PRIME Minister Imran Khan has directed the provinces to immediately make the Provincial Finance Commission(s) (PFCs) functional and announce PFC awards to end any ‘disparity’ in the distribution of funds among districts.

The instructions were issued during the federal cabinet meeting on July 1, in which the issue of disparity in the distribution of funds among districts, particularly in Punjab, came up for discussions.

The PFC awards are based on multiple criteria as is the formula of the National Finance Commission for distribution of resources among the provinces and the federation. PTI member of the Sindh Provincial Assembly Bilal Ahmed has also recently pointed out that the new PFC award should be based on multiple criteria including revenues, population and backwardness. Federal Minister Fawad Chaudhry blames the Pakistan Muslim League (Nawaz) for wrapping up PFCs which did not exist till today.

Referring to the issue as far back as January 25, Punjab Chief Minister Usman Buzdar had revealed that the interim Provincial Financial Award 2017 was functional. However, under the law, it is compulsory for provincial governments to issue PFC awards every four years. In Sindh, the PFC award was last announced in 2007.

‘The local bodies in Pakistan unlike elsewhere are to an extent disconnected from its citizens and saddled with a governance style which is top-down, reactive and authoritative’

The two provinces — Khyber Pakhtunkhwa and Punjab — ruled by PTI and Balochistan governed by its ally — do not have elected local governments whereas Sindh and Islamabad Capital Territory have functioning elected local bodies though without the political, financial and administrative powers as entrusted to them by the Constitution.

The three provinces seem to have forgotten that Pakistan is a federal republic embodying three tiers of representative governments national, provincial and local.

It may be recalled that the PTI Manifesto 2018 had promised that “we will transform Pakistan by devolving power and decision-making to the people through the empowerment of local governments (system).”

“The local bodies in Pakistan unlike elsewhere are to an extent disconnected from its citizens and saddled with a governance style which is top-down, reactive and authoritative,” says the United Nations Development Programme (UNDP).

In its first report on ‘Covid-19 — Pakistan Socio-economic Impact Assessment and Response Plan’, the UNDP notes that the stated governance style has led to the weakening of the essential state-society social contract leading to marginalisation, group grievances and conflict and social resilience in the country.

The elected local governments (ELGs) ceased to function in Punjab on May 4 following the Punjab Local Government Bill 2019, which envisioned PTI ‘s KP local government (LG) model which has yet to be implemented. The tenure of local governments in KP and Balochistan expired on August 28, 2019, and in January 2019 respectively. But no elections have been held so far as required by law.

Under the Election Act 2017, fresh polls are to be organised within three months after completion of the term of existing ELGs. The LG elections in KP are planned for April 2021 and in August for Punjab.

Critics are not sure whether the PTI would take the risk of holding local elections in view of its performance in these difficult times, falling much short of the electoral promises that helped it come into power.

At the same time, they also point to the building up of pressures on the government by PTI MNAs and MPAs and the party’s allies for development spending in their constituencies. They would be competing for resources with the ELGs.

The growth of participatory grassroots organisations, which can better identify the needs of the poor and vulnerable and resolve their problems more effectively, has been partially stifled by mainstream political parties. It is not realised, as some experts point out, that a well designed local government system can strengthen Pakistan’s federal democracy, based on the three-tier system of governance.

In a related development, the absence of the ELGs in KP has been followed by the suspension of allocated development funds for local bodies. The PTI-run KP government withheld Rs43 billion from Rs46bn allocated by the PFC award for 2019-20. A mere Rs3bn was disbursed.

In the previous four year’s share of Rs144bn earmarked by the PPC awards, only 50 per cent or an amount of Rs77bn was disbursed.

The provincial law says the development grant for the three tiers of local councils shall not be less than 30pc of the total development budget of the province in the respective year. KP Finance Minister Taimur Saleem Jhagra explained that the allocated funds were not released as there were no elected local governments after the tenure of the councils expired in August.

And the UNDP report reminds Pakistan that the presence of elected governments would have created an effective bridge between the government and the population, defusing the current situation in which the citizens have been losing trust in governmental decisions.

The World Bank report titled Resilient Institutions for Sustainable Economy covering the period from July 1 to June 30, 2020, says a preliminary analysis suggests that, in the worst-case scenario, four million households could fall in poverty Given the state of fiscal constraints both at the federal and provincial levels, the role of ELGs in mobilising their own resources for socio-economic development cannot be overstated. For reasons well-known, the actual annual development spending in Punjab, the biggest, most developed and prosperous province, has dropped from Rs411bn in 2017-18 to Rs178bn during the last fiscal year.

Owing to erratic transfers of resources from the federal divisible pool and the resultant cash problems of the four provinces, their borrowing limits from the State Bank of Pakistan have been enhanced recently. The new and old borrowing limits (in brackets) for the four provinces are as follows: Punjab Rs77bn (Rs37bn), Sindh Rs39bn (Rs15bn), KP Rs27 (Rs10bn) and Balochistan Rs17bn(Rs7.1bn).

Excluding Public-Private Partnership projects worth Rs50bn, the federal government’s budgeted Sector Development Programme for 2020-21 has been slashed by Rs100bn compared to 2019-20. The utilisation of funds is still less.

The mounting demand that LG elections in the three provinces be held as provided by the electoral law and that all four ELGs be empowered as stipulated under Article 140-A of the Constitution should be heeded by relevant authorities. The relevant constitutional provision lays down that “each province shall by law establish an LG system and devolve political, administrative and financial authority to the ELGs representatives.”

Published in Dawn, The Business and Finance Weekly, July 13th, 2020