The Public Sector Development Programme (PSDP) for 2003-04 has been pitched at Rs160 billion against the targeted spending of Rs120 billion for the current fiscal. The comparative figure for FY 2002 was Rs123.6bn.
For the first three quarters, the provisional estimate for fund utilization is officially put at Rs82.4 billion against the original budgeted amount of Rs134 billion.
A sharp rise in development outlay is the outcome of new fiscal pace and the developmental concerns of an elected government. Representative democracy has created a domestic constituency that tends to counter pulls and pressures from the dogmatic multilateral donors.
And the proposed federal development spending for next year accounts for entire increase of Rs40 billion —the difference between the provisional actual for this year and the budgeted amount for 2003-04. A bigger PSDP can help stabilise a weak coalition with countrywide stakes.
While the size of the PSDP has been enlarged, the share of the provinces for self-financed Annual Development Plan (ADP) has fallen by nearly Rs 3 billion to Rs47 billion for 2003-04 compared to the current fiscal. Cash development loans have been stopped. No money is given to the provinces for development spending. The provinces have been weakened by empowering the district governments at their cost.
Except for federal projects like Gwadur port, officials say that the executing agency for federal PSDP projects would be provincial governments in the sphere of activity assigned by constitutional arrangements.
The PSDP is shared by provinces on population basis as are the resources under the National Finance Commission Award. Fiscal autonomy for the provinces is a distant dream.
Similarly, in Punjab, the PSDP is seen in the context of political economy.The provincial government is allocating funds for uplift schemes (initiated by MPAs) to the ruling party candidates who lost in the October elections to the opposition. It has resulted in loud protests from many PPPP and PML (N) MPAs who, in retaliation, were also debarred from attending the assembly proceedings by the Speaker.
With parliamentary divide and brewing confrontation on LFO, the PSDP implementation may suffer setbacks. The budget may not have a smooth passage in the parliament. There is also strong opposition from MNAs, MPAs and bureaucrats to the creation of a fairly empowered district government. This is affecting their decision-making and is slowing down execution of the projects in places like Karachi. The tensions between district Nazims and the NWFP government would also have a negative impact on district government’s performance in the province. Because of their teething problems, district governments have yet to acquire the required level of efficiency to deliver.
In Karachi, district officials have been replaced by provincial government before their normal three-year tenure in order to acquire some stakes in local authority. The elected Sindh government has held in abeyance the transfer of two key institutions to the district, the Karachi Water and Sewerage Board and the Karachi Building Control Authority. The province is creating hurdles in the smooth governance of districts.
There are political tensions because the transfer of power from the provinces to the districts has been brought about without approval of the elected representatives. MNAs, MPAs and district nazims are competing for delivery of goods in the same constituency.
The district governments get their money from the provinces to manage their affairs as mandated by the Provincial Finance Commission.
As the current political trends indicate, the federal government may find itself too much preoccupied in politics to focus on economic development despite the decision to convene the National Economic Council meeting twice a year from one originally mandated to review the PSDP performance.
The implementation of PSDP already suffers from many snags. Political wranglings is just one of them. The capacity of the government departments and agencies to prepare and get approvals and to absorb allocated funds is very limited. In some cases, the utilization is stated to be below 30 per cent of the budgeted amount.
Releases from the finance ministry (MoF) are slow to come and slower still is the utilization of the disbursed amount. In first three quarters, official figures show that Rs82.4 billion were utilized and nearly Rs40 billion is to be disbursed in the last quarter, a historical pattern that persists to this day. The “rush through “ disbursement also raises the question of prudent spending. It also indicates that fiscal agenda is still a core issue with the ministry of finance. Delays in project execution results in cost over-runs.In such cases,despite 100 per cent utilization of funds, physical targets may not be achieved. It is continuity rather than change that is the hallmark of governance.
Officials in Islamabad are however optimistic that the next year’s targets can be met as the PSDP comprises ongoing projects that would not be difficult to complete on schedule. Investment in the 52 new projects are a mere Rs17.4 billion. The shortfall in the PSDP targets is also explained by delays in utilization of foreign aid. Often agreements need clarification. There is hassle in appointment and quick changes of project directors and delays in matching rupee resources with foreign funds.
Officials in MoF say that funds are released without any questions asked in the first quarter but then the executing agency has to account for spending and progress on projects for subsequent quarterly disbursements. Often departments ask for more funds than they can absorb and more projects than they can handle.
They lack the capacity to prepare projects, get them approved and implement them on schedule. Yet, they are able to get what they seek.The key issue here is capacity building.
Sources in the Planning Commission reckon that the capacity to absorb the PSDP funds is there. The Rs160 billion PSDP is 3.6 per cent of the GDP when the government has in the past had demonstrated its capacity to implement development programmes accounting for 4.5-5 per cent of the GDP.