KARACHI, March 4: After observing discrepancies and deviations in the provincial budgets in last couple of years, the World Bank has given a framework to prepare the budget for 2006-07 and also draw up a policy action.

The World Bank directives are based on the discussion held by an eight-member mission with the senior officials of the provincial and the federal governments during January this year. The mission has given an aide-memoire which focuses on devolution, improvement of service delivery and education.

Considered to be leader in implementation of the devolution process about five years ago, the World Bank now finds Sindh to be “one of the slowest moving provinces in terms of furthering devolution.”

The authorities in Sindh government informed the World Bank in January that a composite package of fiscal decentralization was being prepared which would be part of the 2006-07 budget. The package will include as a minimum the devolution of salary budget of the district employees through district accounts. The district governments will be given more development funds.

The World Bank has been given a firm assurance by the Sindh government that in the subsequent years after 2006-07 the decentralization programme will be further strengthened and service delivery will further be improved in the districts.

In its document the World Bank has lauded the Sindh government for being the first province to work out a Provincial Finance Commission award in the year 2002-03 “which was arguably the best award announced by any province”.

While appreciating the simple and logical formula for sharing of the “allocable funds” between the district and the Sindh governments, the World Bank report pointed out that the two separate though same formula for sharing of the recurring and the development resources emerged as the main weakness.

This weakness is attributed to the “unfunded” nature of the development programmes of the Sindh budget in which resources are not identified and hence no question of sharing these funds. The development funds can only shared if and when they become available.

Note has been taken of the compartmentalization of district funds into salary, non-salary and development funds which the World Bank says amounts to “restricting the autonomy of the districts”.

Significant delays have been observed in release of the non-salary funds to the districts which affect their functioning and delivery of services.

The Sindh government has now committed with the World Bank to prepare the 2006-07 budget under a medium-term fiscal framework, with the education budget aligned with sector policy.

A three-year plan for enhancing provincial resources is also being prepared. Provincial revenue generation in last few years have been found satisfactory but the World Bank has taken note of unimpressive collection of the agricultural income tax.

A commitment has also been given to increase the non-salary budget for key sectors including the education sector. The World Bank wants Sindh government to prepare a realistic annual development outlay. The ADP has increased from Rs9 billion to Rs24 billion and allocation for new development schemes has increased.

The advice is to allocate 75 per cent of the development programme to the ongoing schemes. All unimplemented schemes of 2005-06 ADP will have to be re-evaluated for inclusion in the 2006-07 budget. The number of unapproved development schemes will have to be substantially reduced.