KARACHI, Aug 2: The Sindh government is engaging a full-time fund and investment manager to operate and manage its two funds -— Pension Fund and Social Relief Fund —- which at present have a composite size of Rs9 billion but are expansionary, and the provincial government is expected to provide more funds from its budget in future.
A well-placed and reliable source said the government had been providing Rs2 billion every year for the last three years for the Pension Fund. The Rs6-billion-fund at present is in different term deposits of commercial banks after the government failed to strike a deal with State Life Insurance Corporation. A sum of Rs3 billion has been provided for the Social Relief Fund from the budget.
“The fund manager will be appointed through a transparent system to invest these funds in most productive way,” the source said. The manager will also advise the government to launch social relief products for the benefit of marginalised sections of the population in the province.
An uncomfortable political coalition that caused serious governance problems in Sindh since 2003 has apparently not impacted on the financial health of otherwise a financially sick province. Sindh has come a long way since 1990 when it was under a severe fiscal stress that multiplied after the fallout of international sanctions after 1998 nuclear explosions.
Now maintaining a hefty composite cash balance of Rs27 billion, of which Rs18 billion of account number one of the State Bank of Pakistan belongs to the provincial government and Rs9 billion to the district governments in central bank’s account number 4, it is difficult to imagine that the Sindh government maintained a negative balance with the State Bank from 1990 to 2003.
Since 1990, Sindh’s balance with the State Bank remained negative and its debt accumulation also went on swelling with every budget adding to the overall debt burden and reducing provincial capacity to go for meaningful development. In 1998, the SBP negative balance of Rs10 billion was converted into a block loan for which a monthly debt servicing installment was fixed.
“A massive SBP overdraft, about Rs9 billion liability of Wapda bills, a pile of unpaid bills left by the late Jam Sadiq Ali and then subsequently of the contractors and fast accumulating liabilities on account of pensions and provident fund caused an immense fiscal stress on the provincial budget,” sources disclose while pointing out shrinking provincial capacity to provide funds for operation and management and development of social and physical infrastructure during the last 15 years.
Sindh still groans under the impact of unpaid federal government’s loans stock of Rs35 billion against a total debt liability of Rs52 billion. Sindh suffers this loan burden even after paying Rs117 billion to service its Rs52 billion loans. The federal government has fixed interest rates at 16 to 18 per cent and structure of debt servicing is such that the payment of Rs117 billion could adjust only Rs19 billion principal amount while Rs97 billion went towards interest payment.
About Rs20 billion loans of the outstanding stock of unpaid Rs35 billion pertain to SCARP related borrowing. Against this liability of about Rs20 billion SCARP loans, Sindh paid back Rs31.24 billion. But only Rs4 billion adjusted the principal amount and Rs27.2 billion went towards interest payment. “Sindh is seeking an urgent reconciliation for forestalling at-source deductions on the basis of non-reconciled loans,” the source said.
Nonetheless, under an accelerated debt reduction programme, the Sindh government retired Rs2.1 billion in 2002-03, Rs4.1 billion in 2003-04 while another repayment of Rs2.1 billion is being contemplated in near future.
With all this burden of liabilities, limitations and handicaps in the last more than 15 years, the size of Sindh’s budget went up to Rs193 billion in 2006-07 from less than Rs100 billion five years ago. The size of ADP too went up to Rs32 billion from Rs5 billion. For this improvement, the credit goes to inflow of federal transfers that swelled three times from Rs54 billion in 2001-02 to Rs125 billion in 2006-07.
Financial analysts and independent observers appreciate prudent financial management but they find the resource allocations without any direction. Non-effective monitoring of fund utilisation also renders development investment a worthless exercise. “In the last many years, there has been no political leadership with vision to exploit full potential of opportunities in the province,” a retired bureaucrat remarked.
The bureaucrat, who was associated with the Sindh government for almost two decades in different capacities, said a bureaucrat could never take up the leadership role in setting development priorities within a long-term vision and drawing up a strategy for judicious fund utilisation. “Development funds were best utilised and useful projects were taken up during a brief democratic period of five years from 1972 to 1977 when political leadership provided the guidance,” a technocrat in the PPP said.
Sindh does not have a long-term development plan that should take care of rural and urban needs. There is no data and information about population growth, as an unending influx from North has made all projections meaningless. There is no idea how many children seek enrolment in schools. How many young boys and girls would be in the job market in the next five years or so?
Officials said President Pervez Musharraf was recently given a detailed presentation on provincial finances and development schemes. The sources quoted the president as asking the provincial government, “where are the assets for which development funds were invested? “What are the results of these development schemes? How many people benefited from these schemes and how many are there looking for such schemes? These are the questions which can be answered by the political leadership only.