KP government to borrow Rs91bn to cover FY21 budget deficit

PESHAWAR: The Khyber Pakhtunkhwa (KP) government has decided to borrow Rs91 billion from banks to cover its budget deficit due to delay in payment of net hydel profit and other dues by the federal government. 

For the fiscal year 2020-21 the KP government will take Rs47.49 billion in foreign loans and Rs44 billion in loans from local banks. 

According to the budget documents, KP government was expected to receive Rs33.70 billion as net hydel profit for FY 2016-17, but was only provided Rs21.80 billion. For FY 2017-18, the province was expected to receive Rs35.80 billion but was provided Rs41.5 billion.

During the last two fiscal years, the province was supposed to receive Rs121 billion in total from the federal government as payment for net hydel profit. However, the centre has so far released only Rs34.50 billion. 

The KP government has sought Rs128 billion next year from the federal government under the AGN Kazi formula, but the final decision in this regard is yet to be taken by the Council of Common Interests. The provincial government also expects to receive Rs36.77 billion in arrears for the two years. 

According to KP Finance Minister Taimur Saleem Jhagra, it is not the first time the province will be borrowing money from banks to cover its budget deficit. The KP finance minister further added that even developed countries borrow money from banks to cover their budget deficit.

Out of the Rs91 billion in loans, the KP government will spend Rs10.82 billion on road construction, Rs9.99 billion on transport, Rs8.46 billion on energy, Rs4.57 billion on agriculture, Rs3.25 billion on finance, Rs3.25 billion on urban development, primary and secondary education, Rs2.55 billion on irrigation, Rs2.55 billion on provision of drinking water, Rs 1.48 billion on health, Rs1.17 billion on sports and tourism, Rs546 million on multi-sector development and Rs10 million on irrigation and drainage.

Out of the Rs47.49 billion in foreign loans, Rs31.91 billion will be provided by the Asian Development Bank (ADB), Rs11.63 billion by the International Development Agency, Rs3.32 billion by the European Union (EU), Rs2.32 billion by the World Bank (WB), Rs1.10 billion by the Japan International Cooperation Industry (JICA) and more than Rs710 million by British Aid.