Setting priorities for new KP budget

Setting priorities
Expansion in non-productive sectors is creating liabilities for the government and is ultimately leaving little space for other activities
By Tahir Ali

As the drafting of the 2012-13 budget is in final stages in Khyber Pakhtunkhwa, the provincial government has spelled out its budget priorities.

Chief Minister KP, Ameer Haider Khan Hoti, says investment in productive sectors (industries, water and energy, etc,) completion of ongoing schemes, and need-based one-time allocation of funds for new projects would be top priorities in the Annual Development Programme (ADP) for the coming budget.

Chief Economist of Khyber Pakhtunkhwa, planning and development department, Usman Gul, says there would be more emphasis on the improvement of service delivery in both the socio-economic sectors (agriculture, food, R&D, etc,) and social sectors (education and health, etc,).

According to him, most of the ADP projects would boost regional economy, spur economic activities, and bring marginalised districts to the mainstream of development.  In line with the ongoing ADP, he says, ADP would be 35 per cent and the current expenditure 65 per cent of the total budget.

Following landmark increase in KP’s income from 14.78 percent to 16.42 percent under the 7th NFC award and other federal heads that saw provincial income from the sources jumping to Rs223bn last year from Rs133bn in 2009-10, which is projected at over Rs252bn for the ongoing year, the provincial government more than doubled the ADP outlay from Rs39bn in 2009-10 to Rs85bn this year.

But the increase in current expenditure for high pay and pension bill, soaring cost of security and flawed development priorities have left the people mostly deprived of its benefits.

The ADP tries to address as much problems as possible in the limited space and money available. The result is, the people are only made to wait for the trickle-down effect rather than full-blown development initiatives.

According to an official document, the previous ADPs were skewed towards brick and mortar projects, which created public assets, but deprived soft drivers of growth in productive and socio-economic sectors.

Social sectors have consumed a sizeable chunk of the development programme whereas the socio-economic and productive sectors remained low in priorities. Rapid expansion in non-economic sectors is creating massive liabilities for the government and is ultimately leaving little space for other activities,” it reads.

The size of ADP for the current year, for example, was Rs85bn, including foreign assistance of Rs16bn with the share of ADP in budget standing at 35 percent against 65 percent for the current revenue expenditure.

But the productive sectors were allocated only Rs10.8billion, socio-economic Rs21.3bn and the social sectors Rs36.8bn. The allocations for the socio-economic sectors like agriculture don’t match the assertions. For example, even though allocation for the agriculture and its related sectors was increased from Rs1.175bn in the last fiscal to Rs1.355bn this year, its share decreased from 1.70 per cent to 1.59 per cent as percentage to the total ADP outlay.

Increasing current expenditure is the major worry. KP’s salary budget alone has increased from Rs40bn in 2008 to Rs76bn in 2010, mainly for the creation of new posts, increase in salaries and rising rate of retirement. The strength of government employees has risen from 0.3mn to 0.37mn posts between 2006-07 and 2011-12. This leaves little room for investment in productive and socio-economic sectors.

Low utilisation of allocated funds is another problem. For example, by March- this year, an overall 50 percentage utilisation ratio was recorded with productive sectors registering 32 per cent, the socio-economic sectors 62 percent and the social sectors 38 per cent utilisation ratio.

Officials, however, are optimistic that ADP utilisation ratio would be between 80-100 per cent at the year end. Usman Gul claims all the ongoing projects are moving according to plan, adding that almost all the major sectors, especially social and economic ones, have achieved their targets.

KP has prepared a 10-year hydro power generation action plan worth Rs330 billion according to which 24 projects would be initiated in KP to generate 2100 megawatts of electricity. “Chief Minister Ameer Haider Khan Hoti recently inaugurated the Dral Khawar Power Project in Bahrain, having a capacity of generating 36.6 megawatts. It would be completed within three years at a cost of Rs7 billion”, he says adding, “Work on numerous other energy projects forming part of the present ADP also continues. These will help meet our energy requirement. All these projects are predominantly foreign funded with only 10-20 per cent local component,” he says.

About foreign investment in KP, Mr Gul says donor’s intervention in KP has increased by about 4 times in FY 2011-12 as compared to FY 2008-09. Also, major share -79 per cent- in the foreign aid in 2011-12 is that of grant.

“Likewise, through Foreign aided project ‘Livelihood Development’ the government is trying to reach out to the poor population to create livelihood activity, and work on social safety nets. Livestock, dairy development, seed quality assurance, water for all, maximise food production, and above all mitigate climate change impact on all the sectors remains focus of this project,” he adds.

“Besides, work on the three special area development schemes for the backward districts of Torghar, KalaDhak and Kohistan worth Rs4bn, Rs1.3bn and Rs0.9bn respectively also continues. Along with several other urban development projects, such as construction and remodelling of Southern Bypass at Hayatabad worth Rs3bn and flyover on Rehman Baba and Bacha Khan Chowk Peshawar worth Rs1.8, the Bacha Khan Poverty Alleviation Programme worth Rs1.5bn also continues in full swing,” he informs.

ADP utilisation ratio has been low due to corruption, terrorism, financial constraints or lack of capacity of the implementing agencies/departments. To a question about whether these and other factors affected the ADP utilisation this year and to what extent, Gul says the aggregate utilisation ratio of previous ADPs usually remained at 50 percent at the end of the 3rd quarter but it increased in the last quarter. “Local ADP utilisation remained very good, except for donor funding and federal pledging for its vertical programmes, which sometime causes delay and, resultantly, ADP utilisation suffers. But we do not anticipate any such issue for the current ADP,” he adds.

However, the economic growth strategy paper prepared by KP, poor infrastructure, low human resource base and skills levels, high insecurity, unreliable supply of utilities — electricity, communication and water — and weak public-private collaboration are hampering the development and entrepreneurial activity of industrial and value added sectors of the economy.

The completion of Chakdara Bridge, connecting Dir with the rest of the country via Malakand in a record time of four months with the help of Pakistan Army shows delay in development projects can be minimised provided coordination with relevant development agencies is improved.

The province needs to focus on sectors like energy and power, water, minerals, industries, labour, transport, agriculture and tourism sectors that could mobilise resources and generate employment.

Against the present practice where non-productive sectors are preferred, 70 per cent additional funds should be provided to productive sectors and 30 per cent to socio-economic sectors. The government should utilise loans only for the productive sectors. It should seek grants from donors for the social sectors and if need be, soft loans for the socio-economic sectors.


About Tahir Ali Khan (Official)
I am an academic, columnist, and a social worker.

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