THE Punjab government plans to more than double investment spending to Rs290 billion in the next fiscal year, from actual spending of Rs137 billion on development in the present year.
The focus of investment will be on infrastructure development (Rs 92.6 billion) in energy, road and irrigation sectors, and on social sector (Rs 87.5 billion) in education, health and water supply and sanitation.
However, the implementation of the ambitious spending will be a challenge for the Shahbaz Sharif government, which returned to power for a second consecutive term with a heavy mandate in the May 11 elections. The ruling PML-N says that voters have given it a strong mandate in Punjab and the centre because of its development record in the province.
An analysis of the investment programme of the Punjab government in the last five years shows that it would project unrealistically high spending plans in the budget, which would then have to be revised down drastically later in the year because of resource gap.
Barring its first year in power, the Shahbaz Sharif government was forced to cut down its investment spending plans to 66-76 per cent of the original estimates in the later years. Actual utilisation of funds has fluctuated between 48 per cent and 68 per cent of the original estimates in these years, save for 83 per cent in 2008-09. When compared with the revised estimates, utilisation definitely picks up.
The major victims of the downward revision of investment spending cuts are always essential social services like education, health, water supply and regional planning (for the development of the least developed districts of south Punjab), which usually leaves a deep impact on the quality of life of the common citizens.
During the current year, for example, the government reduced spending on the social sector by 32 per cent to Rs58.60 billion to boost its funding for infrastructure development by more than 30 per cent to over Rs81 billion for the populist, expensive Metro Bus project in Lahore ahead of elections.
The government blames the lower-than-estimated federal tax collection for the cuts in its investment spending. “Our budget estimates are based on certain assumptions. Since the federal government projects higher resource availability, we also increase our spending targets. When the resource availability falls short of the projected numbers, we have to cut our spending targets,” said a Punjab planning and development department official, who refused to share his name.
He, nonetheless, admitted that the spending cuts were mostly based on the political needs of the government. Sometimes, the capacity constraints of a department also forced the government to reduce allocations for its programmes, he added.
Punjab’s stock of ‘throw-forward’ of incomplete development schemes is again showing a rising trend for the last two years, because of frequent diversion of funds for one project to another. The throw-forward has soared by 22 per cent, from Rs267 billion in 2010-11 to Rs328 billion in the present year, according to budget documents for the next financial year. But it still is slightly less than half its peak of Rs653 billion reached in 2009-10.
“The selection of uplift schemes because of political reasons rather than on account of their economic value, and huge cuts in development spending at the end of every financial year owing to fund shortages, are major factors responsible for the increase in the throw-forward of the uplift schemes,” said another provincial official.
The government had drastically reduced the throw-forward a year after it had touched its peak. “It wasn’t done through allocation of more money for the completion of the incomplete schemes, but by abandoning most of them incomplete,” said a Punjab finance department official on the condition of anonymity.
Some officials say that political governments often give way to pressure from lawmakers to retain their support and include economically unviable schemes identified by them in the provincial annual development programme (ADP). Many of these schemes are left incomplete because of a shortage of funds. They insist that the throw-forward often results in the loss of the taxpayers’ money when the schemes are left incomplete.
Others do not agree with this assertion. “The schemes showing up in the throw-forward account of uplift projects mostly comprise approved schemes. But work on these schemes may or may not have started yet,” argued the planning and development official. However, he conceded that ‘token’ allocations were provided for a majority of the schemes appearing on the throw-forward account.
The main reason for the increase in the throw-forward of uplift schemes in the present year is said to be the initiation of mega projects, particularly the Metro Bus project, and the funding of new, politically motivated schemes through supplementary grants.
“We are trying to reduce the throw-forward of unfeasible and slow-moving schemes, either by fully funding the viable schemes, or abandoning them. Token allocations for development schemes will be discouraged in future,” said the official. He, nevertheless, refused to say anything when asked why such schemes were approved in the first place. “This is a question you should ask the politicians,” he said.
He also did not provide the exact amount of money spent on schemes on which work had been stopped, with a view to cut them out of future planning.
Although officials claim that the provincial government will bring down the throw-forward of incomplete schemes next year, some are of the view that the changes in the projected investment spending on account of possible decrease in resource availability could make the task difficult for the planners.
“The Punjab government’s investment spending plan is based on the assumption that its share from the federal transfers will rise by Rs133 billion next year. Besides, it will be able to boost its provincial tax collection by around Rs37 billion. Both the federal and provincial tax collection target appear to unrealistic in the given circumstances,” said an expert of public finance who has worked with the provincial and federal governments in the past.
“The gap between the projections of resource availability and actual realisation will not only hit the spending targets for education and health, but also add to the throw-forward of incomplete schemes unless the government chucks them out of its future development programme,” added the expert.