Sindh struggles for development

For development, the budget is tight across the federating units. Just as Punjab, the province of Sindh has is also facing fiscal difficulties in allocating more of its resources towards development projects in the province.

On paper, the Rs284 billion provincial development budget does not look bad for FY20, considering that Punjab, the largest provinces, has budgeted Rs350 billion for its development next fiscal. Sindh has allocated 23 percent of its Rs1.2 trillion overall budget to development – a share also higher than Punjab, which is looking to spend 17 percent of its entire expenditures next fiscal on development.

However, when compared internally, Sindh is allocating a lower share to development from the budgeted resources. While the size of the overall budget has expanded, it is obvious that in numerical terms, Sindh’s development budget in FY20 is almost the same as it was in FY17. A province that used to budget nearly a third of its resources for development is now looking to spend less than a quarter of the pie on uplift of the province.

But the proof of development lies in actual spending – not what high or low figure is budgeted for, only to be chopped down eventually. In that regard, Sindh is no different than its provincial counterparts and the federal government. Between FY16 and FY18, Sindh’s actual development spending averaged 70 percent of the budgetary allocations.

The FY19 development spending is particularly struck by fiscal tightening. In the ongoing fiscal, the government of Sindh has revised downwards its estimated development spending to Rs173 billion. This will mean that just half of the original budget will be spent in FY19.

In that case, actual development spending in Sindh will fall below 20 percent of overall expenditures. That will be sharply lower than the 26 percent development share in actual spending that has been seen on average during FY16-18. Effectively lower spending takes back Sindh’s development four years, dealing a quantitative blow to ongoing projects. The less said about the quality of project management the better.

Lower share of provincial allocations on development reflects fiscal distress of the times. Moving on, do not rule out more spending cuts next fiscal. Unlike Punjab, Sindh has not shown any indication to create a budget surplus for the center in FY20. This could further erode development spending if the federal government demanded a sizable surplus from Sindh to help bring its fiscal deficit under the IMF margins.