The Punjab budget 2019-20 envisages a budget surplus of 233 billion rupees accounting for 55 percent of the total provincial surplus of 423 billion rupees earmarked in the federal budget. While during the tenure of the previous administration, the Centre and Punjab were also governed by the same party, PML-N, yet Punjab consistently was unable to generate the surplus envisioned by the then federal finance minister Ishaq Dar in the federal budget for two reasons: first, after the devolution of social sectors to provinces in 2010 subsequent to the passage of the 18th Amendment, provincial expenditure requirements naturally increased, though revenue also increased as per the 2010 National Finance Commission award; and second, the federal government plugged in the required provincial surplus based on its need rather than in an attempt to determine the actual surplus that could be generated by the provinces through mutual consultation.
The incumbent Punjab government has meticulously adhered to the federal budget's surplus requirement reflects the reduced leverage of the Buzdar-led Punjab government with respect to the Imran Khan-led government at the centre. Be that as it may, however, to aim for a provincial surplus is a policy that must be supported and is certainly in line with the staff-level agreement with the International Monetary Fund (IMF) which stipulates in its 12 May 2019 press release that "provinces are committed to contribute to these efforts by better aligning their fiscal objectives with those of the federal government." It is extremely doubtful if Sindh no doubt the other major source of provincial surplus for next year is not on board.
Another disturbing aspect of the Punjab budget is the fact that Punjab's share from the divisible pool taxes is estimated at 1.6 trillion rupees, a figure taken from the federal budget documents. However, the federal budget clearly has overestimated collections from the divisible pool taxes notably customs duties (which projected a growth from 416.9 billion rupees in the revised estimates of last year to 568 billion rupees in 2019-20 based on a 150 rupee to the dollar parity which Friday last exceeded 155 rupees to the dollar. Additionally, the federal government's target of an additional 1.45 trillion rupee more than what was actually generated in the revised estimates of the current year are widely believed to be unrealistic, a point of view expressed by senior members of the Federal Board of Revenue, though the Chairman, Shabbar Zaidi, remains optimistic. Thus in the event that the federal government's revenue targets remain unachieved, a usual occurrence for decades and especially during an IMF programme, Punjab revenue maybe less than envisaged which would again compromise not only on its capacity to deliver on its expenditure targets but also in terms of generating the surplus that it has committed to.
Punjab's expenditure priorities reflect the priorities highlighted by the Prime Minister time and again - education (42.2 billion rupees), health (22 billion rupees with health card budgeted 2 billion rupees), clean water supply (8 billion rupees), water sanitation (6.3 billion rupees) and transport (26.4 billion rupees) as well as sports, and youth. The budget speech was strangely silent on tourism promotion, a pet project of the Prime Minister. Local/municipal services would receive an additional 36 percent compared to the outgoing year. And what must be fully supported was to budget expenditure equally among the 11 Punjab regions with 35 percent earmarked for South Punjab. Provincial Ehsaas programme is budgeted to include - Ba-Himmat Buzurg programme (3 billion rupees), the disabled (3.5 billion rupees) and the Sarparast for widows and orphans (2 billion rupees).
Punjab's Annual Development Plan envisages a 47 percent jump with social sector accounting for a jump of 37 percent, which may indicate the intent of the government to change the socio-economic fabric of Punjab, yet again without the resources this may remain a challenge.
Receipts of the province are budgeted at 388.4 billion rupees - 295 billion rupees from tax and the remaining from non-tax revenue. Increased provincial taxes include raise in existing taxes (stamp duty) as well as a flat rate on more service sector groups including lawyers, jewellers, health clubs, cigarette/tobacco dealers, stock brokers, money changers, doctors, hakeems, homoeopaths, contractors, builders and property dealers. Additionally, a 1500 rupee tax is proposed on factories with 10 people employed, 5000 rupees for those units employing 25 and 7500 on those employing 25 or more. Service taxes are the fastest growing taxes for provincial governments; however, there is a need to exercise discretion in their application as their incidence on healthcare without provision of applicability threshold would render essential services beyond reach of the poor.