Saturday, May 20, 2006

P.S. The PSDP isn't working

The numbers are in and yet again the utilisation of the Public Sector Development Program (PSDP) funds is abysmal: only Rs. 103 billion of the Rs. 204 billion federal share has been spent in the first nine months of the current fiscal year. One can only wish that the military emulate their development counterparts in thriftiness.

Three observations are in order. First, the last quarter is going to see a spurt in expenditure as departments scramble to meet budgetary targets. The planning commission has baldly stated that '(t)he expenditure is likely to further pick up in the last quarter ... Rs193 billion (95 per cent) of the total Rs204 billion federal allocation would be spent up to June 30, 2006.' (Dawn) In turning on the spigot issues such as quality, merit and utility of projects are sure to fall by the wayside.

Second, the same planning commission has budgeted Rs. 250 billion as the federal share of next year's PSDP fund. No one realistically expects such an amount to be utilized, but it's a nice number for Musharraf and Shaukat Aziz to throw around in the countless foreign capitals they will visit next year.

Third, there will be no attempt to understand why the PSDP has failed to be fully utilized year after year now. A developing country by definition has no shortage of sectors in need of development. The likely culprit is institutional capacity: there just isn't enough expertise or manpower to take advantage of the vasts sums of money being poured into the system. In fact, providing departments with the financial wherewithal but not the necessary management is a recipe for incompetence, corruption and worse.

Early into his regime, Musharraf's financial mandarins set out a three-stage plan to rehabilitate the economy. Seven years on we are firmly into the third stage - long-term social development. Embrace neo-liberal policies and pay no attention to the new class of the super-rich, we were told, for they were only a means to an end. Now that the time has come to start to deliver on the promised end, it keeps getting pushed farther into the future. A particularly damning statistic from the PSDP accounts is that the utilisation ratio of social sector and infrastructure funds is amongst the lowest of all sectors. Khaleeq Kiani (The Outcome of Increased Public Spending, Dawn, 27/03/06), in an assessment of half-yearly expenditures, provided the following utilisation statistics: labour ministry (1.2%), women development (5.3%), local government (nil), industries (5.7%), commerce (3.9%), water sector infrastructure (28%).

It's time our economic managers made the postscript of their memos the main subject.

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