Living on federal doles, Punjab, or for that matter, any other province, always finds it hard to put the monies where the mouth is.

In such an exceedingly centralized tax collection system as is practised in Pakistan, the performance of provincial economies largely, if not entirely, hinges on the performance of a single federal department - the Central Board of Revenue (CBR) - and whatever share Islamabad deems it fit to transfer to provinces under the National Finance Commission (NFC) award.

If the CBR, which collects over 90 per cent of the country's total tax revenues including the value-added tax (GST), does well, it means a smooth flow of funds to provinces for meeting their current and development needs.

The failure of the CBR in meeting the revenue targets as has happened throughout the 1980s and 1990s leaves little choice for the provinces but to borrow heavily from Islamabad and the State Bank to finance their development requirements.

The result is expensive and unsustainable debt burden on all the federating units. Punjab alone had run up Rs83.74 billion expensive cash development loans (CDL), which is about 57.18 per cent of its entire debt stock of Rs146.45 billion, by the end of the fiscal 2002-03.

The huge debt stock accumulated by the province over the last several years due mainly to the poor performance of the CBR means further narrowing down of whatever little fiscal space it has for development.

The huge, hidden pension and GP fund liabilities accumulated by the province are beside the unmanageable CDL stock hampering the development of the province. The provincial government has drawn up a debt reduction and management strategy under which it intends to retire a large part of its most expensive CDL stock in order to create fiscal space for development.

As part of its debt reduction strategy, Punjab will repay Rs45 billion over a period of three years (2003-06) to the federal government to retire a part of its CDL debt.

The provincial government, which will pay Rs15 billion to the centre each year, has arranged two low-cost facilities from the Asian Development Bank and the World Bank to swap its expensive loans. This will create a fiscal space of Rs5.10 billion at the end of three years to divert greater resources for development.

In this background, the Punjab finance department officials concede, the process of preparing the provincial budget can best be described as a farcical ritual that has to be enacted each year with the same religious zeal.

In the case of Punjab, the dependence of provincial budget on the federal transfers from the divisible pool under the NFC becomes even more stark. It is mainly because Punjab, like other provinces, has surrendered its large tax base, including the value added provincial tax, to the federal government and is not rich in natural resources like Balochistan or the NWFP.

The most populated province of Pakistan is fiscally the least endowed province with a per capita resource of Rs335 (on the basis of final accounts of budget 2000-01) followed by the NWFP with Rs544, Sindh with Rs935 and Balochistan with Rs1,699.

It means Punjab would require an additional resource transfer of Rs600 per capita or Rs44 billion on top of what it is getting under the NFC if its fiscal capacity has to be bridged compared to Sindh.

As a consequence of fiscal imbalance and resource constraint, the officials insist, it is not possible for the province to provide quality social/public services to its people even at a level commensurate with other three provinces.

The data pertaining to education shows that the public sector facilities in terms of schools is substantially lower in Punjab in relation to its population as compared with other provinces. The number of teachers in Punjab is also lower than its population share.

Similarly, the number of public sector hospital beds is lower than its population share while infant mortality rate in the largest province is higher than other three so-called backward provinces.

Resource constraint notwithstanding, the rulers of Punjab, which houses about 26 million people, or over one-thirds of its population, living below the poverty line and almost as many just above the threshold can still not absolve themselves of the responsibility of improving the conditions of its residents.

The deterioration in the condition is not caused just by meagre resources, it also reflects a lack of will on the part of successive governments to improve the quality of life of the people of the province.

"Things wouldn't have been as bad as they are right now had the successive governments prudently and effectively utilized whatever resources were available to them. Political expediencies and lack of development vision made the successive governments to put monies in projects which were either not needed at all or could serve only a few," the economists say.

The unused infrastructure available in the shape of basic health units (BHUs) and rural health centres (RHCs) spread across the province is just one example. Few of those for whom this infrastructure is said to have been erected could benefit from it in several years.

No doctor wants to go there; no equipment or medicine is available; and patients find them out of their reach due to the distance involved even if doctors and medicines are made available there.

The problem with the provincial budgets, according to the economists, is that the provincial budget has always lacked the economic, political and social vision of the sitting governments.

"The budget has always been treated by the rulers as a document spelling out incomes and expenditures for a given year or as a means to please the MNAs and MPAs in return for their loyalty and support. Nothing beyond that," they say.

The allocation of funds on political basis means that Punjab has a "throw forward" of incomplete development schemes. It would take at least 10-12 years if it allocates the entire monies available with it to complete these projects.

"All unviable schemes should be discarded and, in future, only those schemes should be approved which have utility for larger sections of population and can be completed in two to three years in accordance with their PC-Is.

The rulers should stop allocating funds on political basis. Unless this is done, we would continue to squander meagre resources and accumulate a huge throw forward of unviable, incomplete projects of little or no public utility," economists insist.

"The need is that the government should set its priorities right. Since poverty and high unemployment rate are the major problems faced by Punjab, the government should focus on these issues and try to attack them in a planned manner through an effective, greater resource allocation."

Construction of roads, improvement of irrigation network, and efficient and quality delivery social services like education, health, potable water, especially in the rural areas, should be focussed in the fight against poverty and unemployment.

Regional disparities between the southern and other parts of the province need to be addressed through greater resource allocation for the poorer, backward areas.

The sitting provincial government claims to have "given the provincial budget a direction that it lacked in the previous years". The objective of this new "direction" is to improve the conditions and quality of life of the people.

"But, of course, it can be argued that we haven't done as much as people would have wanted us to. This is mainly because of the resource constraints. Yet whatever we've done will start to bring about a sustainable and real change in the life of the people in the very near future," says a cabinet source.

In the budget for the fiscal 2003-04, the government has tried to increase allocations for the social sector including education and healthcare as well as taken initiatives for the provision of potable water and improve service delivery to the people.

Though the government claims that its reforms, especially in the education sector, have begun to pay dividends in the form of improved school enrolment in remoter and poorer areas, not many people believe it.

The provincial finance department officials say the government has conducted a survey in collaboration with a UN agency to assess the current status and financial needs of social sector in the province. In addition to it, the province is also working on the Punjab Economic Report which is expected to be brought out before the start of the next fiscal.

"In the light of our past experiences, we are going to quit the traditional way of preparing provincial budget from the next fiscal year. Though it would be too early to say anything on it, we are definitely going to see as to how can we increase the size of the budget from 2004-05 in order to allocate larger resources to the social sector, improve service delivery and reduce poverty," the officials claim.

Whatever their plans may be, their fate will hinge more on the quantum of fiscal transfers from the divisible pool under the NFC dispensation rather than any other factor.