The Asian Development Bank (ADB) has hinted at grant of $180 million for NWFP under Devolved Social Sector Delivery (DSSD), but termed its use for investment purposes as high risk. It recommended that the government of Pakistan (GoP) must ensure use of DSSD to supplement operational funding.
The bank attaches great importance to early announcement of Seventh NFC Award and is of the view that the new award would ensure more funds to provinces for social sector development as well as help them plug gaps in operational funding.
In its report on 'Improving devolved social sector delivery in NWFP and Punjab', the bank recommended use of DSSF programme funds to supplement operational funding rather than utilising it for investment purposes.
The report said: "The new NFC Award, once agreed on, may provide a major opportunity to shift budget allocations, although this may not be enough on its own. The study estimated that an increase in the NFC award from 37.5 percent to 50 percent would increase the allocations to local governments by around 80 percent in NWFP and Punjab.
These increases could initially be channelled through a social services conditional grant earmarked for service providers in the social sectors through local governments, with an explicit long-term commitment to integrate the funding into the PFC block allocation over time.
The report added that if inefficient resource allocation and consequent lack of operational funding for service providers continued, there could be no major improvement in service delivery. Effective devolution needs a shift in the balance of power towards service provision first, and local governments second, otherwise power is concentrated at the local government level.
It added that a key element of any step change would be to establish user committees for all existing service providers and then allocate significant operational funding to these committees through local governments.
The report said: "Although it is possible to reach reasonable operational funding levels by down-sizing the local government establishment and integrating vertical programs into the local government grant system, this is realistically achievable only in the medium term, and very likely will impact Pakistan's ability to achieve the Millennium Development Goals for health and education.
Operational funding needs to be shifted into the hands of the customer and the service provider quickly. A medium-term target expenditure of Rs 100-150 per capita for non-wage current spending in primary schools, BHUs, and RHCs should be achievable, rising to double that over time.
In Punjab, this means an additional allocation of Rs 7 to 10 billion, and in NWFP Rs 2 to 3 billion per annum. This would make a huge difference to the ability of existing facilities to function, but can only be achieved by reducing the size of the establishment or increasing resources allocated by the province".
The report said that a simultaneous effort should be made to address gaps in infrastructure. It suggested that a part of the service delivery conditional grant should be earmarked for this purpose and efforts should be made to rehabilitate the existing infrastructure.
Significant initiatives are needed in the water and sanitation sector to increase the functionality of existing water schemes. It noted that it was important not only from the perspective of addressing gaps in infrastructure, but also for garnering political buy-in from local and provincial politicians.
The fact that politicians protect teachers' posting and transfers, for instance, means that there must be a real political cost if they were to fail to do so, and instead support campaigns to reduce absenteeism.
Financing infrastructure projects undoubtedly wins votes, and if increases in operational funding and campaigns to reduce absenteeism go hand in hand with more visible improvements in infrastructure, then politicians are more likely to support the process and become more interested in service delivery.
However, as a conditional grant, such large allocations should be used not only to fill the current financing gap, but also to lever reforms build local government institutions in the education sector, and provide strong incentives for local governments to improve service delivery.
A major part of this would be linking the allocation of the grant to reductions in the costs of staff establishment, thus creating a strong incentive to address the imbalance in budget allocations. Allocations should also be made conditional on improvements in staff attendance and compliance with specific transparency and accountability requirements.
Over time, conditions could move to other processes within local governments. This may yield better results in service delivery, while improving democratic accountability within local governments.
For example, local governments should be encouraged to develop plans for improving service delivery as a condition for accessing funds. Similarly, they could be encouraged to improve their budget process, the balance between salary and non-salary allocations and expenditures, and the alignment between current and development allocations.
The study said that at the outset, the provincial government should spearhead a wider transparency and accountability drive for service delivery, to supplement the campaign against absenteeism.
The provincial governments should first develop sector policy statements and then implement public information campaigns to stimulate demand for public services, informing the public of their rights to service delivery and avenues for complaint.
In addition, provincial line departments should prepare guidelines for local governments on planning, budgeting, and managing service delivery within each sector. These guidelines should be aimed at assisting local governments' use of existing and new resources more effectively.
If the provincial government manages to mobilise and channel additional resources through local governments to service providers, it should disseminate this information through the media, and enforce the requirement that receipts for these transfers be published by service delivery units. Publicity around user committees and CCBs should be carried out alongside the introduction of the service delivery conditional grant.
An important opportunity for civic education in these issues would be around the build-up to the next council elections in 2005. This could shift the agenda to what councillors have done for the public in terms of improving services.
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