THE State Bank’s veiled criticism of the government’s lack of policy focus on the social sector is but a confirmation of what so many people have long been trying to bring home to the country’s policymakers.
“One of the key objectives of public policies is to improve the living conditions... improvement in social welfare requires ‘focused policy measures’ in addition to (the) usual growth enhancing and stabilisation policies,” the bank underscores in its annual State of the Economy report for the last financial year.
The report’s chapter on the social sector is nothing if not the bank’s disapproval — even if not total and complete — of the government’s spending priorities. It makes no bones about the government’s deep inclination towards funding politically motivated, construction-related projects rather than prioritising the social sector - education, healthcare, sanitation, water supply, etc — to improve the quality of public services for the citizens.
“While the country has failed to achieve a number of MDG targets, the clock for achieving the new SDGs has begun ticking... this will not be possible without a rigorous reform process in public service delivery”
As a consequence of low public investment on the social sector, the bank points out, Pakistan’s progress (on MDGs now replaced with SDGs) has “lagged behind its regional peers in terms of both scale and pace”.
The country’s ranking on the Human Development Index has slipped nine positions from 138 to 147 during the same period. On the other hand, Bangladesh was able to improve its HDI ranking by three notches from 145 to 142, Sri Lanka by 16 from 89 to 73 and China by six from 96 to 90.
The HDI ranking is based on three principal human development characteristics: leading a long and healthy life (measured by life expectancy at birth); the ability to acquire knowledge (measured by mean years of schooling and expected years of schooling); and the ability to achieve a decent standard of living (measured by gross national income per capita).
For instance, the average life expectancy in 2000 was nearly the same in both India and Pakistan (62.63 years vs. 62.77 years). But by 2014, the indicator for India had improved to 68.01 years whereas it only reached 66.18 years for Pakistan. Life expectancy in Bangladesh has risen to 72 years, in Nepal to 70 years and in Sri Lanka to 75 years.
These nations also spend more money on the social sector than Pakistan. India, Sri Lanka and Nepal, for instance, spend 1.4pc, 2.6pc and 2.3pc of their GDP (gross domestic product) on healthcare compared with 0.9pc in Pakistan. Similarly, India allocates 3.8pc of its GDP on education compared with 2.2pc in Pakistan. Bhutan spends 6pc, Nepal 4.7pc and Bangladesh 2pc on education.
Several factors are responsible for the country’s poor performance in the social sector compared with its regional peers: the expensive, prolonged war on terror that has cost it over $118bn; floods and other natural disasters; increased policy focus on economic stabilisation because of a recurring balance of payments crises; and more importantly, inadequate budgetary resources (owing to a low tax to GDP ratio, as well as a higher defence spending and debt servicing obligation) along with poor capacity of public institutions to formulate and implement internally consistent policies for social service delivery.
The bank also highlighted the rapid population growth and the exclusion of the female population from the national, economic and social uplift policy framework as a major constraint to social sector development.
“… A large segment of the female population in Pakistan continues to remain excluded from formal education and the labour force. Female enrolment lags behind that of males across all education levels (primary, secondary and tertiary) while Pakistan’s female labour force participation rate, at around 25pc, is lower than that for regional countries like India and Bangladesh,” the report said.
The bank also laments that provinces, which have been given greater responsibilities related to social sector uplift — particularly for education and health — as a result of the 18th amendment and the 7th NFC Award — are “still struggling to make any notable progress in service delivery, particularly related to healthcare and education”.
“Although provinces have enjoyed a significant jump in their resources, they are not able to channelise enough funds towards social sectors. One reason behind this under-spending is a disproportionate focus on infrastructure projects”.
The bank acknowledges that these projects provide jobs to thousands of people and are necessary to cater to the demands of a rising population but says these also provide ample opportunities for unwanted rent-seeking behaviour.
Another factor that kept the provinces from increasing allocations for the social sector was the federal requirement to produce fiscal surplus to keep the consolidated fiscal deficit under check under the IMF programme that completed in September this year. “… they were underutilising the resources coming from the divisible pool during the past few years.”
A bureaucrat, who is currently working on a donor-funded project for improving public service delivery in the Punjab district, says both poor allocations for public services and mismanagement of the available funds were hampering social sector development, besides leakages and loopholes in the implementation systems.
“While allocations — both development and current — for social sector fall far short of the requirements, expenditure issues like procurement processes, lack of planning and bureaucratic delays mean that even the available funds are not properly or fully utilised,” he told Dawn on condition of anonymity.
The state’s failure to deliver quality public services to the vast majority of the population has led the private sector to penetrate in the education and healthcare sectors over the past few years. But private services remain too expensive to be availed by larger parts of the population, the bank states.
The report argues that in view of the population growth rate the country will need to sizably increase allocations for social development just to maintain the current level of its social indicators let alone make any meaningful improvement therein.
“While the country has failed to achieve a number of MDG targets, the clock for achieving the new SDGs has begun ticking.
“However, this will not be possible without a rigorous reform process in public service delivery”.
Published in Dawn, Business & Finance weekly, November 21st, 2016