Sindh neglects development

Published July 14, 2014
File photo
File photo

SINDH is a rich province, not only in terms of resource endowment but also in terms of the progress it has made so far and its potential for economic growth.

Its population comprises about 23pc of the country’s population. However, Sindh’s share in the country’s economic progress has been higher than the national average. Its share in GDP — 27pc — exceeds its share in the national population, and according to IoBM estimates, its per capital income is about 18pc higher than the national per capita income. It’s share of total bank credit in the country is almost 50pc and its share of total bank deposits is 34pc.

Sindh’s fiscal strategy, as reflected in the FY15 budget, does not adequately exploit the province’s development potential.

Even after the 7th NFC Award, which considerably enhanced Sindh’s resource availability, there has not been any significant increase in development expenditure. This is reflected in the revised estimates of budgets of various years. Development expenditure as a percentage of total expenditure shows a broadly declining trend.

For instance during 2013-14, revised budget estimates show an expenditure of Rs152.013bn, down 34pc over the budget estimate of Rs229.937bn that year. The budget estimate for 2014-15 stands at Rs.215.359bn, down 7.4pc over the budget estimate for 2013-14.

Compared with the downward trend in development expenditure over the years, total current expenditure shows a rising trend both in terms of budget estimates and revised estimates, overshooting the budget estimates. During 2014-15, budget estimate of current expenditure is Rs470.81bn, 21.6pc higher than that for 2013-14 and 8.3pc higher than revised estimates for 2013-14.

An important feature of the development expenditure in Sindh, as well as in other provinces, is that actual expenditure on projects remains significantly lower than the sanctioned amount. As a result, year after year, the sanctioned amount keeps on rising, with actual expenditure constituting a small percentage of the sanctioned amount.

The amount that is sanctioned for expenditure in a year but remains unspent is transferred to the following year and is called ‘throw forward’. This is a sum that was sanctioned for previously undertaken projects but could not be released for some reason.

The budget estimate for FY14 shows that ‘throw forward’ as of July 1 2014 will be Rs703.776bn. On the other hand, actual expenditure is expected to be Rs168.00bn. If Foreign Project Assistance is included, the expected expenditure will be Rs192.884bn (FPA at Rs24.884bn).

The throw forward amount has risen rapidly between 2010 (Rs290.438bn) and 2014-15 (Rs703.776bn), by 242.31pc.

Also, in most years, expenditure per project on new projects has been substantially higher than that on ongoing projects. The significance of such a policy is difficult to understand. Ongoing projects should be given priority, otherwise benefits of such investment will be delayed. Besides, with the passage of time, the expenditure may need to be revised repeatedly. According to FY15 PSDP estimates, total expenditure on new and ongoing projects will be only 20.3pc of the unspent sanctioned throw forward amount.

Pakistan’s biggest financial markets are in Karachi. Yet, it is somewhat surprising that the Sindh government has never tried to take advantage of these markets to meet/supplement its financial needs.

It is time that the provincial government seriously considers issuing its own papers like bonds to raise money at the Karachi Stock Exchange. Other things, like borrowing, can supplement/substitute the recourse to the State Bank for borrowing under ways and means facility. Also, surplus funds can be invested for a short term. Another source of investment funds and aid for economic growth could be floating of attractive projects, particularly in the agricultural sector for Gulf investors.

However, to take advantage of the above possibilities, well thought-out initiatives and improvement in law and order situation in the province are necessary.

While Sindh, as a whole, has done well in overall economic development, income disparities between urban and rural areas are very large. In one word, rural Sindh has only marginally benefitted from economic growth, which has largely been concentrated in urban areas. Rural conditions are reflected in a number of indicators given below.

The share of the rural sector in bank credit in Sindh is 3pc, and is 4pc in bank deposits. Per capita income in the non-agriculture sector is almost 400pc higher than that in the agriculture sector. Overall per capita income in the non-farming sector is 285pc higher than income in agriculture.

This clearly calls for priority attention for agriculture. Among other measures, the development of livestock — which contributes about 52pc of income of the agriculture sector — may help improve the economic condition of farmers in the province.

In our view the planning and development department should also come out with the annual Economic Survey before the presentation of the budget to the Sindh Assembly.

The writer is an advisor to President IoBM, Karachi

Published in Dawn, Economic & Business, July 14th, 2014

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