Kerala government caps treasury payments in the wake of fund shortage

In the wake of shortage of funds, Kerala's Finance Department has capped Treasury payments in the first month of the new fiscal.

In its directive to the Treasuries Director, the Department asked for the reduction of the ways and means limit from Rs 1 crore to Rs 25 lakhs with immediate effect.

If there was a requirement for any payments to be made above Rs 25 lakhs, then special sanctions will have to come to effect.

Till April 25, the Treasuries were allowed to pay bills up to Rs 1 crore.

According to informed sources, the decision comes as the Kerala government is on a borrowing spree and is done to pay the salaries and pension to state government employees, besides paying of interests on earlier borrowed loans.

Kerala appears to have gone 'broke' is on account of a delay in sourcing funds, they added.

If borrowed funds do not return on time or if the GST compensation to the state does not come in time from the Centre, then the salaries and pensions to be paid in the first week of May might not happene.

When the economist turned Minister of Finance, Thomas Isaac was at the helm of affairs during the first Pinarayi Vijayan government (2016-21), he deftly managed the poor state of finance through proper fiscal management and now with first-time legislator K.N.Balagopal as the Finance Minister, things appear a bit tough.

Incidentally the total outstanding public debt of Kerala had skyrocketed after Vijayan took over and it now stands at above Rs 3 lakh crores.

Outstanding debts is the sum total of public debt which consists of internal debt, loans and advances from the Centre besides loans from financial institutions such as LICA and special securities and not to mention of borrowings from deposits in state PF, treasury, pension funds and insurance.

To get a clearer picture of the debt, it is best highlighted as a ratio of the size of the state economy/state gross state domestic product (GSDP).

A comparison of the national picture of states and union territories with the highest debt GSDP ratio in 2022 are Arunachal Pradesh 57.4 per cent, Jammu and Kashmir Kashmir 56.6 per cent, Punjab 53.3 per cent, Nagaland 44.2 per cent, Himachal Pradesh 43.4 per cent, Rajasthan 39.8 per cent, Meghalaya 39.2 per cent, West Bengal 38.8, per cent Kerala 38.3 per cent and Andhra Pradesh 37.6 per cent.

One thing which has to be noted is the present staggering figure of the outstanding debts of Kerala did not happen overnight and successive state governments to a certain extent can take credit for the achievements of the state in the fields of education and health, which leads the rest of the country and to reach here, investment is required, but looking deeper into it experts revealed the real situation.

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