Some significant moves are being been made by the federal government to devolve financial authority and responsibility to the provinces to speed up the nation-building activities.
The National Economic Council (NEC) which met in Islamabad last week decided to empower the federating units to sanction projects up to Rs1billion, a five-fold increase from Rs200 million.
Bureaucratic hassles often delayed approvals by the Islamabad-based Planning Commission. For several months, the Commission was without a chairman. The new PC boss, Dr Akram Sheikh has just taken over. Besides, the ceiling prescribed decades ago on provincial project approvals had become outdated. But, surprizingly, the financial approval limit for district governments up to a maximum level of Rs20 million has been retained and no similar raise has been allowed.
In a dramatic move, the NEC presided over by Prime Minister Zafar Khan Jamali also decided that unutilized portion of financial releases which lapse at the end of a fiscal year, will remain valid for three years. It was not very clear whether this also applied to districts.
There have been widespread complaints that project planning and execution have slowed down because of the bureaucratic web embracing three tiers of the government, the federation, provincial and district governments.
Empowering the provinces had become necessary to improve governance under the poverty reduction strategy which has, says the finance minister, Shaukat Aziz, "brought the social sectors in the centre stage of economic planning". The provinces would now be put to a critical test to deliver.
Measures are also stipulated for further devolution of fiscal management. "A fast approach would have to be adopted in ironing out issues of financial releases, bookings, disbursements and utilization,- between the provinces, district and tehsil governments- to ensure that the pro-poor expenditures remain in line with the government's medium-term targets," says an official document, monitoring the poverty reduction programmes.
The often delayed financial releases for districts lapse and to get the unutilized funds revalidated takes considerable period of time because of the bureaucratic procedures that hold up project execution. If financial releases valid for three years have been made valid also for districts, a major operational snag would have been removed.
The federating units would be furthered empowered by the official move to raise the share of the provinces in the next National Finance Commission Award from current 40 per cent plus to the 45 per cent plus, hopefully by next fiscal as officials anticipate.
Under the new federal expenditure management policy, the ministries are allowed to spend 50 per cent of the public sector development programme (PSDP) allocations in social sectors and 45 per cent in others during the first half of the financial year without any reference to ways and means.
Officials say that this has also started to give positive outcomes with federal spending up by 90 per cent in the first quarter 2003-04 compared to corresponding period of the previous year.
One of the four core elements or the pillars of the poverty reduction strategy is to "improve governance and consolidate devolution- both as a means of delivering better development results and ensuring social and economic justice," says Wajid Rana, who has prepared the poverty reduction strategy paper (PRSP).
As the implementation of poverty reduction programme picks up, the administrative and financial challenges mount. The key issue is the improving of the governance to ensure that good policies do not suffer from bad execution.
For example, the performance of districts in Sindh has suffered because financial releases lapse if not utilized within the given fiscal year contrary to provisions of the Local Government Ordinance, 2001.
The challenge comes from a fossilized administrative machinery, an archaic political system and unfair trade practices in an unregulated market as reflected in the soaring prices of wheat, cement, steel, automobiles etc.
A high rate of inflation, as repeatedly pointed out by Shaukat Aziz, hurts the poor most. The PRSP objective of a "high and broad-based economic growth " would stand defeated by emergence of unfair trade practices, cartelization and the creation of oligopolies.
The second generation of reforms, says the finance minister, will further improve the competitive environment for an expanded private sector. These need to be expedited. The PRSP rightly recognizes that, " the economic growth is necessary but not a sufficient condition to reduce poverty," and, "a special effort to ensure that economic benefits are shared by all," is needed.
But all success stories- whether of the East Asia or China- had two fundamental elements in common: land reforms and 80-90 literacy and education. The government has ruled out land reforms that could cut farm size to more economic and efficient production levels.
Instead, it has undertaken distribution of resumed and state lands among the landless peasants. In the first quarter 2003-2004, 415 acres were distributed among 53 beneficiaries against 153,197 acres among 14,419 in the corresponding period 2002-2003. The focus is on Sindh and the pace of distribution is slowing down.
Investing in human capital with a renewed emphasis on basic social services is yet another pillar of the Poverty Reduction Strategy. In the first quarter of the current fiscal, pro-poor budgetary expenditure on education went up to Rs19,548 million from Rs15.541 million in the last fiscal's initial three months. But spending on health was down from Rs4,092 million to Rs3,832 million.
The expenditure on health and education is at the very low levels to bring about any significant impact on development of human capital. And the financial performance has to be matched by the quality and quantity of physical achievements.
The total budgetary and non-budgetary pro-poor expenditure improved in the comparative period from 0.97 per cent to 1.30 per cent of the GDP,- from Rs36,992 million to Rs50,717 million.
Sindh's social spending declined by 11 per cent which can be perhaps explained by meddling of the provincial government in the district affairs. Officials committed to devolution have been replaced by personnel with no ownership of social sector programmes, elected district officials lament.
Similarly, the provincial government appoints district employees of grades 1-17, although it is the prerogative of the district government. Officers of grades 11 and above are recruited directly without approval of the Sindh Public Service Commission as required. The provincial government is usurping district autonomy weakening its own case for fiscal federalism with Islamabad.
The district government lobby is weak. District governments were conceived by the National Reconstruction Bureau which has lost all its teeth after the exit of Major-General (rtd) Tanvir Naqvi to lend support to grassroots democracy.
