending has been earmarked for South Punjab.

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Unlike the Centre, Punjab does not struggle for finances. In fact this year, it had a surplus of Rs125 billion, despite an aggressive expansion of its development programme. It already gets Rs1.68 trillion from the federal taxes divisible pool, and generates the rest of the money through its tax revenue, capital receipts and foreign funds.

In fact, Punjab’s finance minister announced that it collected Rs42 billion over its annual target of Rs317 billion during the ongoing financial year. This has encouraged the finance minister to announce a provincial tax target of over Rs400 billion for the coming financial year. The minister also announced tax concessions of nearly Rs50 billion to continue existing and new concessions.

But despite such a ready availability of resources, over 75% of Punjab’s budget is spent on non-development expenses, while the development spending of Rs560 billion is less than one fourth of its total budget outlay of Rs2.56 trillion.

Take the example of education, where Rs440 billion has been set aside, but only 15% is earmarked for development schemes in the coming year.

However, in the health development budget there has been an increase of 250% compared to the previous year.

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This year's budget is also focused on industry and agriculture.

Punjab’s finance minister announced a 300% increase in development schemes in the industries, small and medium-sized enterprises and skill development to Rs 12 billion. An additional Rs10 billion has also been earmarked as an ‘Economic Stimulus Package’ for industrial and business growth.

The industrial development budget aims to complete ongoing schemes and new schemes such as the surgical city and tannery zone in Sialkot and a SME estate in Gujrat.

For agriculture, the finance minister has announced a fourfold increase in the development budget to almost Rs32 billion. This includes an allocation of Rs4 billion for the Kissan Card.

Moreover, around 36% of the new Punjab development program of Rs560 billion has gone to the social sector, therefore, Rs205 billion, out of which Rs98 billion has been allocated to health and Rs54 billion to education.

One major scheme the government plans to undertake in the education sector is to set up a new Engineering and Technology University in Sialkot for over Rs17 billion.

Another important theme in Punjab’s budget was infrastructure, which has a 26% share and an allocation of Rs145 billion. Under this, the government aims to build new highways in the provinces as well as other infrastructure projects.

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Housing, urban development, water supply and sanitation, municipal services and local government have also seen an uptick in their budget this year. A World Bank-aided Rs86 billion project has been launched to provide sanitation facilities in 16 tehsils. 

Separately, Rs7 billion has been allocated to improve municipal services in 16 cities, Rs3.7 billion for the conservation of the Lahore Fort and over Rs40 billion for water and sewerage treatment plants in Faisalabad and Lahore.

After the passage of the Public Private Partnership Act 2019, the Punjab government aims to undertake such projects worth Rs100 billion in the coming years.

Social protection also seems to be a major focus for the Punjab government and different schemes of over Rs60 billion are under execution. 

 The major projects are the Rs32 billion Punjab Human Capital Investment project , Rs15 billion South Punjab Poverty Alleviation Project and the Rs9.5 billion Zewar-e-Taleem Project, under which young women are given cash stipends of Rs1,000 to attend school.

Budget 2021-22: Realistic or over-optimistic?