The Khyber Pakhtunkhwa government has warned that the continued shortfall in the release of funds by the federal government under the National Finance Commission (NFC) and other commitments has created a serious risk to achieving the agreed cash surplus target of Rs 157 billion with the International Monetary Fund (IMF).
According to sources, Khyber Pakhtunkhwa’s Adviser on Finance, Muzammil Aslam, has warned Finance Minister Muhammad Aurangzeb that due to the Federal Board of Revenue’s (FBR) failure to meet its targets for the first six months of the year, the province received Rs 76 billion less than its estimated share under the NFC. Despite collecting billions of rupees through unjust income tax and sales tax advances and slowing down the payment of refunds, the FBR still fell short by Rs 545 billion of the original tax target and by Rs 330 billion of the revised target. This marks the second consecutive year under Prime Minister Shehbaz Sharif’s leadership in which tax targets have not been met despite full support extended to the FBR.
The adviser wrote earlier this week that it is clear that the continued reduction in federal fund transfers poses a serious and immediate threat to achieving the Rs 157 billion budget surplus. When contacted, the spokesperson for the Ministry of Finance declined to comment.
According to sources, these developments have emerged amid rising tensions between the provincial and federal governments, following claims by the Khyber Pakhtunkhwa Chief Minister regarding the withholding of Rs 4.5 trillion in dues and the Pakistan Tehreek-e-Insaf’s decision to call a strike on February 8 over alleged election rigging.
For the current fiscal year, all four provincial governments have committed to providing a combined cash surplus of Rs 1.46 trillion, equivalent to 1.1 percent of the size of the national economy. Meeting the cash surplus target is another key IMF condition, which is essential to demonstrate the primary budget surplus target of Rs 2.1 trillion.
However, the provinces maintain that they can only provide these funds if the FBR meets its tax collection targets. The government had assured the IMF of achieving 20 percent growth in tax revenues, but so far the FBR has managed to achieve barely 10 percent growth.
