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  • Jan 7th, 2004
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The non-budgetary disbursements have shown significant increase during the first quarter of the current financial year, especially in respect of employees old-age benefit and micro-credit.

During the first quarter of fiscal year the micro-credit disbursements stood at Rs 824 million among 84,808 beneficiaries.

This disbursement is 165 percent higher than corresponding period of the last year. It indicates accelerated economic activities at the grass-root level, asset creation for the poor, and income increase that would lead to reduction in poverty.

This programme is enabling the poor, especially the rural poor, to diversify their income and employment base.

This was disclosed in a ninth quarterly report (July-Sept) FY 2003-04 (implementation progress report), which was released by the PRSP Secretariat, Finance Division, recently.

According to report, the micro-credit disbursements through Pakistan Poverty Alleviation Fund (PPAF), Khushhali Bank (KB), and Agriculture Development Bank of Pakistan (ADBP) is an important initiative aimed at stimulating income-generating investment, asset creation, and income increase for the poor.

Apart from setting a sizeable fund and a well-capitalised bank, a regulatory framework has been developed enabling private sector to set up micro-finance institutions.

The central bank has been given necessary responsibility to oversee the licensing process and operations of these institutions.

The outreach of existing institutions in Pakistan is around five percent of the 6.6 million poor households, which is likely to expand in the future.

Through recent initiatives such as Food Support Programme (FSP) and land transfers, the government has significantly increased assistance to the vulnerable.

As a result, the number of beneficiaries under social safety transfers has been increasing steadily in terms of coverage.

Social safety transfers by the government can be divided into three broad categories: cash transfers, in-kind transfers, and public works programmmes.

CASH TRANSFERS: The broad cash transfer mechanism providing social protection to the vulnerable segments of society includes transfers through zakat, food support programme (FSP), employees' old age benefits institutions (EOBI), provincial social security institutions, and micro-credit disbursements by Khushali Bank (KB), Pakistan Poverty Alleviation Fund (PPAF) and the Agricultural Development Bank of Pakistan (ADBP).

The PRSP process envisages a strengthening and improved targeting of these transfers to better align them with the overall objectives of eliminating poverty and human deprivation.

ZAKAT: Zakat is a non-budgetary transfer that is raised through a 2.5 percent annual levy, on the value of fixed financial assets above a prescribed limit (nisab), which is distributed to beneficiaries identified by local zakat committees.

Over the years the zakat fund has accumulated over Rs 20 billion in savings, while annual zakat deductions are expected to remain around Rs four billion over the medium term.

By the end of the first quarter FY 2003-04, over 72,000 were provided assistance of Rs 146 million through the zakat mechanism.

Majority of zakat beneficiaries gets fixed stipends of up to Rs 500 per month as guzara (subsistence) allowance.

However, in order to protect beneficiaries from getting caught in an equilibrium of dependency and to encourage them to set up income generating schemes the government has introduced a new zakat instrument - the zakat rehabilitation grant.

Under this initiative beneficiaries are provided one-off grants of up to Rs 50,000 to set up small-scale businesses that can generate a steady flow of income for the beneficiaries and their families.

For the current year the central zakat council has approved a sum of Rs two billion for this scheme, which will be raised to Rs five billion in the future depending upon results during the present financial year.

Food support programme is another source of financial support for the poor aimed at mitigating the impact of wheat price rise.

During first quarter of FY 2003-04, more than Rs 600 million were distributed among 600,000 beneficiaries who were paid Rs 1000 each.

By adopting a joint strategy aimed at closely aligning their targeting mechanisms, FSP and zakat can significantly increase the spread of cash transfers to the poor and vastly enhance the coverage of public social safety transfers.

EMPLOYEES' OLD AGE BENEFITS INSTITUTIONS (EOBI): Punjab Employees' Social Safety Institutions (Pessi) and Sindh Employees' Social Safety Institutions (Sessi) are the government's principal social insurance tools for workers.

Registered industrial and/or commercial establishments are covered under the employees' old-age benefit institution (EOBI) scheme.

It is funded by employer contributions equal to five percent of the wages and corresponding federal contributions.

Since EOBI deductions as well as social security contributions are funded through payroll taxes, they have implications for labour costs and employment.

These payments are an important source of social assistance for those unable to work due to old age or disability and need to be closely co-ordinated with the overall labour market policies of the government.

KIND TRANSFERS: While a cash transfer serves as a safety "net" to mitigate the impact of exogenous shocks, secure title of assets serve as safety "ropes" that protect the vulnerable against falling into destitution in response to a shock.

Therefore, these two mechanisms are interwoven elements of a poverty reduction strategy. The government's policy of distributing the state land to the landless, regularisation of katchi abadis (slum settlements), and granting of leasehold rights forms the basis of this social protection mechanism.

A well-targeted initiative of transferring land tenures to the poor can have a far-reaching impact not only on the overall productivity of the land but also on the socio-economic profile of the beneficiaries.

