By Staff Reporter
ISLAMABAD: The provinces have consented to sign a Memorandum of Understanding (MoU) to generate a revenue surplus of Rs750 billion this fiscal year to narrow the federal budget deficit to 4.9 percent of the GDP (gross domestic product) as demanded by the IMF, it is learnt.
“The Ministry of Finance has shared a draft MoU with all the four provinces, while extending the government’s guarantee to remove objections raised by each province, and the federating units have agreed to ink the accord,” a top official source confirmed to IP on Wednesday.
The federal government has undertaken fiscal consolidation to slash the budget deficit to 4.9 percent of GDP at federal levels with the help of a provincial revenue surplus of Rs750 billion or more than 1.1 percent of GDP during the ongoing fiscal year 2022-23.
How much revenue surplus had been generated by the province in the last fiscal year 2021-22 will become known by the end of the ongoing month.
The IMF wants to see signatures of all four provinces at the bottom of the MoU that proves their formal agreement to generate a revenue surplus of Rs750 billion in FY2023.
The PTI-led government of Khyber Pakhtunkhwa (KP) had expressed reservations about the signing of the MoU at the initial stage; however, its finance minister held a meeting with Federal Minister for Finance Miftah Ismail this week on Tuesday and reached a consensus on clearing the stumbling blocks in the way forward.
When KP Finance Minister Taimur Khan Jhagra was contacted and inquired about the province’s stance on signing the MoU, he confirmed that the KP would sign the MoU.
“The Centre agreed to resolve the issue regarding increasing KP’s share in the NHP (Net Hydel Profit) after the merger of FATA with the province, thus we agreed in principle to sign the MOU for generating our share of revenue surplus,” the provincial minister said.
Jhagra said that KP’s government would sign this MoU tonight or tomorrow (Thursday).
The official sources also corroborated Jhagra’s statement.
However, the KP’s government may raise objections over Punjab’s decision to provide free 100 units of power to lifeline consumers, which, according to KP officials’ estimates, will require a subsidy of Rs148 billion.
One of the gripes shared by the provinces was the federal government’s decision to raise salaries and pensions of public servants without consulting with the provinces as the education and health sector workforce largely existed in the provinces so the salary bill of the provinces would exceed manifold, leaving no fiscal space for expenditures on other important subjects.
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