Punjab government facing cash flow constraints

LAHORE: Caretaker Finance Minister of Punjab Zia Haider Rizvi has said the interim government has inherited outstanding payments of Rs71 billion under different heads and its first priority is to timely release salaries of government employees.

“Punjab government is facing cash flow issues due to various reasons,” said Rizvi in a statement on Thursday. A major reason behind that was slower transfer of provincial share in the National Finance Commission (NFC) award by the federal government.

Apart from the NFC award, some shortfall in the Punjab Revenue Authority’s tax collection, due to the Supreme Court order that suspended tax collection on telecommunication services, is another factor behind the liquidity crunch.

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“In view of this, the Finance Department has anticipated that some cheques/instruments will remain unpaid this year,” he said.

The caretaker chief minister has directed the Finance Department to accord first priority to the payment of salaries as per directives of the Supreme Court.

Second priority is being given to claims of less than Rs5 million to facilitate maximum number of people with comparatively slower cash flow whereas third priority is being given to payments of over Rs5 million.

“The government of Punjab had issued an advice to the State Bank of Pakistan for making payments in accordance with the above priorities and instructing all banks concerned to stay open on June 30,” he said.

Moreover, as per the chief minister’s directives, Rizvi also wrote a letter to the federal finance minister seeking the release of withheld share of Punjab and it was also reiterated in a meeting with the finance czar in Islamabad.

A number of cheques and instruments issued by various departments or organisations of the Punjab government and the payments made on June 30, 2018 could not be cleared because of various reasons.

The provincial minister pointed out that provinces heavily depended on their share in the federal divisible pool distributed according to the NFC formula.

In line with that, Punjab prepared its budget on hopes that the federal government would release its share. However, the latter could not collect the promised amount, resulting in a gap of Rs136 billion Of that figure, Rs44 billion was released in the first week of July, he said.

Moreover, despite the Punjab government’s advice to make payments on June 30, the SBP did not allow it on the last day of the fiscal year on instructions of the federal government.

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“This resulted in non-payment of a large number of cheques. The Punjab government is taking up this issue with both the central bank and the federal government,” Rizvi added.

In the consolidated budget statement, the federal government made an unwarranted and unrealistic entry of Rs347 billion as estimated provincial surplus without any consultation with the provinces. This was done to contain the consolidated fiscal deficit at 4.1% of gross domestic product, he said.

Published in The Express Tribune, July 6th, 2018.

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    Original news : https://tribune.com.pk/story/1750762/2-punjab-government-facing-cash-flow-constraints/