An estimated 2.7 million acres of state land is available that can be distributed among the landless to improve their livelihoods.

This could not only ease credit constraints for the poor, as land can be used as collateral, but also shield them against exogenous shocks.

A co-ordinated effort for distribution of state land and provision of credit would not only raise investment in land but also lead to significant productivity gains.

With majority of the population living in rural areas, and depending upon agricultural incomes, such gains would considerably improve the lives of the poor farmers and non-farmers alike.

During Q1 - FY 2003-04, 400 acres of available land was distributed among over 53 beneficiaries. A transparent, targeted, and co-ordinated re-distributive initiative on the part of federal land commission and provincial revenue departments would have important implications for equity and productivity in Pakistan.

PUBLIC WORKS PROGRAMMES: After Khushal Pakistan Programme, starting from FY03, the government has launched Tameer-e-Watan Programme allocating Rs five million to each member of the National Assembly increasing it to Rs 10 million to be spent on federal functions such as sui gas, electrification, etc.

The menu has recently been expanded to include social sectors also.

Significant ground was covered through the three workshops held to reach a consensus on intermediate indicators (education, health and population planning) and agreement on baselines.

To date agreement on 12 education and health indicators has been reached with agreed baseline years and their reporting systems are being developed.

A similar participatory reporting mechanism will be institutionalised for finalising and monitoring of other PRSP outcome indicators.

Presently work on developing consensus on environment, a gender and labour indicator is in progress.

With these in place, there would be a regular flow of information on anti-poverty expenditures and their effectiveness in achieving desired strategic outcomes.

Moving ahead, the road map envisages finalisation of provincial PRSPs and the national PRSP.

Regular information on intermediate indicators is an effective guide for evaluating the efficacy of public policies and public funds.

But in many cases information/data sources for intermediate indicators are not readily available and reporting systems need to be tuned for quick reporting.

However, as part of the government's anti-poverty efforts, information systems are being strengthened for finalising intermediate indicators, their measurement methodologies, definitions and sources for timely and accurate review of policy interventions.

The efficacy of PRSP expenditures is being regularly assessed, in terms of progress on following agreed health intermediate indicators:

-- Utilisation rate of FLCFs. - Percentage of population covered by LHWs. - Immunization coverage of children - completed courses of all six vaccinations (DPT1-3, measles, BCG, polio).

-- Percentage of births attended by skilled birth attendants - doctors, LHVs, nurses & midwives.

-- Number of skilled female birth attendants - doctors, LHVs, nurse and midwives but not TBA (annual reporting).

-- Number of skilled female health workers, lady doctors, LHWs, LHVs and nurses.

-- Number of FLCFs meeting staffing norms (doctors & LHVs are key staff to monitor).

-- Availability of all four contraceptive supplies from FLCF (annual reporting).

-- Percentage of FLCFs not experiencing stock out of any of the five key supplies (ORS, Cotrimoxazole, Foalte tablets, chloroquine and syringes) during the past month.

There has been a paradigm shift in government's health strategy ie with a focus from curative to preventive and from urban to rural health care.

Public sector health facilities are mainly provided through dispensaries, basic health units (BHUs), maternal and child health centers (M&CH), rural health centers (RHCs), and hospitals.

However, utilisation rates of public health facilities are still heavily biased in favour of public hospitals in urban or semi-urban areas.

Moreover, utilisation rates for hospitals are rising at a much faster pace than those for first level health care facilities.

This represents a major challenge for the public health administration as it overburdens the hospital system and leads to under-utilisation of FLCFs.

Correcting this imbalance would require considerable improvement in medical supervision and substantial improvements in equipment and preventive vaccines and drugs at FLCFs.

With a shift in government's policy towards a greater focus towards rural population, this gap is anticipated to bridge in the coming years.

Under ESR, there is an important policy initiative to provide basic facilities to all functioning schools such as water, latrines, electricity, and boundary wall to encourage school enrolment especially among girls.

At present the National Education Management Information System (NEMIS), Ministry of Education, reports this information on an annual basis.

However, the government will work with the provincial education departments and NEMIS to build a reporting system that will report progress on these education sector indicators on a six-monthly basis.

This will allow the government to gauge progress in increasing the number of functional schools with facilities including water, latrines, electricity, and boundary wall and thus remove constraints that impede the demand for education especially for female enrolment.

CWIQ SURVEY: The management information systems for education and health (EMIS and HMIS) are key sources of information for intermediate indicators.

However, the government will launch a full-scale CWIQ survey to capture information for the 13 intermediate indicators at the district level. It will also act as third party validation for EMIS and HMIS.

REPORT OF THE TECHNICAL COMMITTEE: The government constituted a technical committee under the chairmanship of the director, Pakistan institute development economics with representatives from public as well as private sector to look into the sample frame of Pakistan integrated household survey.

