KARACHI, May 4: The Sindh cabinet has come down heavily on the Medium Term Development Framework (MTDF), a federal government document that outlines a programme of Rs2,094 billion investment of development funds during the next five years. “It abounds in economic cliché like millennium development and environmentally friendly but is scarce in presenting ground realities like basic needs and social security,” the cabinet observed.
In a special session on Monday, the Sindh cabinet with Chief Minister Dr Arbab Ghulam Rahim in the chair took a timeout to make a deep analysis of the MTDF, which is spread over five years Public Sector Development Programme (PSDP). Its 74 per cent of the funds amounting to Rs1,545 billion are federal allocations and only 26 per cent (Rs549 billion) are for the provinces.
By implication, the Sindh cabinet has rejected the MTDF strategy as it has ridiculed inconsistencies in the year-wise fund allocations, dominant federal funding in those sectors where service delivery system lies with the provincial and local governments and has questioned as to from where the resources will come to finance this more than Rs2 trillion programme.
The PSDP, it said, covered 27 sectors of the economy. The federal government has pre-dominantly higher share in 21 out of these 27 sectors. These 21 sectors include education, health, social welfare, sports and tourism and agriculture. The MTDF gives a pre-dominant share of funds of all these sectors to the federal government. But the service delivery system of all such sectors is primarily with the provinces.
The Sindh cabinet wants a functional clarity between the federal, the provincial and the local government, “particularly after the devolution of the bulk of service delivery subjects like education, health, water supply and sanitation to the local governments”.
The cabinet noted federal dominance in performing concurrent functions like population planning, generation and distribution of electricity, tourism and also social sectors. It advised that the “federation may now seriously consider downloading these functional responsibilities to the provincial government.”
“This will trim the size of the federal PSDP and bring the much-needed economic efficiency in resource allocation in line with the reform agenda currently being pursued by the federation for better management and governance.”
The provinces get fiscal transfers from federation in two forms. One is explicit and through the NFC and the second is implicit and is given through allocations in different federal programmes. But the MTDF is rather vague and silent on giving location wise information of the projects and schemes to be taken up.
“Under the existing arrangements, the criteria for allocation to the provinces are not clear-cut and transparent,” the cabinet noted while pointing out the lumpiness of various projects and long implementation period that is hard to follow the formula-based PSDP allocation criteria.
Another interesting aspect of the MTDF is allocation of Rs1,545 billion for the federal government programmes that has a throw forward of Rs900 billion, indicating that new projects of Rs600 billion are being initiated during the 2005-10 period.
The year-wise allocations for the PSDP show inconsistent growth rates that cannot be explained. For example, the PSDP in 2005-06 is indicated at Rs272 billion, showing about 35 per cent increase over Rs2002 billion in the current fiscal year. But in the year 2006-07, the indicated PSDP outlay is Rs319 billion, a rise of 17.3 per cent; Rs379 billion in 2007-08, a rise of 18.8 per cent; and then there is a big leap of over 37 per cent to Rs519.6 billion in 2008-09; and finally a rise of 16 per cent to Rs604.5 billion in 2009-10.
In short, the PSDP will rise from Rs202 billion in the current fiscal year to Rs604.5 billion in the terminal year of the medium-term 2009-10. “It is not entirely clear that how and through what sources (public sector, foreign project assistance, etc.) this investment would be met,” the cabinet enquired and asserted that “this is essential to know the trend of financing plan from public sector.”
As against inconsistent growth in the federal development fund allocations in the next five years, the provincial allocations show an orderly and consistent growth from 25 per cent to 24.5 per cent in the next five years. But the Sindh government expressed doubts in availability of funds because of substantial current expenditure liabilities and unsound resource position of the provinces. The provinces to a very large extent depend on the federal transfers and even now there is great difficulty for arranging the finance for the annual development programme. “Provinces are even not allowed to borrow from banks to finance their development plans,” the Sindh cabinet complains while pointing out the excessive rate of federal loans.
It is for the first time that any province has come out with such a profound and in-depth analysis of a federal economic plan that according to the Sindh government was prepared by avoiding consultation with the elected representatives of the people and the occupational bodies like chambers of commerce and industry, women organizations and NGOs.
The National Economic Council in its annual meeting in June last year had given instruction for the preparation of a five-year plan. The Sindh government held a meeting in August 2004 and suggested the federal government to consult all the stakeholders. But in March this year when a mid-term review meeting of the NEC was held, the MTDF was given to the provinces with an instruction to give their comments.