ADB to provide $400,000 for Balochistan resource management programme
FAISALABAD (December 21 2007): Asian Development Bank will provide $400,000 equivalent on a grant basis from ADB's TA funding programme for preparing the "Second Balochistan Resource Management Programme". According to ADB sources, the TA is estimated to cost $450,000 equivalent in local currency costs.
ADB will provide $400,000 equivalent on a grant basis from ADB's TA funding programme. The government of Balochistan will contribute the remaining local currency cost of $50,000 equivalent in kind by providing office accommodation, counterpart staff, and facilities for seminars and meetings.
The government has been informed that approval of the TA does not commit ADB to finance any ensuing project. The Government of Pakistan has also been informed of the scope of the TA.
According to official sources, this project preparatory TA aims to help the government develop the next generation of public administration reforms to be pursued under BRMP- II. Such continuation and deepening of policy reforms in fiscal and financial management, public administration, and asset management will free resources for pro-poor development and better public service delivery.
This in turn is likely to improve the economic and social outcomes in the province. The expected outcome is greater fiscal space for the province of Balochistan through enhanced flows and improved management of resources.
These outcomes will be achieved through diagnostic and analytical work under the TA, with wide stakeholder consultations (involving the government, civil society groups, and the private sector, among others). Several policy papers will be prepared to help formulate the reform agenda under BRMP II. The consultative nature of the process will raise awareness and build capacity to co-ordinate policy development.
According to an update project report, the Asian Development Bank (ADB) has supported the government of Balochistan (the government) in public resource management reforms through the Balochistan Resource Management Program (BRMP I). BRMP I was approved in November 2004 and closed after the release of the second tranche on 31 May 2007.
In total, BRMP-I provided $130 million to assist the government of Balochistan to enhance provincial finances through fiscal restructuring and better financial management, and improve processes and establish appropriate institutions for public service delivery and private sector development.
In early 2007, the government requested further ADB support to sustain the first phase of reforms. An ADB mission visited Quetta and Islamabad during 3-12 September 2007 to reach general agreement on the scope of the proposed technical assistance (TA) required to prepare the second Balochistan Resource Management Program (BRMP II).
According to ADB Project Report, BRMP-I was successful not only in initiating systemic thinking on strategic reforms in the government and with other stakeholders but also in implementing certain fundamental policy changes. Balochistan had an open-ended subsidy system for electricity for operating agricultural tube wells, which accounted for about 8 percent of provincial current expenditure and had increased by 150 percent between fiscal year (FY) 2001 and FY2006.
Through BRMP-I, the subsidy was capped at Rs 2 billion in nominal terms (about 5% of provincial expenditure in FY2007). This decision was taken despite the fact that most of the larger landowners, the principal beneficiaries of the subsidy, had considerable political influence.
The water resource component of BRMP-I has provided a firmer institutional basis for better water resource management through the adoption of an integrated water resource management policy-a first in Pakistan. Debt restructuring was made possible by using ADB's ordinary capital resources loan to retire the more expensive cash development loans of the province from the Federal Government, thus saving over Rs 1 billion per annum in debt servicing costs.
Initial revenue management reforms have begun to take effect: revenue receipts from tax and non-tax sources increased by an impressive 58.2% in FY2006 over the previous year, although the increase in tax revenue was only 8%. The recovery of irrigation water charges has picked up under an action plan supported by BRMP-I.
ADB report explained that the "throw forward" of Balochistan's public sector development program has been reduced under BRMP reforms. A throw forward is the excess of the cost of a development scheme over the current financial year's allocation, and is one of the measures used to analyse the sustainability of the development budget.
It provides information on how many years it will take to complete a development scheme, or in how many future budgets the scheme will have to appear. In this case, the throw forward was reduced from almost 10 years in 2004 to 4 years in 2007. Another fundamental policy achievement was the establishment of a rule-based transparent system of local government funding. Moving forward, there are three sets of constraints.
The fiscal and public financial management reform agenda is incomplete. While the government has taken a number of important steps7 to improve fiscal discipline, further short and medium-term reforms are required over the next one to five years to strengthen the planning and budgeting systems, and adopt a medium-term expenditure framework to enhance the credibility, predictability, comprehensiveness, and transparency of the budgeting process.
BRMP II will continue to strengthen the devolution agenda. Under the Balochistan Local Governance Ordinance, 2001 the provincial government is no longer a direct implementer exercising complete administrative and financial control.
Under the ordinance, it is now required to define the policy and regulatory frameworks and ensure they are observed at the local level. This requires a more complex and sophisticated monitoring and analysis role, and building capacity at the local level.
ADB report hoped that gradually phase out the remaining subsidies that are deemed to be inefficient, while strengthen property and agriculture tax administration, at both provincial and local government levels; (iv) improve pension administration and contingent liability management; and strengthen accounting, internal control, and audit systems.
Business Recorder [Pakistan's First Financial Daily]