The committee after detailed deliberations concluded that the sample frame is in order. However, there were non-sample errors and a need for effective supervision at each stage of survey including post-enumeration validation sample survey is required.

It was mentioned that after having achieved macroeconomic stability with fiscal deficit (less than 4.5 percent of the GDP) the target (4.6 percent of the GDP), current account surplus of 4.8 percent of GDP, national savings of above 20 percent, GDP to debt ratio of 90 percent (502 percent of total revenue) and GDP growth rate of 5.1 percent against the target of 4.5 percent during FY03, the economy is poised for accelerated growth over the medium term.

At the end of the first quarter (July-September) of FY 2003-04, the foreign exchange reserves reached to 11.388 billion dollars, home remittances were 1.488 billion dollars, as against 1.655 billion dollars during the corresponding period of the last year.

Inflow of foreign direct investment was 204.4 million dollars, tax collection were on target (Pak Rs 94.062 billion), and Karachi Stock Exchange Index reached 4027 points with a total capitalisation of Pak Rs 876 billion.

Exports grew by 14.65 percent and imports rose by 12.09 percent over the corresponding period of the last year.

The growth in large scale manufacturing for July-October 2003 was 14 percent. Weighted average lending rate during the period was 7.58 percent and CPI was 1.78 percent.

PRSP EXPENDITURES RANGE: Pursuant to extensive discussion with the World Bank and the IMF, the PRSP's expenditures range has been expanded to include spending on law and order, administration of justice, and village (rural) electrification because of their close nexus with determinants of poverty as a result of dialogues with the grass root communities through rural support programme network and the participatory poverty assessment (PPA).

With the inclusion of these sectors, PRSP expenditures would rise but it would be compared with the previous year on comparable basis.

It needs to be appreciated that PRSP expenditures do not capture a large quantum of annual public sector development programme and current expenditures, both at the federal and provincial levels, such as agriculture, highways, works, information technology, telecommunications, higher education commission, women development, power sectors etc. that directly or indirectly contribute to poverty reduction.

Based on June (final) reconciled civil accounts, the PRSP expenditures with extended range and scope during 2002-03 was Rs 208.840 billion as compared to Rs 167.280 billion in 2001-02 for the same sectors, an aggregate increase of 24.8 percent (or 5.20 percent of GDP in FY-03 as compared to 4.49 percent of GDP in FY-02).

The PRSP expenditures during the first quarter (July - September) of FY-04 were Rs 49.334 billion against Rs 36.992 billion for the corresponding period of FY-03, an increase of 33.4 percent.

Analysis of PRSP spending: An in-depth analysis showed that the line ministries/programmes at the federal level spent 90 percent more during the first quarter of FY-04 than the corresponding period of the last year.

Likewise, the increase was 58 percent in Punjab, seven percent in NWFP and 19 percent in Balochistan over the first quarter of FY-03.

Sindh however registered a decline of 11 percent.

This indicates that significant ground has been covered since the first year of devolution (FY 2001-02) when the PRSP expenditures in Punjab, NWFP, and Balochistan registered a decline of 21 percent, 26 percent, and five percent, respectively, on a year-on-year (YOY) basis.

This also reflects that the pace of pro-poor expenditures is picking up and the provinces and districts seem to have overcome expected procedural hiccups during the first quarter of a financial year.

At the federal level, new policy of expenditure management allowing the ministries to spend 50 percent of PSDP allocations in social sectors and 45 percent in other sectors during the first half of the financial year without reference to ways and means position has started paying dividends in the form of substantial increase at the federal level.

Sectoral analysis exhibited increase in critical areas like 256 percent in roads and bridges, 26 percent education, 46 percent in social security, 11 percent in land reclamation, nine percent in law and order, 92 percent in administration of justice, and 1,011 percent in food subsidy.

However, some of the important sectors have registered decline such as 6.35 percent in health, 31.5 percent in population planning, 1.60 percent in irrigation, and 29.7 percent in rural development.

The provinces have been advised to gear up the pace of expenditures in the sectors that are lagging and keep track to ensure meeting quarterly quantitative targets.

It is expected that by the end of second quarter, the position would be improved. It may be noted that water and sanitation is now a completely devolved function to Tehsil municipal administration in all district governments except city governments and expenditure is booked against transfers to the local fund.

As the devolved financial management system is taking shape, the devolution process is being consolidated, new operational snags are being addressed and the administrative capacity of district governments is being augmented through increased technical assistance, operational support and training.

It is expected that it would increase effectiveness of the spending and improved service delivery.

At the same time a fast track approach would have to be adopted in ironing out issues of releases, bookings, disbursements, and utilisation - between provincial, district, and Tehsil governments - to ensure that pro-poor expenditures remain in line with the government's medium-term targets.

These measures would have to be supplemented by institutionalising effective monitoring and evaluation mechanisms to measure the social impact of these outlays especially at the district level.

Copyright Business Recorder, 2004


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