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Decline in Balochistan’s development spending

June 03, 2012

Increasing public spending on development to stimulate economic growth in the province for eradicating poverty will be the most serious challenge facing those preparing Balochistan’s budget for the next financial year.

The public development spending in the province has drastically decreased (during the last four years) in spite of the historic jump in the provincial revenues under the current National Finance Commission (NFC) award, a senior official of the Balochistan Finance Department official told the Dawn.

“The substantial reduction in the quantum of public sector spending on development has sharply slowed down the pace of growth of gross regional product (GRP) and increased poverty,” he contended. “If the provincial economy is to expand at a faster pace, the government will have to raise public spending on development of the province.”

The official, who spoke on the condition of anonymity, pointed out that over Rs65 billion were spent on development projects in the province (with the provincial government chipping in around Rs13 billion) during the last year of Gen Pervez Musharraf in power.

Compared to that, he said, the public sector development spending (including provincial share of Rs30-31 billion) is projected to be around Rs41-42 billion this fiscal.

“If the price inflation bogging down the national economy is also taken into account, the real spending on the provincial development this financial year will further drop,” he added.

Officials insist that public sector development spending has a crucial role to play in pushing the pace of the slowing provincial economic growth in the absence of private investment and a weak manufacturing base. “The economic stimulus has to come from the public sector,” the finance department official said.

He said the reduction in federal funds for development is responsible for falling public sector spending. The federal public sector development programme (PSDP) projects acounted for just 25 per cent of the total development spending in the province this year, the official claimed. The rest was spent by the province from its own resources.

“This compares to the Federal PSDP contributing 80 per cent to the provincial development in the last year of the previous government,” he pointed out.

He said the shortage of funds for development was keeping the provincial government from investing in sectors like mining and fishing that had comparative advantage over the rest of Pakistan.

These two sectors have immense potential of generating revenues and jobs in the province, he said. But the lack of enough funds was impeding the development of these sectors.

The Balochistan finance department expects the total outlay of the provincial budget for the next year to rise to somewhere between Rs170 and Rs175. “The size of the budget depends upon the size of the development allocations,” said another official of the finance department on condition of anonymity. He said the provincial government was still trying to firm up the size of funds it could easily afford to allocate for development schemes.

“The situation in our province is a little different from the rest of Pakistan when it comes to preparing the development budget,” he said.

“We have to give a lot of weight to the development proposals brought by provincial legislators. It is important for the government to retain their loyalty to stay in power.

“The members of the provincial assembly are still coming with new schemes and we are accommodating them. So it is not easy to project the size of the provincial annual development programme or the size of the budget at this moment,” he said.

He said the government intended to focus on schemes that would push economic growth and create jobs. “The chunk of the development funds would be spent on building the social and economic infrastructure in the province like water, power, energy, health, education and roads.”

He said the social and economic infrastructure development costs in Balochistan were very high because of massive backwardness in most of its areas and large distances.

“In Punjab, for example, you can connect many cities, towns and villages by constructing a 10km long stretch of road. In our province even the construction of 100km long stretch of road is not enough to connect two villages,” he said.

“This means our needs for infrastructure development funds are quite different and bigger than the rest of Pakistan. Pumping 40-50 billion rupees a year will not make much of a difference,” he insisted.—Nasir Jamal