Governance Reforms in Punjab

The Manila-based Asian Development Bank (ADB) is expected to shortly release $150 million under the Punjab Government Improvement Efficiency Programme (PGIEP), which will help the provincial government to overcome its financial problems and partly finance its ambitious but risk-prone development budget for the current year.

The provincial government is expecting more than Rs10 billion in the shape of multilateral financial assistance from the ADB and the World Bank to partly finance its record Rs172 billion annual development programme (ADP) for 2009/10.The development budget indicates an operational shortfall of Rs26.250 billion.

The ADB had agreed in 2007 to provide the Punjab government a $750 million Development Policy Loan (DPL) to be disbursed over a period of five years as budgetary support to carry out crucial governance and financial reforms in the province under the Punjab Resource Management Programme II (PRMP-II).

PRMP-II is the continuation of the wide-ranging reforms initiated under PRMP-I and is the umbrella programme which includes three major components: Punjab Government Improvement Efficiency Programme (PGIEP), Punjab Access to Justice Programme (PAJP) and Punjab Millennium Development Goal Achievement Programme (PMDGP).

The first tranche of $250 million for PGIEP was released in January 2008 after successful completion of actions under sub-programme I.

”We have successfully implemented the actions that were needed to be completed before the ADB released the loan. These actions have also been approved by the provincial cabinet,” a senior official in the provincial finance department told this reporter. He said the provincial government is expected to sign the agreement with the bank on September 17, which will be followed by release of the much needed funds.

The PGIEP programme design provides flexibility to the Punjab government as well as the ADB as prior actions are agreed in advance and the loan is released on their completion.

PGIEP seeks to improve the efficiency of the government by introducing financial reforms, managing contingent liabilities, improving efficiency and productivity of civil service and increasing participation of the private sector in development and economic growth of the province.

The core policy reforms areas under PGIEP include: public financial management, pension reform, civil service reforms, and private sector development.

”In order to impose greater fiscal discipline, Medium Term Budgetary Framework (MTBF) has been developed under PGIEP in two pilot departments -- I&P and Health -- where each spending unit has come up with its output based budget for the years 2009-12. This financial reform will be rolled out to three more departments in the next year which include Livestock and Dairy Development Department, Excise and Taxation Department and Higher Education Department.,” says the policy document approved by the provincial cabinet weeks ago.

It is for the first time that these departments have received training on MTBF and have learnt to align their results/outcomes with their financial resources available to them. “The existing financial crunch facing the Punjab government especially under the current weak macroeconomic situation necessitates the need for improved financial management and fiscal discipline. The MTBF will help to improve the current state of financial management and fiscal discipline,” says a PRMP official.

PGIEP seeks to reform both the top down as well as bottom up financial management systems and emphasises expenditure management and own source revenue generation. “Improving budget preparation and planning, tax policy and administration are key outcomes of this programme,” says the document.

The Punjab government is also undertaking reforms to contain and capitalise its contingent liabilities like pension and provident fund. “The province has more than one million employees working at various levels of the government. In order to manage their contingent liability, including General Provident (GP) Fund and Pension. Punjab Pension Fund was created under sub programme 1 of PGIEP and pre-funding strategy was developed in order to incrementally shift the burden of pension and GP Fund away from the current budget of the province. This measure is expected to not only create fiscal space but also ensure smooth administration of pension and GP Fund by active pensioners and employees of the government,” says the policy document.

Civil Service reforms are hoped to create a highly motivated, efficient and competent civil service which can perform functions of the government in a transparent and effective manner. Among other things, the civil service reforms focus on improving recruitment processes and strengthening Punjab Public Service Commission.

PGIEP seeks to attract private investment under the Public Private Partnership. In order to provide legal cover to the rights of all the parties and also to determine and enforce duties and responsibilities of all the parties involved in PPPs the cabinet has approved a law that will be placed before the provincial assembly during its next session for approval. The proposed PPP law provides credibility and assurance to the private party. It provides legal cover to transactions and institutions under the PPP mode.

DAWN  | Sep 14-20, 2009 |