BEFORE the promulgation of local government ordinances (LGO), the districts and tehsils were directly administered through provincial bureaucracy while elected representatives had formal but not real participation in these local affairs. As such, decisions about local level planning were taken by bureaucrats at higher levels ignoring local needs and priorities.
Under the new system, the planning and development in the local bodies is to be carried out in accordance with local needs. Civil servants are answerable to elected representatives, who are, in turn, accountable to the people.
Theoretically speaking, devolution must take power and decision-making to the grassroots level and ensure that planning and development is to serve local needs. But it is an uphill task, which requires huge resources, capacity building initiatives and highly committed personnel, institutions and organizations. In Balochistan, the task is all the more difficult for lack of human skills.
The province has a fragile fiscal base, with a budget 2004-05 deficit of Rs9.5 billion. It generates only Rs1.536 billion revenue from its own resources while its own revenues (tax and non-tax) constitute just about five per cent of the total budget. It is excessively dependent upon the transfer of resources from federal government under the NFC award.
There is still no comprehensive system for district government accounting to adequately support local financial arrangements. Though many new institutions have been established by the Balochistan Local Government Ordinance (BLGO) like Provincial Finance Commission (PFC) and local government commission (LGC), they are not functioning effectively. They still lack institutional processes. PFC has been established to regulate the transfer of funds to local government.
The PFC’s role in determining formula-based transfers to local governments makes it an important body in local governance. It can perform its role in ensuring predictable, timely and adequate resource transfers to local governments. Institutional development of the PFC in Balochistan is yet to be carried out, so vital to sustain the process of fiscal decentralization.
Local governments lack the operational funds and money for development. Elected counsellors and other stakeholders lack the ability to fully understand their responsibilities. Institutional capacity building is necessary to rejuvenate fiscal decentralization.
Under the BLGO 2001, the local governments are required to prepare their own budgets for which the district government officers lack professionalism. Areas which need to be handled with expertise are framing of fiscal transfer rules and rules of business, preparation of first annual report, preparation of databases to support analytic work of the PFC, assessment of revenue potential of local governments, determination of unit costs of service delivery and the training of PFC staff in rules and mechanisms governing inter-governmental transfers. All these are key issues related to fiscal decentralization.
No doubt, the decentralization support programme (DSP) addresses the main problem areas - lack of operational funds, lack of capacity and lack of systems. It is mainly aimed at improving local government representation, accountability and efficiency leading to improved service delivery. It is a radical reform programme which is demand-driven and output-oriented’, said Mushtaq Ahmad, the project Director DSP Balochistan while talking to this scribe.
He said, ‘policy objectives of DSP include sufficient and effective federal support for decentralization and related reforms and for local government institutions managing resources accountably and equitably’.
Outlined in the 2000 devolution plan and implemented in the LGO 2001, the DSP is being carried out for the past three years with the financial aid of the Asian Development Bank (ADB). Reforms are being carried forward in the areas of decentralization, fiscal restructuring and local governance.
The DSP is a federal programme of fiscal restructuring supporting legal, institutional and capacity-building costs of decentralization and related reforms. It primarily focuses on local government performance, accountability and service delivery. This $300 million programme comprises of the following components: $270 million loan to meet the cost of decentralization; $27.1million technical aid (TA1) for performance enhancement; $7 million TA2 for gender and governance mainstreaming and; $3.18million advisory technical aid (ADTA)grant for implementation of DSP.
These programmes will take some time to give positive outcomes and strengthen the fiscal autonomy of local governments.
Balochistan also lacks awareness about basic approaches and tools of fiscal decentralization. Social indicators are lower than other provinces with similar per capita income. It means that improving service delivery is a pressing task for the government. The budgeting is a critical tool of local government finance. A strong budgeting and financial system establishes the basis for financial control and provides uniform and timely financial information.
TA1 specifically addresses the training and systems needed in the local government system. It gives support in 11 thematic areas including audit, accounts, budgeting, revenue generation and social audit. Efficient and effective accounting and auditing practices are essential to managing district current and future budgets, and making district finances increasingly transparent to the local constituency.
The project director says that TA1 places deliberate stress on strengthening fiscal decentralization which is the next and crucial stage in devolution. It provides capacity building and other assistance in response to local needs. It gives support for capacity building and for systems development and installation.
Technical investment proposals (TIPs) in DSP’s annual work plan (AWP) focus the key areas, which are essentially linked to fiscal restructuring and decentralization. A total of 17 TIPs in different stages of AWP have been developed by the DSP at an approved cost of Rs81.132 million.
The important TIPs include institutional development of PFC, framing of rules and model bylaws under BLGO 2001, skills development and capacity building of district government officials in planning and budget making, development of teshil municipal administration (TMA) financial reporting, union administration on budget rules 2003, capacity-building of TMA officials in planning and budget-making, performance enhancement of capital city public safety commission, and the capacity building of local fund audit departments.
The DSP under one of its TIPs completed initial four days training for 310 district government officials of 26 districts of the province on planning and budget-making. For this purpose, it signed a contract of Rs5.753 million in October 2004 with a consultancy firm, Financial Consultants (FINCON). Another contract costing Rs1.688 million was signed with a firm, GISDAPH in July 2005 for the preparation of an automated database of tax receipts in TMA- Zarghoon.
The DSP for institutional development of PFC has provided technical expertise and necessary hardware for the secretariat of PFC. Since its establishment, the PFC has faced tremendous challenges in meeting its ob1igations due to insufficient resources.
The PFC needs adequate resources to carry out activities required for its analysis like surveys and database development. The provincial finance department has so far not been able to provide this necessary support. The main reason has been the resource constraint of the provincial government. The development of resource management systems requires the medium-term budget planning, service standards and monitoring and evaluation systems.
The DSP is playing an important role in developing proposals for new administrative structure and systems with special focus on financial rules and procedures enabling provincial government administrations to be synchronized with financial administration structure in post-devolution scenario.
It is providing cost- effective and applicable solutions to smoothen the functioning of fiscal decentralization within provincial government. It has been organizing training workshops and similar activities to suggest recommendations on auditing, accounting, budgeting and procurements devolution framework for effective fiscal decentralization in the province.
Fiscal decentralization is however a challenging task, which requires an improved fiscal transfer system from provincial government to district governments. Funding for the local government needs to be strengthened. The designs of the provincial transfer system need further improvements, particularly to ensure equitable and adequate resource distribution.
BEFORE the promulgation of local government ordinances (LGO), the districts and tehsils were directly administered through provincial bureaucracy while elected representatives had formal but not real participation in these local affairs. As such, decisions about local level planning were taken by bureaucrats at higher levels ignoring local needs and priorities.
