Punjab facing Rs 30bn deficit in new fiscal year

[Naveed Yaseen]

* Government operating with Rs 60bn overdraft
* Salaries of govt employees, development works may be delayed if situation persists

By Nauman Tasleem

LAHORE: The Punjab government started the fiscal year 2009-10 with a net loss of Rs 30 billion, possibly delaying the salaries of government employees of the province, Daily Times learnt on Wednesday.

The current fiscal year, which started on July 1, could be the worst in the country’s history for Punjab, as the government’s account at the State Bank of Pakistan (SBP) has a Rs 30 billion deficit and currently has a Rs 60 billion overdraft. According to sources, the overdraft has risen sharply in only two months, starting at only Rs 8 billion in the third week of May and reaching Rs 30 billion in a mere 40 days by July 1.

Possible delays: Sources said the government could delay the salaries of Punjab government employees to control the deficit, adding the government was currently paying Rs 900 million per month in interest on the overdraft. Efforts are underway to get money from the federal government, they said. Punjab Finance Secretary Tariq Mehmood Pasha and Additional Finance Secretary for Budget Umar Masood travelled to Islamabad on Wednesday to meet Federal Finance Secretary Salmaan Siddique and request a bailout from the federal divisible pool.

Bailout: According to the sources, the Punjab government has requested Rs 37 billion from the federal government. However, they said, the federal government would likely only pay half the amount as it was running a deficit itself. “The provincial government’s problems will not end after getting money from the federal government,” said an official of the Punjab Finance Department. Meanwhile, the State Bank has warned the provincial government to prepare for bounced cheques if it does not reduce its overdraft.

In a letter dated May 14, 2009, the SBP expressed grave concern over the overdraft amount, asking the Punjab government to take “remedial measures” on an urgent basis. It said the SBP would be forced to exercise its statutory powers by dishonouring the Punjab government’s cheques if the situation persisted.

In recent negotiations between the government of Pakistan and the International Monetary Fund (IMF) in Istanbul, the SBP was instructed to stop paying money to the governments, both federal and provincial, if they continued to operate on an overdraft. Another official of the Punjab Finance Department, on condition of anonymity, said the Punjab government was trying to convert the overdraft amount into a running loan. However, he added, negotiations on the conversion of the overdraft into a loan had not been initiated yet.

When contacted, none of the provincial secretaries were willing to formally comment on the issue. Punjab Finance Secretary Tariq Mehmood Pasha said he was in Islamabad and could not confirm the figures. “I will confirm the figures when I reach Lahore and then will let you know,” he said. Additional Finance Secretary for Budget Umar Masood refused to comment.

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