October 25, 2003	Saturday	Sha’aban 28, 1424

KARACHI, Oct 24: The World Bank has found the Sindh government failing to observe the implementation of constitutional requirements “in letter and spirit” in annual budget-making exercises.

“Devolution has introduced additional risks in the governance process,” a report on Provincial Financial Accountability Assessment warns. The report was prepared by a team of World Bank executives in close consultation with senior officials of the Sindh government.

“Weak governance and lack of institutional development have curtailed the effectiveness of public expenditure” is the candid observation of the report that points out provincial expenditure accounts for more than 80 per cent of expenditures on key sectors such as education, health, agriculture, irrigation and most of road expenditure and as such is “crucial for poverty reduction”.

The financial provision of Pakistan constitution shows that it specifies: (i) participation and transparency — by providing that the annual budget requires approval of the Sindh Assembly; (ii) regulate expenditure in open and prescribed manner — by providing the laws regulating the Provincial Consolidated Fund, Public Accounts and Borrowing; (iii) relating purpose with financial expenditure — by stating that the federation or a province may make grants for any purpose; (iv) monitoring revenue, expenses and variations in assets and liabilities — through annual accounts; (v) accountability — by providing that the audit report and accounts of the province shall be laid before the assembly; and (vi) federal fiscalism — by assuring a mechanism for a balanced and fair division of responsibility and authority (resources).

According to World Bank report, the budget development process had become ineffective mainly because medium-term vision and agreed sectoral objectives were given least regard. Wage bill of provincial government employees and debt servicing are rigid expenditures and led to incremental budgeting in place of performance budgeting. There are low allocations for social sectors.

There is low participation of civil society and elected representatives in the budget-making, conceptualization and monitoring of development projects and programmes. The provincial legislature has ineffective control over estimates of receipts and borrowings which result in deficit financing. Then there is mixing of public account receipts with the consolidated fund receipts and their unauthorized use to meet government expenditure and liabilities. Block allocations are made to sustain unanticipated shocks, capital projects are not amortized and there is no proper and reliable system of feedback, the report adds.

The World Bank found the monitoring of budget implementation equally ineffective and consider management and control system weak. It points out that accounting and financial reporting do not provide reliable information to the provincial government. There is no functional relationship between accounting and management.

“Financial reporting in the province is neither reliable nor timely and cannot be used as a tool for management,” it says.

The World Bank report has taken notice of the recent devolution programme under which new structures have been created at the district, taluka, town, and union levels, which now have a broader mandate than the previous local bodies. The local bodies are now the sole providers of critical social services, including education, health, water supply and sanitation. Much more funds are now at the disposal of local governments to be budgeted and spent in accordance with the priorities.

“Fiscal decentralization is underway, but there are transitional issues adversely affecting financial accountability at the local level,” the report observes and advises that there need to be more attention to long-term perspective and vision in the budget preparation.

How much interest the bureaucrats, parliamentarians and elected Nazimeen take in financial affairs of their province became more than evident on Thursday when World Bank report was theme of a seminar organized by the finance department. As many as 48 persons attended the seminar, most of whom were the officials and staff of the finance department. There were two ministers, including a senior minister who chaired the seminar, two advisers and leader of the opposition in Sindh Assembly, a bureaucrat representing Auditor General, four representatives of the World Bank.

But in the last 32 years, since Sindh province re-emerged with an elected legislature in 1971, all the six elected assemblies after 1977 were dissolved through executive orders much before their constitutional terms. Only the one elected in 1970 completed its term. No wonder then there was no public accounts committee for the last 17 years in the province.