BALOCHISTAN’S development lag is widening in spite of a significant increase in its share of revenues from the federal tax divisible pool over the last five years under the 7th National Finance Commission Award.

Conversations with several provincial officials and politicians highlight a number of factors responsible for the widening development gap: worsening security environment because of the Baloch insurgency; sectarian violence and targeted killings; inefficient bureaucracy; lack of economies of scale owing to its large sparsely populated landmass; and political compulsions of the coalition government.

The provincial advisor on finance Mir Khalid Langau told Dawn that the bloc allocation of Rs15bn set aside in the federal Public Sector Development Programme (PSDP) for Balochistan remained unspent because the government had failed to suggest schemes owing to ‘differences within the coalition partners’.

A comparison between Balochistan’s budgets for the last years of the 6th and 7th NFC awards (2009-10 and 2014-15) shows that the size of the total budgetary outlay almost trebled from just over Rs74bn to more than Rs215bn, including a deficit of Rs15bn.

Claiming that the government had spent almost 85pc of its development funds for the present year, the provincial advisor on finance said the size of the development budget for the next fiscal would be around Rs45-50bn

But a big chunk of this increase from the tax divisible pool and straight transfers under the present award was consumed by current or non-development expenditures, which rose from the original target of Rs53bn to Rs165bn during the period.

And while the provincial development spending also went up significantly from Rs13.5bn to Rs48bn, it failed to produce ‘the desired impact’ on Balochistan’s social and economic infrastructure and on reducing the poverty level.

“The trend of swift increases in current expenditures is quite disturbing. In spite of a rapid surge in its share under the present NFC award, our government has failed to allocate enough money for development,” a provincial official said on the condition of anonymity.

“Even the funds set aside for development aren’t utilised effectively and efficiently. A part of the money is wasted in corruption due to political reasons and bureaucratic inefficiencies.”

A source close to chief minister Dr Abdul Malik blamed the previous provincial government for the ‘unsustainable’ surge in the province’s current budget.

“Instead of spending the money on development, the previous government had raised its current spending. You cannot expect the present coalition to reverse that trend in just two years.”

The previous government of Nawab Aslam Raisani is largely blamed for creating thousands of jobs in the public sector because of political reasons, at the expense of slower increases in the allocations for development.

Some, nevertheless, defend that policy, saying he had no option as the private sector wasn’t investing and creating new jobs owing to the security conditions in the province. A provincial planning and development official rejected the criticism against the provincial government’s low development spending.

“It’s not because of a lack of intent that the rise in allocation for development hasn’t kept pace with the surge in current expenditure. Neither the public sector nor the private sector in the province has the capacity to spend even what you call ‘meagre’ development funds. Then, a massive insurgency and sectarian violence does not let us implement development projects in many areas. You eat as much as you can digest easily.”

The province’s underdeveloped economy means that it is heavily dependent upon federal transfers to meet both its non-development and development expenditures.

In its budget for the present year, the province had estimated an income of Rs141bn from the tax pool, Rs23bn in straight transfers, Rs10bn in federal grants, and Rs10b from gas development surcharge) arrears. Its own tax and non-tax revenues were estimated at just over Rs8bn.

“The financial problems facing Balochistan cannot be resolved without federal help,” the advisor on finance, Mir Khalid Langau, said. He conceded that the ‘shortfall’ in the promised federal transfers this year was negligible, but added that the rising spending on security and the financial support (subsidies) the government was providing to different sectors of the economy was making it difficult for the province to substantially raise its development spending.

“During the current year, for instance, we have had to bear an additional non-development expense of Rs11bn — Rs4bn on account of the increase in the pay and pension of the levies and police, and Rs7bn in subsidies for agricultural tube-wells (on top of the Rs5bn already being given to the tube-wells),” he contended. Claiming that the government had spent almost 85pc of its development funds for the present year, Mir Langau said the size of the development budget for the next year would be in the vicinity of Rs45-50bn.

“Unless we are given additional financial resources, we will not be able to increase our development allocations,” he said, adding that the province would argue for a better deal in the next NFC award in view of its security conditions.

“We want the NFC to provide additional funds to Balochistan, as it did for Khyber Pakhtunkhwa in the 7th award, to fight insurgency and sectarian violence and to improve the security conditions.”

Published in Dawn, Economic & Business, June 8th, 2015

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