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Competing for development

Updated June 23, 2014
Federal Minister for Finance Ishaq Dar chairing a meeting with FBR officials on the finance bill at the Finance Ministry on Friday. — Photo by INP
Federal Minister for Finance Ishaq Dar chairing a meeting with FBR officials on the finance bill at the Finance Ministry on Friday. — Photo by INP

In the terminal year of 7th National Finance Commission Award, the political competition for development among provincial governments is picking up while the capacity constraints at new centres of power and money seem to give diverging messages in the 2014-15 provincial budgets.

The provinces’ cumulative share in the federal divisible pool has increased from 45pc in 2009-10 to about 58pc now — almost 13pc increase in five years —, providing a quantum jump in resources to the federating units but their inability to spend these funds is quite evident from Rs257 billion cash surplus returned by the four provinces to the centre during the current fiscal year.

Based on this, the federal government is anticipating a provincial surplus of Rs289bn next year but the provincial governments have pitched a cumulative deficit of Rs65bn — Rs14.7bn deficit by Sindh, Rs35bn by Punjab and Rs15.6bn by Balochistan. Jamat-e-Islami Amir Sirjul Haq of KP was the only finance minister to present a balanced budget with no deficit or surplus.

For political reasons, the competition between Punjab and Khyber Pakhtunkhwa for development is evident from their annual development plans

For obvious political reasons, the competition for development is evident between Punjab and Khyber Pakhtunkhwa from their annual development plans. Sindh lags behind with reduced development allocations while Balochistan struggles to catch up.

With its Rs345bn development outlay at 33.4pc of total budget (Rs1.033trn) for 2014-15, Punjab seems to be building on a base its leadership has already created over the last six years. In fact, the largest province is already at a higher scale of development in terms of social indicators as its journey has continuued for almost two decades now.

To show case its performance for the future, the Imran Khan-guided KP government has earmarked almost 34.4pc (Rs139bn) of its Rs404bn total budget for 2014-15 and has followed PML-N’s signature strategy of taking in hand big infrastructure projects of popular nature with mass transit transport scheme for its largest metropolitan Peshawar.

While the PML-N- led Punjab has decided to allocate about 36pc (Rs119bn) of its resources to the development of health, education and the transport system in southern Punjab to counter a perception of being Lahore-Rawalpindi G.T Road centric party, the KP government has allocated more than Rs30bn funds — almost a quarter of total development allocation — for its provincial capital of Peshawar. It also includes a major city beautification project and a number of roads etc.

Sindh’s allocation for the Rs168bn annual development plan for 2014-15 accounts for 29.5pc of its Rs686bn total budget. The next year ADP is even lower than current year’s Rs185bn, down by more than 9pc. Seen in poor infrastructure and development gap, the PPP in Sindh was expected to be more aggressive but perhaps it did not visualise any challenger.

Balochistan has allocated 23.5pc (Rs50.7bn) of its Rs216bn budget on development — the lowest allocation among all the four provinces. But then it has argued that its strategy was a directional change in development to focus more on social sectors and improved productivity instead of brick and mortar strategy.

But perhaps its capacity to spend on development and the need to allocate more for brick and mortar have more to do with greater spending by the federal government for major projects like Gwadar port and airport and related logistical support up north in addition to Rs15bn block allocations by the federal government for provincial uplift.

The Punjab government has articulated a strategy that seems to be dovetailing to the federal economic development strategy. It plans to make use of annual development plan as a catalyst for economic growth so as to increase GDP growth rate to 8pc in four years from less than 5pc at present and to 5.5pc for next year.

Secondly, it plans to provide technical training to two million people in 3-4 years with Rs6bn initial investment next year with the expectation to create four million jobs given the fact that its 70pc population at present was of less than 30 years of age. That is great population bulge or a great demographic dividend to lead the nation in any direction.

It also plans to spend about Rs30bn for energy sector projects to set up power generation plants and, on the other hand, encourage people to conserve energy. A similar Rs30bn allocation by Sindh for energy sector projects including for Thar coal based projects and initiation of small hydropower projects by KP could be one of the greatest contributions by the provinces to a federation struggling to overcome energy shortages for the past decade.

It also has the potential, if handled and articulated properly, to counter growing centrifugal voices emanating from inadequate oil and gas production, their current sharing among the provinces and the issue of uniform electricity rates.

But more than mere allocations that seldom materialise at the end of the year and remain questionable on the basis of quality of utilisation and corruption, it would be more practical for the federal and provincial governments to jointly develop a matrix of various development and social sector indicators to compete.

This could be done on the sidelines of next NFC or under the aegis of the Council of Common Interest.

Published in Dawn, Economic & Business, June 23rd, 2014