NWFP’s growing debt burden
Looking at the financial constraints, rising establishment costs, the increasing population and the pressing requirements of the social sector, one senses that the NWFP is passing through a critical phase of its economic Development.
It is quite apparent that the provincial government’s finances do not match its growing expenditure requirements—neither on the development nor on non-development side. Like its predecessors, the present rulers rely heavily on borrowed funds.
By June 30, 2005, the province had already borrowed an amount of Rs63.3 billion from its lenders, the major portion of which amounting to Rs39.7 billion is payable to the federal government on account of the cash development loans (CDL) taken since early 1970s to support the provincial development works. Whereas Rs23.6 billion have to be paid to the foreign donor agencies.
Though the government intends to retire loans of more than Rs4 billion (the principal amount during the FY2005-06), the size of the total loan is likely to increase in the next 12 months as the government is constrained to obtain more loans for supporting its development activities.
With a meagre resource base and huge establishment costs, the province has never been able to stand on its own feet. It’s development activities have been debt-driven.
None of the successive governments was ever able to achieve self-reliance. The rulers had to compromise strategic interests while adhering to the donors’-sponsored development works which clearly reflected the lenders’ agenda. The present government is not in any better position.
Though building of streets, roads, pavements, boundary walls of schools and other infrastructure are being executed in hundreds, the fact remains that the ratio of people living below poverty line in the province is much higher than the other three federating units.
In the far-off areas people still go without doctors and medicines- contradicting the official claim about improvement in the standard of health facilities in the province. The same is the case with primary and secondary schools as people still complaining about absenteeism among teachers, particularly, in the far-off areas like, Chitral, Kohistan, Dir, Shangla, etc.
According to the federal government’s data, less than 60 per cent of the people of NWFP have access to drinking water and one cannot be sure that those having access to the natural resource get anything apart from water/ save drinking water.
The fast deteriorating environment, rising air/water and atmospheric pollution and the depleting underground water level are some of the perennial problems which none of the successive provincial government was successful in handling.
While being insensitive to the needs of improving the prevailing environment and air quality that would help reduce the growing expenditure on health, the provincial government has earmarked only Rs15 million under its annual development programme for the environment sector.
It comes to less than Re1 per person when compared with the NWFP’s total population of 20 million people. The reason may be the paucity of funds, The other reason could be that that poverty alleviation, gender and governance reforms which are high on the international donor agencies’ agenda. Because of the lack of resources, the NWFP mostly relies on financial assistance from the centre for carrying out its development activities.
After the cash development loan facility was scrapped in 1997-98 during the days of the second Nawaz Sharif government, the province started looking towards the foreign donors specially when the centre empowered the provinces to take loans directly from the IFIs. Presently, the Asian Development Bank and the World Bank are two of its major donors.
The province obtained Rs11.4 billion as loan from the World Bank during the last three years as budgetary support, part of which was utilized to carry out development works.
A part of the funds was also spent on repaying before time the expensive loans to the federal government and a part of it was went to meet the budgetary deficit.
The provincial government hopes to get the third tranche of Rs5.2 billion structural adjustment credit (SAC-III) during the 2005-06 financial year. The bank has shown its readiness to support the province in future as well. That would only be possible if the province continues to adhere to the bank’s conditions including short/medium and long term bench marks.
Similarly, the ADP is also making substantial investment in the NWFP’s development sector. Its sponsored development programme is estimated at over Rs24 billion.
Though the province in pursuance to the policy laid down by the last military-backed civil government, prematurely retired more than Rs4 billion expensive CDL during the last two years, the foreign debt portfolio has grown substantially in the same period.
According to conservative estimates, the NWFP’s foreign debt portfolio is likely to touch Rs50 billion mark during the next five to seven years from the current level of Rs23 billion as the government is receiving Rs3 billion to Rs5 billion annually from the donors. Excluded from these figures the budgetary support amounts extended by the World Bank..
On the domestic debt side, the provincial government’s new fiscal year’s budget documents contain a three-line plan to retire Rs15 billion loan in the next five years given that the federal government allows the province to prepay its expensive cash development loan.
The big worry is that while the foreign debt portfolio is growing at considerably fast pace, the income of the provincial government is not increasing at the same rate.
The clergy-led province has attached high hopes on the new award of the National Finance Commission without making any alternative arrangements.
Can the province break the shackles of poverty linked with unemployment, illiteracy and backwardness in a situation when the funds procured from foreign donors are being spent mostly on constructing new roads, hiring teachers on contract basis without bothering about the quality of education being imparted in the public sector schools and spending money on upgrading the existing health facilities without paying attention to creating hygienic conditions by promoting cleanliness and improving air and water quality?
The provincial government should evaluate the situation to the benefit of the people and should keep their interest in mind before mortgaging the future of this province.