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Budget share in social spending declines

August 05, 2013
- Illustration by Abro
- Illustration by Abro

In the present financial year, Pakistan will spend less money on its social sector — education, health, social protection, population planning, environment, etc. — as a percentage of consolidated federal and provincial expenditures as well as GDP, compared with the last fiscal year.

The share of budgetary allocations for social sector in the total consolidated expenditure has declined from actual spending of 17.7 per cent last year to 16.9 per cent this year. As percentage of GDP, it has also dropped — albeit slightly — to 4.1 per cent, from 4.2 per cent.

An analysis of federal and provincial allocations for social sector by former chief economist of the planning commission, Pervez Tahir, shows that the federal government has increased its pro-poor spending as a percentage of its total budget — though marginally — from 5.4 per cent to 5.7 per cent.

It may be recalled that provinces have been given greater responsibility to improve social indicators and spend more on sectors that have an impact on poverty reduction after the 18th Amendment and the 7th National Finance Commission (NFC) Award, which substantially increased their share of funds from federal taxes.

The ruling Pakistan Muslim League-Nawaz (PML-N) in Punjab has allocated less money for social sector spending as percentage of its budgeted expenditure than it actually spent last year. On the other hand, the three smaller provinces have tried to increase their allocations for the sectors that can have direct impact on poverty reduction.

For example, Sindh, which is ruled by the Pakistan Peoples Party, will spend 44.2 per cent of its expenditure on social sector, compared with 43.5 per cent last year. Khyber Pakhtunkhwa, where the Pakistan Tehreek-i-Insaf is in power, has increased pro-poor allocations to more than half of its budgetary expenditure — 51.4 per cent — from 45.3 per cent. Even Balochistan, which is ruled by a coalition of the PML-N and nationalists, seems to be trying seriously to address the issue of poverty, by allocating 44.6 per cent of its expenditure for social sector, from 39.4 per cent. Punjab, on the other hand, has reduced social sector allocations to 26.3 per cent from 29.3 per cent.

At an Economy Watch 2013 Workshop on Resource Allocation for Basic Rights, organised by the Human Rights Commission of Pakistan, the former chief economist pointed out that social sector expenditure was a “component of the budgetary allocations deemed relevant for poverty reduction, an overarching goal”.

Several recent research studies have shown that poverty is on the rise. No official estimate has so far been made to document the impact of poor economic and financial conditions on the incidence of poverty in the country.

According to the former chief economist, economic slowdown, deindustrialisation, falling investment, surging prices etc had pushed poverty, income disparity and unemployment over the last several years. The economic stabilisation programme under the recent loan agreement with the International Monetary Fund will put further burden on the people and increase incidence of poverty, he argued.

In his analysis, Tahir laments that “poverty reduction was not even an officially adopted goal in Pakistan,” although the country has to halve the incidence of poverty from 26 per cent in 1990 to 13 per cent by 2015 under the Millennium Development Goals. Contrary to the pledges made by successive governments to cut poverty, the federal expenditure on poverty reduction has decreased from 19 per cent last year to 15.4 per cent this year.

Apart from other factors, he argued, social sector expenditure in Pakistan has been low compared with other developing countries and the requirements of sustained growth, because of relatively high security expenditure.

“Defence has been the second major claimant of the budget after debt servicing for a long time. In recent years, the expenditure on internal security has increased manifold. There is almost 1:1 ratio between social sector and national security expenditure, with both hovering around four per cent of the size of the economy.”

The former planning commission official contended that human, economic and social rights of the people cannot be delivered without outcome-based investment in human beings and the creation of opportunities for economic growth.

“The role of the state, through budgetary allocations, is crucial in this process. The analysis shows that the economy and the public sector resource allocation have not provided a strong support base for rights. Growth is uncertain and poverty remains. Inequality is starkly visible. National security, rather than social protection, is the strategic objective of the state, despite the stabilisation of electoral democracy,” he concluded.

As long as the government does not adopt poverty reduction as a policy goal, the wish for right-based budgeting will remain a dream.