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Haunting regional socio-economic disparity

Updated June 20, 2016

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The Shahbaz Sharif government’s populist Rs1.45trn budget for the next fiscal year is feared to increase the existing social and economic lag in underdeveloped south Punjab, since the bulk of the proposed development investment is intended for large infrastructure projects in the rest of the province, with Lahore getting a lion’s share.

The government says it has set aside over 31pc or Rs173bn of development funds for projects in south Punjab that has most of the poor of the province; many remain sceptic of its plans.

In fact, the PML-N government’s development priorities as well as its focus on large infrastructure projects in Lahore and other major central and northern districts of the province has attracted a lot of criticism from the opposition as well as from within the ruling party.

Officials at the provincial planning and development department admit that normally only a little more than half of the total resources committed for the southern region actually gets spent on its development.

“Historically, the government spends between 17pc and 20pc of the entire provincial development budget in south Punjab against an annual allocation of 31-36pc,” a bureaucrat who has worked at senior positions in the planning and development department in recent years told Dawn.

“The rest of the funds are either diverted to the ‘priority’ schemes elsewhere, or fall prey to the resource shortfall because of low tax collection and federal transfers,” he added.


Officials at the provincial planning and development department admit that normally only a little more than half of the total resources committed for the southern region actually get spent on its development


But a finance department official said the next budget is not the first budget to ignore the needs of the people of south Punjab. “Successive governments have failed to invest adequate public funds in socio-economic infrastructure in the region, entrenching backwardness.”

A Lahore University of Management Sciences (LUMS) economist who was part of the team that developed the Punjab Growth Strategy 2015/2018 said growing economic disparity between different regions of the province should be top priority for the planners. The issue needs to be addressed on a fast-track basis, he added.

“It’s good to see the authorities talk about closing the development gap between different regions and increasing allocations for the underdeveloped regions. But not enough is being done,” he argued.

“At the end of the day, the big ticket schemes (in bigger cities) that capture the imagination of voters somehow leap to the top of the government’s priority list,” he concluded, refusing to give his name because of personal reasons.

Punjab has raised its investment spending for the next fiscal year by 37.5pc to Rs550bn, or almost two-fifth of the budget, from the present year’s original estimates of Rs400bn. It will be financed by provincial resource of Rs435bn and foreign debt of Rs115bn.

Construction and roads will get over 37pc of the development outlay with the chunk of money under this head meant for projects in Lahore.

But the government rejects the ‘perception’ that the development of the south Punjab provincial government is more focused on Lahore and other big cities.

“Look at the allocations made for south Punjab; it is equal to the region’s share in the province’s population,” a provincial minister who didn’t want to be named argued.

The minister said the development budget for Lahore appeared inflated owing to the inclusion of the $1.6bn Lahore Orange Line Metro Train Project.

The project is being implemented with a Chinese loan. The government has allocated Rs85bn, or 15pc of the total proposed investment spending for the next year, and almost half of the funds set aside for development projects in south Punjab.

The minister pointed out that the low level of development spending in backward regions has a lot to do with the (lack of) implementation capacity of the administration in the southern districts of the province as well as the types of projects being executed there.

“Bulk of the Rs50bn allocation for the agriculture package will go to south Punjab. Similarly, a major chunk of the funds for the Rs27bn rural road programme will be spent in that region as is the case with the Rs30bn drinking water project. Besides, we are executing numerous energy and irrigation projects to boost the economy of, and to create jobs in, southern parts of the province,” the minister insisted.

The LUMS economist was of the view that the intra-provincial development and infrastructure gaps will not close by just increasing funding for the lagging regions.

“No change will come as long as political compulsions of the ruling party continue to dictate development priorities of the government. The state must create efficient and transparent institutions for effective public service delivery especially in education and health, and empower local body institutions for spending development funds.”

Published in Dawn, Business & Finance weekly, June 20th, 2016