June 12, 2006	Monday	Jumadi-ul-Awwal 15, 1427

THE performance of development budget is being assessed by the government these days merely on the basis of budgetary allocations, financial releases and utilisation of resources under the public sector development programme (PSDP).

Its performance on the basis of designed objectives and outcome is seldom analysed, thus depicting a lopsided picture of the real economic benefits and cost benefit ratios.

What we normally forget in the process is the fact that the efficient utilisation of funds with a continuous process of monitoring and analysis leads to realisation of development objectives. Take for example, the government’s “clean drinking water to all’ scheme being executed almost on a country-wide basis with billions of rupees worth of investment. The utilization of funds for setting up of filtration plants in each ward has no meaning for the people, if after installation of plants they continue to get contaminated water.

A critical issue that the government now obliquely accepts— an inbuilt factor in the operation and monitoring system— is corruption. They do not admit that officials at the executing agencies do not forward the bills of contractors for payment unless they are paid 5-10 per cent of the bill in advance. And the accounts department would not issue the cheque unless provided with a similar graft. There are many such steps in the whole process.

Nobody from the government is ready to talk about the inbuilt gratification system. Dr Akram Sheikh, deputy chairman of the Planning Commission, however, believes that it was a social problem and we should follow the role of Soofis and not the rulers to improve the society. There is no denying the fact that the planning commission has lost its monitoring capacity over the years and the only thing it can do at the moment is to assess the performance on the basis of funds releases, funds utilised and overall progress made. What is the quality of utilization is anybody’s guess. Cost over-runs, late completion and poor quality construction are some of the outcomes known to and seen by everybody in daily life.

Every year, the release and utilization of funds is kept slow and only 50 per cent of total allocation is utilised by end of the 10-month of each year. Maximum funds are released in the months of May and June to show maximum utilisation but these bulk releases normally go into non-productive sectors like purchase of vehicles, office furniture, stationary and white-washing etc and into the hands of contractors and clerks and officers of the executing agencies and bill clearing departments like accounts and audit.

The utilisation of the public sector development programme (PSDP) has remained very low and stood at Rs103 billion or just over half of the total Rs204 billion allocation in first nine months of the current fiscal year. The actual expenditure during July 2005 to March 2006 was Rs103 billion of the total allocation including a foreign aid of Rs10.6 billion.

However, the expenditure of 50.5 per cent of the allocated amount is slightly higher than the development expenditure of Rs72.5 billion incurred during the same period of last year (2004-05). The funds are released by the ministry of finance and planning commission on the basis of pre-approved work and cash plans.

First, the work plan is approved by the line ministries and shared with the finance ministry and the planning commission and then on the basis of this work plan, a cash plan is approved for release of funds and execution of the project.

Like in the past, this year again, the release of funds was on time in the first quarter of the year, i.e. July-September period. Second quarter releases were delayed for two months, leaving another two-three months for the reaction time to retain the money to show that PSDP was not progressing. The fact of the matter was that revenue availability was not up to the mark.

The pattern of funding of PSDP is also changing. With the change in inter-provincial fiscal sharing under the interim national finance commission award given by the president, the provinces no more qualify for the federal funding in the provincial projects. The centre used to provide 50 per cent of the cost to launch any provincial project and the remaining 50 per cent used to be financed by the provinces from their own resources. This practice has now come to an end.

The Rs115 billion share of the provincial Annual Development Plans (ADPs) in the federal budget would be fully financed by the provinces through their own resources. Normally, utilization of funds remains better in the provinces compared to the federal projects.

However, the provinces have taken the position that they would not fund projects that the president and the prime minister usually announce in the provinces and if the president or the prime minister gives a special scheme for a specific area, the federal government would now provide full funding.

Next year, the provinces would now get Rs398.1 billion in net transfers from the centre including Rs321.1 billion share out of the net proceeds of the federal divisible pool under the interim National Finance Commission Award announced by the president. The Rs398 billion net transfers to the provinces are 14 per cent higher than current year’s revised estimates of Rs349 billion. Similarly, the net proceeds to the provinces of the federal divisible pool at Rs321 billion are about 31 per cent higher than current year’s revised estimates of Rs244.6 billion.