Centre blames provinces for fiscal deficit

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KARACHI – The federal government, which is again haunted by soaring international oil prices that would increase the country’s woes on the inflation and balance-of-payment fronts, has held the provinces responsible for the widening fiscal deficit.
The country is also faced with a longstanding challenge of circular debts which, the economic managers said, have again ballooned to Rs 300 billion due to power tariff differentials. The federal government in a bid to protect the economic recovery has cut the development budget by Rs 100 billion promising that it would soon slash its non-development expenses either.
Addressing the members of Overseas Investors’ Chamber of Commerce and Industry (OICCI) here on Saturday, Finance Minister Dr Abdul Hafeez Shaikh said that inability of the federating units of the country to show surplus in their budgets had left little space for the center to arrest the widening fiscal deficit.
Attributing the widening of fiscal deficit from 4 to 5.2 percent to huge money transfers from federation to the provinces, the finance minister said his government was struggling to remain on a stable balance path through slashing expenditures, mobilizing fresh resources.
Dr Hafeez said the transfer of Rs 300 billion to the provinces under NFC Award and other factors like ever-rising expenses emanating from the war on terror and post-floods rehabilitation works had greatly dis-balanced the economy. The floods had shrunk the growth rate to 2.5 percent, said Dr Hafeez. About the IMF package, he said the government was extending only targeted subsidies rather than the general ones.
The finance minister, however, made it clear that the government would never compromise its national interests and would continue to head towards economic self-sufficiency through enhanced domestic resources mobilization. The finance minister also formed a committee to resolve the issues facing the OICCI members relating to income tax and sales tax refunds.
The body would comprise the officials from OICCI and FBR would also look into the matters relating to the implementation of MoU between the FBR and Pakistan Exploration and Production Companies Association (PEPCA).