The International Monetary Fund (IMF) and Pakistan are on the same page in respect of the timing of measures that the PTI government has initiated for the country’s economic and social uplift while staying on the path of stability.

“Development spending is being prioritised and measures to strengthen the social safety net are being implemented,” officials of the Fund were quoted as saying. They observed that economic “growth, although slow, remains positive”.

The IMF officials were always confident that the implementation of the stability agenda would lead to “robust and balanced economic growth”. But the question of timing for finding the fiscal space to speed up development spending was left to the evolution of a congenial microeconomic environment.

On the conclusion of his 10-day visit to Islamabad, IMF mission chief Ernesto Ramirez Rigo said that “all performance criteria for (the) end (of) September were met with comfortable margins” while “work continues towards completing remaining structural benchmarks for (the) end (of) September”.

Prime Minister Imran Khan says his government is heading towards the implementation of its manifesto, a move possibly precipitated by mounting public pressure. Widespread economic hardships are creating strong political waves that are buffeting the corridors of the technocracy.

Technocrats focus on ensuring stability even at a prohibitive cost to economic growth while denying elected representatives the needed resources to carry out development work

The PTI government has decided to strip the Ministry of Finance of much of its control and has cut bureaucratic red tape to accelerate development spending. Streamlining the procedure will help achieve the new disbursement target of 50 per cent of the budget outlay instead of the scheduled 40pc over the first two quarters and 80pc by the end of the third quarter. The quarterly ratios of financial releases were earlier fixed keeping in view the ebb and flow of government revenues in each quarter. Measures are also being taken to promote self-employment and widen the social security net.

Adviser on Finance Hafeez Shaikh says the government’s priority is now to move the economy on a fast track for employment generation. Last Monday, he announced an additional subsidy of Rs30 billion for the Naya Pakistan Housing Authority to step up the construction of low-cost housing for the poor. Tax and other incentives for construction and allied industries are reported to be under official consideration.

While foreign and local direct investments are at low levels, stepped-up public-sector spending may help prevent a steeper economic downturn.

It will generate some economic activity in the private sector.

The Federal Public Sector Developed Programme (PSDP) pitched at Rs701bn for 2019-20 is higher than the actual spending of Rs502bn in 2018-19. In the last fiscal year, the PSDP was affected by a lower collection of taxes and partial suspension of development spending owing to the general election. Badly affected were the provinces as their combined spending in terms of annual development programmes (ADPs) dropped sharply to Rs506bn in 2018-19 from Rs880bn a year ago following the reduced amounts of federal fiscal transfers. The social sector is the primary responsibility of the provinces.

With a 16pc increase in tax revenues, the federal government can spare some funds for the development programme. The provinces have also scaled up their annual socio-economic uplift programmes, expecting increased federal fiscal transfers. PTI-run Khyber Pakhtunkhwa has come up with an ambitious Rs319bn ADP while Punjab has announced a more realistic outlay of Rs350bn for 2019-20. Sindh Chief Minister Murad Ali Shah says his province was hit by a shortfall of Rs109bn in July-October. The province received Rs169.2bn against Rs278.4bn apparently because of a significant gap between targeted and collected federal tax revenues. There is a limit to which a sagging economy can be milked.

The points of view held by the technocracy and public representatives usually tend to coincide less and diverge more. Technocrats focus on stability at a prohibitive cost to economic growth while denying elected representatives the needed resources for carrying out their electoral mandate. Representative democracy is thus made dysfunctional.

In an interaction on Nov 6 with IMF mission chief, members of the Senate and National Assembly committees called for a review of the terms and conditions of the IMF programme. They said it had triggered inflation and unemployment and had a negative impact on economic prospects.

The PTI government has taken significant steps to remove bottlenecks and ease the implementation of the development programme. It has done away with the “ways-and-means clearance” of the finance ministry for approved PSDP projects for the first three quarters of 2019-20. Under the existing procedure, the Planning Commission authorised funds for development schemes on the basis of cash plans of the executing agencies. But the finance ministry withheld sizeable funds for the PSDP to meet urgent current expenditure requirements. This slowed down financial releases.

The endorsement of the officers of the Finance Division on the disbursement of funds sanctioned by principal accounting officers (PAOs) — secretaries of various divisions — has also been done away with.

The whole process of the authorisation, releases and sanctioning of allocated PSDP funds will henceforth be addressed by the Ministry of Planning, Development and Reforms and the PAOs concerned.

Similarly, executing agencies should be made more efficient to complete projects and schemes as per original schedules to avoid cost overruns. The current practice of fund transfers from slow-moving projects to better-performing ones tends to distort the priorities for integrated and inclusive development. The quest for development requires a well-thought-out and well-defined strategy and its effective implementation. It is not a patchwork.

jawaidbokhari2016@gmal.com

Published in Dawn, The Business and Finance Weekly, November 18th, 2019