THE size of the government’s Public Sector Development Programme (PDSP) will be 35 per cent higher at Rs272 billion in the federal budget for 2005-06 from the current year’s level of Rs202 billion but concerns abound about poor utilization and ineffectiveness of development spending in the country.
“It’s not a question of how much development spending is increased as much as whether it’s being spent properly,” says Sakib Sherani, chief economist at Abn Amro Bank.
Dr Akram Sheikh, deputy chairman of the Planning Commission in Islamabad told Dawn that PSDP utilization has been 49 per cent in the first seven months but will rise to 97 per cent by the end of the fiscal year in June, improving utilization by about 25 per cent from the previous year.
The PSDP represents the allocations in the federal budget for development including social sector spending (which includes health and education budgets), infrastructure, transport, water, power and allocations for the provinces. Since the PSDP, which is about one fifth the size of the federal budget, is the only part of the budget which relates to development spending, it is considered critical in the poverty alleviation effort.
In recent months, discontent and restlessness has grown within the country as the rate of GDP growth has topped eight per cent this year and the government’s prior claims that poverty alleviation will show results once growth rises above six per cent have begun to sound increasingly empty.
“The increase in poverty in the last five years is unprecedented,” says Kaiser Bengali, an independent economist. “Current expenditure continues to rise and the government continues to default on social and development expenditure.”
His suggestion: If the federal government has such trouble identifying and initiating schemes, each district should be given Rs1 billion to spend. “This government just doesn’t have a development mindset,” he says. “And that’s why there’s such a North-South divide with rural Sindh and Baluchistan having become extremely poor.”
The government’s PDSP will be based on the Medium Term Development Framework of the Planning Commission (formerly known as five year plans) for 2005-10, a sectoral development document which envisions, among other things, a reduction the rate of unemployment from 7.7 per cent to four per cent.
Some economists quip that if all the five year plans developed in Pakistan were implemented fully, the state of development would be exemplary.
“The MTDF is essentially a bureaucratic plan,” says one senior bureaucrat in the Sindh government. “The people who matter, the union councils, the NGOs, the consumers, they have no role in its preparation.”
Dr Sheikh defends the MTDF and says it has been prepared by professionals in the private sector. But the point is that legislators also need to set aside their political differences in the interest of development and take a keen interest in where development spending is allocated. This is perhaps the one part of the budget in which they can have a say if they are well prepared in advance.
Moreover, unless existing development practitioners—NGOS and people themselves—are involved in the decision-making process, the provincial and federal governments will be unable to identify the needs of districts and towns. Some experts suggest setting up platforms for public dialogue at the town and city level prior to setting development expenditure targets and plans. Problems with the system:
Dr Sheikh says “development activity is rising but the absorptive capacity is not that high.” Experts strongly criticize this view and argue that the flaws in the PSDP are responsible for the lack of results.
The PSDP is criticized on several counts. Perhaps the most commonly heard is the amount of time wasted initiating projects, leading to cost estimates becoming outdated by the time projects get off the ground. “The procedure of paperwork invariably takes longer than is justified,” admits Dr Sheikh.
“But in the last eight months, that process of approvals has been speeded up, the process has improved 60 per cent and the Central Development Working Party has been meeting every three weeks so the period of approvals has reduced from up to one year to a few weeks.”
He also says cash flow statements are now prepared for each project and cash released as per the physical needs of the project (rather than in pre-determined chunks) to save costs.
The second problem is with utilization, since funds allocated are generally not fully utilized. Economic and social sector experts have identified several reasons for the low utilization and poor quality of utilization of PSDP funds.
One is the lack of mapping of towns and villages by the engineering departments of the government. “Allocating funds without mapping is like a doctor going into surgery without x-rays,” says Perween Rahman, director of the Orangi Pilot Project Research & Training Institute in Karachi.
“There is no documentation and no mapping and this is a precondition for planning.” Since provincial databases virtually do not exist, profiles of every district need to be made first.
Dr Sheikh admits that this is an issue. “This kind of professionalism of the twenty first century will take time but the MTDF includes a special plan of action because development without planning is the biggest curse of Pakistan and we do need to spend more time on the drawing board because this will also help reduce costs.”
Slack utilization aside, the PSDP has also been criticized for its poor quality of spending which results in poor results. In the 1990s development funding was frequently sliced to find funds for debt repayments.
Since 2001, significant fiscal space has been created but improvements have not been seen in development. With the highest poverty rates in the region, one reason for this may be lower allocations for health, sanitation and primary education.
The allocations for health and education (including vocational training) are expected to rise by 72 per cent to Rs10.5 billion and 50 per cent to Rs16.9 billion respectively in 2005-06 from 2004-05. The government boasts frequently about record increases in allocations but health and education will still represent just 3.8 per cent and 6.2 per cent of total development spending in 2005-06.
If primary education spending is isolated, the proportion is much lower. To improve transparency, the budget should provide a report of the closing fiscal year to the public about the effectiveness of the projects completed, at the very least in these two critical fields of health and education.
Moreover, and this is another criticism of the PSDP, the monitoring and evaluation of the PSDP needs to be looked at. “The focus needs to be on controlling wastage and this is purely a governance issue,” says Abn Amro’s Sherani. “It’s about how projects are implemented, the quality of spending and the outcome.”
He also suggests a greater focus on agriculture research rather than major projects to help improve per yield productivity which in turn, would improve farm income.
The Prime Minister’s Monitoring Committee was established about two months ago to review 139 slow-moving projects and assess its causes. It would be far more effective for the government to institutionalize the monitoring and evaluating of projects to ensure the effective utilization of resources rather than establishing committees dependent on individuals.
Dr Sheikh says a process was put in place 12 months ago to review performance on a quarterly basis. Every line ministry headed by the secretary as the principle accounting officer was made responsible to hold monthly meetings to review the process of projects and then provide briefings to the Planning Commission on a quarterly basis. “It is essential for them to take ownership of the projects because we cannot manage by remote control from Islamabad,” he says. Some experts suggest enacting through legislation, rules for the process of evaluating and monitoring PSDP projects.
For 2005-06, Dr Sheikh says further improvements have been planned which will show tangible results. First, consolidation and completion will be ensured to make sure the system does not collapse. Second, about 200 project directors will be trained to become financial directors, understand the value of funds and the broader economic costs of delays.
Third, while all projects of over Rs40 million have computerized records, this automation will be improved to develop a control system accessible to secretaries and the Planning Commission so that timely availability of data can result in timely action. Fourth, the capacity of the Planning Commission itself will be further improved. About three dozen young professionals will be added to the ranks of 200 officers—many nearing retirement—and given modernized training.
Dr Sheikh insists tangible results will be seen within the next 12 months as a result of moves on the part of the Planning Commission. Development professionals will be watching closely to see whether he can deliver.