Government Pushing State Into Debt Trap: PDP

23 July 2014
Kashmir Life

Srinagar: Expressing deep concern at the alleged financial crisis facing the state Peoples Democratic Party (PDP) Wednesday said the Omar Abdullah government is pushing Jammu & Kashmir into a virtual financial emergency through its inefficient governance and politically motivated commitments. According to statement, party leader and noted economist Haseeb Drabu, said the market borrowing of rupees 300 crores by the state government reflects not just liquidity deficit but an acute fiscal crisis. He said: 'It is a mismatch between revenues and expenditures; revenue inflows have been delayed even as committed expenditures have been made. This mismatch has been aggravated by unfunded liabilities of around Rs 8,000 crores that have been created by pre-election freebies.' He said while market borrowings are a part of the state finances, these are to be used for financing capital expenditure and building assets. The problem with these borrowing is that it is being used to defray current expenditures like salaries and pensions and that too on the non-plan account. 'This is surest route to a debt trap,' Drabu said. Giving reasons of the prevailing financial crisis, he said, 'the real reason why the liquidity crisis has become binding is because of the institutional change which this government made: replacing J&K Bank by RBI as the lender of last resort for the state government.' 'Earlier J&K Bank would bridge this gap on call through the overdraft facility. Now, with the RBI as the banker, the state doesn't have such an on tap mechanism to meet mismatches,' he added. Drabu said. 'If the situation continues like this, the present liquidity problem will graduate into a solvency crisis which can result in a financial emergency.' This would be yet another inglorious first of this government he said, even as the state government doesn't have money to pay salaries and pensions on time, not to speak of advance payment ahead of the festival season, it is adding to its liabilities. Urging the government to immediately release salaries, pension, GP fund and other dues to the employees and pensioners ahead of the festivals Drabu said this government has failed even to follow the tradition of releasing salary and pension in advance of such occasions. He said there are reports of even regular employees of not being able to get salaries on time. The army of casuals, daily wagers and seasonal laborers this government has engaged on fake orders are not able to get even their standard token 'Eid gift' now which they were paid in lieu of their wages to perpetuate the fraud played with them in the name of employment, added Drabu.