Provincial mandates: Federal spending must be ceased, recommends World Bank

ISLAMABAD: Federal spending on provincial mandates, including through government ministries, vertical programmes, and the development budget, should be ceased, delivering significant potential fiscal savings, the World Bank recommended.

The Bank in a policy note stated that federal and provincial departments that are already redundant or would become so under the proposed devolution to the local governments should be abolished.

The recent exercise to rationalise federal autonomous bodies and attached departments, corporations, companies, councils, institutes, subordinate offices at the federal government should be repeated in line with newly delineated responsibilities and fully implemented; and duplicated at the provincial level.

Debt piling up: Borrowing reliance surging to finance twin deficits: World Bank

The Bank stated that the note recommends a broad range of critical reforms for sustainable economic development, and effective implementation of these reforms will present a major challenge, in the context of important governance and institutional constraints.

Pakistan’s politics remains dominated by patronage, with political elites mobilizing support through the direction of regulatory concessions, public sector rent flows, and private goods to constituents and allies rather than through improved service delivery and economy performance.

Policy decisions are heavily influenced by strong vested interests, including those of military, political, and business leaders. Critical reforms have limited prospect of effective implementation in a context where policymakers are accountable to special interests rather than the public, the WB added.

The structure of government is extremely complex while incentives for performance are often weak limiting implementation capacity. Pakistan has around one million public servants across federal and provincial levels spread across hundreds of departments agencies and State-Owned Enterprises (there are currently around 200 SOEs at the federal level alone among around 340 autonomous agencies).

The note further added that the large number of government entities at federal, provincial and local levels leads to continuous coordination problems with unclear mandates causing overlaps and gaps in service delivery. Unclear or duplicative responsibilities undermine accountability.

Performance management of staff is weak. Performance reviews are rare and incentives reward adherence to the rules rather than good operational performance. Promotions are largely based on seniority and informal networks and do not ensure that those most qualified for leadership end up in senior positions. Rapid turnover of officials in senior government positions weakens institutional capacity and undermines continuity in reform implementation.

The WB stated that devolution can theoretically support effective reform implementation by ensuring closer accountability linkages and feedback mechanisms between service providers and citizens. The 18th Constitutional Amendment saw a major devolution of service delivery responsibilities to provinces presenting opportunities for stronger accountability.

The devolution process has not been effectively implemented however federal government continues to deliver many devolved functions creating overlaps in service delivery increasing fiscal costs and blurring accountabilities.

Financing arrangements are not informed by current service delivery responsibilities. While protected under the constitution local governments have limited power or resources in practice. Local government appointments and budgets remain controlled by the provincial governments leaving decision-making centralized in provincial capitals and Islamabad.

The current juncture presents some potential for overdue reform. International evidence shows that institutional reform is a long-term process heavily dependent on a conducive political context. While technocratic interventions are unlikely to transform Pakistan’s institutional environment in the short-term current contextual factors may present some windows of opportunity for positive change.

Current weak economic performance and the potential for continued macroeconomic crises present threats to the economic interests of elites Recognition of the extent and severity of current challenges may broaden support for required economic and institutional reforms, the WB added.

Copyright Business Recorder, 2023