ISLAMABAD:
As social and development indicators fall below the universally-acceptable standards, the government is facing what it calls a 3-D paradox, where the federal income is less than even the needs of debt servicing and defence, leaving nothing to spend on development.
Whatever the meagre amount is spent on development, it is either borrowed from domestic or external sources. The result is that with an existing allocation of Rs525 billion, which is also under threat of a cut, the government needs at least 10 years to complete already approved projects, irrespective how important it is.
The time was six to seven years when the PML-N took the reign 17 months ago. It has so far approved 240 projects that cost Rs3.8 trillion. Some of these are of a strategic nature and had to be approved.
After coming to power, the government either shelved dozens of projects or put them on hold aimed at creating space for projects it deemed fit. In the last fiscal year, the government created a space of Rs74 billion by closing projects initiated by the previous government.
There were about 1,236 schemes having an accumulative value of Rs4.4 trillion till October 2013. During the course of many months, the government quietly shelved hundreds of them and, today, the latest figure that includes projects approved by this government is 1,144 schemes valuing Rs6.2 trillion.
There was a 41% or Rs1.8 trillion increase in the size of federally-funded development projects in just one year, increasing the years required to complete a project if existing resources are distributed over the total size of the portfolio.
The objectives of socio-economic development can only be achieved, if available natural and economic resources of the country are efficiently utilised by the government, writes Dr Fazli Hakim Khattak, the Director General of Implementation and Monitoring wing of Planning Commission in his paper on the role of monitoring in social sector development. He further writes that this objective may be achieved only when development projects are planned and executed with vigilant management.
However, successive governments have been lagging on both accounts – effective management of the portfolio and resources – and this government is not an exception.
Although Planning and Development Minister Ahsan Iqbal claimed in his presentation to the federal cabinet that his ministry scrutinised the projects and saved Rs490 billion in the last year, a report of Prime Minister’s Inspection Commission (PMIC) highlights structural flaws.
Carried out during the tenure of the PPP government, the PMIC report states that “the existing system of Public Sector Development Programme prioritisation, scrutiny, monitoring and evaluation is defective and inefficient.” More than 75% projects are facing time overruns of about three years on average, leading to huge cost escalation running into billions of rupees.
The government’s income is sufficient to meet only non-development expenditure. To carry development work, it borrows from domestic sources and international lenders. “A number of unfeasible projects have been approved in the past,” finds PMIC.
Contracts not properly awarded
PMIC observed during the inspection of the project that contracts are not properly awarded and, as a result, the economy is losing billions of rupees per annum in terms of foregone energy and irrigation benefits alone.
The government does not have resources, as the chunk goes to defence and debt servicing. In the current fiscal year, the government has allocated Rs1.658 trillion on debt servicing and its repayment and another amount of over Rs1 trillion for defence-related activities. These two heads account precisely two-thirds of this year’s federal budget of Rs4.150 trillion.
Things seem gloomier if one looks at spending trend in the first quarter of the current fiscal year. From July through September, the government spent Rs477 billion or 52% of the quarterly expenses on debt servicing and repayment.
The government is heavily relying on borrowings and focusing very little on other means to improve the state of the economy, said Dr Hafiz A Pasha, former finance minister, in his recent synopsis of the state of the economy.
In the first quarter, defence-related spending was roughly Rs200 billion including grants, which amount to 22% of the quarterly spending. On these two heads, the government spent 73% or almost three-fourth of the total expenses, which is an extremely alarming trend. In contrast, federal development expenses in the first three months of the fiscal year were just Rs40 billion or 4.3%.
The government is facing the 3-D paradox, as it can spend only $5 billion per annum to meet the socio-development needs of a population of 200 million people, explains Iqbal. He says that in the present scenario, no one can turn things around until priorities are changed.
Only an export-led growth model can help the country as external resources are not sufficient to meet challenges, says Iqbal, who believes his government’s Vision 2025 is an answer to the country’s economic ills. He argues that the situation warrants stability and continuation of policies.
But the activities of the past seventeen months suggest that the government has not done enough to expand the export base. If one looks at the engagements of Finance Minister Ishaq Dar, he spent majority of his time in addressing short-term challenges to manage budget and balance of payments by focusing on borrowings.
THE WRITER IS A STAFF CORRESPONDENT
Published in The Express Tribune, November 24th, 2014.
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Yet this country has funds to build more Bombs ! This is the highway to bankruptcy, in normal world ! Sadly those responsible for managing this country, simply don't care it seems.