For many Pakistanis, the announcement of the federal budget 2011-12 represented all there was to the yearly exercise. However, few people realise that it is the provinces whose budget estimates and development programmes hold greater importance than ever due to the devolution of various ministries and divisions to the four provinces.
Among others, now the social sector services and development programmes - including healthcare, education, gender, poverty, water supply, sanitation, etc. - fall in the provinces domain.
In these times of economic sluggishness and social deprivation, provinces have a vital role to play. The federal government is already fiscally strained due to mammoth expenditures on debt servicing, and defence and security affairs. To create fiscal space, these inelastic and highly non-developmental expenditures have been incurred oftentimes at the cost of development programmes.
It must be noted that in the post-devolution scenario, the federal governments development spending would eventually reduce to only large scale infrastructure and communication projects - a fact visible in the federal PSDP outlays for FY12.
The provincial balance sheets, however, are healthier than ever, thanks to the enlarged federal divisible pool after the passage of the 7th NFC Award. With the federal government caught in the D-trap, it is increasingly imperative for the provinces to spend more on development projects, especially in the social sector.
If history is anything to go by, the coverage and execution of the devolved social services may remain inadequate. A closer look at the provinces fiscal operations reveals that their expenditures are also heavily skewed towards current or recurring expenditures, with less than one-third of revenues spent on development programmes in the last five years.
While the provinces own capacity (or appetite) for levying or collecting taxes is so weak that they collected only Rs439 billion themselves in last five years, it is more intriguing to note that the incremental revenues from an enlarged divisible pool seem to be making way to non-developmental expenditures.
It is understandable that the provinces are unwilling to undertake large infrastructure projects due to capacity issues. However, this argument is not valid as far as social sector development is concerned. All four provinces are already collaborating with various donor agencies in this regard.
The cash rich provinces need to prioritise social sector development in their respective annual development programmes for FY12. Not least because of the federal governments habitual slashing of federal PSDP outlays and paltry allocations for healthcare and primary and secondary education services in the federal budget for FY12.
Only after the announcement of the provincial budgets will the clear picture emerge. The provinces should not view the budget, like the federal government did, as a mere accounting estimate of revenues and expenditures; clear economic goals and social objectives must be set, and development allocations need to be in sync with sectoral priorities.
It should be mentioned that lack of budgetary and policymaking coordination between provinces and federation (and among the provinces themselves) is a grave mistake. While the federal government is done with the
itual, provinces are devoid of any direction vis-à-vis a national economic agenda or social sector priorities. The devolution experience runs the risk of going haywire if things continue in this fashion.
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