Punjab, KP staring down the financial barrel

The caretaker governments of Punjab and Khyber Pakhtunkhwa (KP) are on the verge of a potential financial crisis as the one-time authorisation of expenditures for a four-month period is set to expire later this month.

Under Article 126 of the Constitution, caretaker governments are only permitted to authorise expenditures from the Provincial Consolidation Fund for a four-month duration within any financial year, and this authorization can only occur once. Both Punjab and KP availed themselves of this authorization in the third week of June this year.

Officials in both provinces acknowledge the issue and are actively exploring solutions, Express Tribune reported on Friday. A Punjab Finance Department official stated that the matter would be addressed in consultation with the legal department, and it has been discussed with the finance secretary.

Another senior official suggested that, if allowed, the government might opt to introduce a new budget covering another four months in the current fiscal year, as previously announced. There is also the possibility of resorting to an ordinance by the governor.

The official clarified that the Provincial Consolidated Fund is the sole source from which the government draws funds for salaries, pensions, ongoing development projects, and utility bills. If access to this fund were denied after the four-month period, it would result in a “financial shutdown.” This scenario would also impact the timely payment of salaries to judges and other government obligations.

Caretaker KP Finance Minister Ahmad Rasool Bangash emphasised that the only viable path forward was to introduce a new budget for the next four months, as governments would be unable to function without it. Regarding the legal limitations, he noted that October had begun, and the current budget would remain in effect until the end of the month. He indicated that discussions were ongoing with legal experts to address the situation.

However, Kunwar Dilshad, adviser to the Punjab chief minister, downplayed the notion of a “financial shutdown,” asserting that there were no legal obstacles to approving another four-month budget. He emphasised that the perception of a legal impediment was incorrect.