The government made successes in areas like fiscal deficit, current account and foreign exchange reserves but employment generation and investment failed to pick up


Oct 06 - 12, 2003




The Asian Development Bank (ADB) has recently expressed serious concern about the poor quality of public sector development spending in country. At the release of latest Pakistan Economic Update, the country representative of the bank reportedly said that spending under the Public Sector Development Programme (PSDP) and the Poverty Reduction Strategy (PRS) was very low in the first three quarters of fiscal 2002-03. Overall performance of the country during the period has been a mix of successes and failures. The government made successes in areas like fiscal deficit, current account and foreign exchange reserves but employment generation and investment failed to pick up. Marginal improvement in fixed capital formation in the private sector was said to be offset by an equal decline in public investment. After lower spending during the first three quarters under PSDP and PRS, to show higher utilization for the full fiscal, in the fourth quarter large releases were made, which compromised the quality of delivery and resulted in leakages. Other reasons for poor performance identified include weak implementation capacity and delays in activities such as the start up of approved projects, establishment of project implementation units (PIU), recruiting of key project staff/directors/consultants, and the award of project contracts. Project delays also occur during implementation due to factors such as frequent changes in the project staff, changes in project scope, delayed payment to consultants/contractors, project reformulation, revision of PC-1s, delay in land acquisition and settlement and non-compliance of loan covenants. Delays at project start up and implementation reflect to some extent lack of ownership of the project, accountability and understanding of the roadmap for achieving project objectives.

PSDP for 2003-04 has been approved at Rs 160 billion, showing an increase of 31% over revised estimates for the previous year. The on-going schemes under PSDP are expected to be completed at the federal level while a number of new schemes shall be initiated this year for implementation by the ministries and their attached agencies. Same would be the case at the provincial and the district government levels. Each provincial government, keeping in view its resource positions, has also made allocations for development projects under the ADP. In addition, there are expected to be a number of priority projects to be implemented at the provincial level from special federal funds as well as the district level schemes to be financed by the provinces or the federal government.



It may be appreciated that mere expending of the entire PSDP funds would not necessarily yield the desired benefits to the people if other essential conditions were ignored in the execution of the projects. For each physical/social infrastructure project, procurement of services, land and materials are required. Acquisition of each such item has to be proper ensuring value-for-money and also eliminating or minimizing pilferage or wastage of resources.

A review of the past press reports show that the following main reasons adversely affected realization of PSDP objectives: (i) Alleged misuse/wastage of funds in the acquisition of land needed for implementation of large development projects, (ii) The executing/implementing agencies allegedly made excess payments or the payments were authorized in violation of the prescribed procedures; (iii) The international donor agencies, overseeing progress of projects partly funded by them, have termed progress of quite a few of the projects as unsatisfactory. Some of the international donor agencies have reportedly indicated that earmarked funds might be withdrawn if the progress of the funded development projects were not improved; (iv) The projects approving authorities are often approached for supplementary approvals due to delays/slippages in the time schedules or cost overruns; and (v) Some of the elected district Nazims complained of the delays by the provincial governments in the release of funds for PSDP projects.

With a view to improve the implementation of the PSDP projects, the government has recently instituted the following measures: (i) The government has empowered the Planning Commission to conduct physical inspections of various development projects, and based on these inspections to immediately divert allocations of slow moving projects to other sectors in order to make maximum utilisation of budgetary allocations; (ii) The government and the ADB have agreed on a strategy to improve implementation of future loan projects. The plan to be made effective from July 2003 involves establishment of full time Core Project Management Units (CPMUs) to be funded initially through five revolving funds by the Ministry of Finance and departments of finance in Balochistan, NWFP, Punjab and Sindh for provincial projects. Establishment of CPMUs is expected to ensure improved project implementation ownership and accountability as well as benefit in project preparation, appraisal, PC-1 approval, loan negotiations and implementation; and (iii) The first inter-ministerial meeting to enhance project implementation was held in the 3rd week of August 2003, with Finance Minister in the chair. The meeting reaffirmed strong political support for reforms, fresh training for capacity building, and better co-ordination between the line departments and executing ministries. It identified reasons for slow progress and also decided to evolve an effective implementation system. It emphasized the need for close supervision, better co-ordination among the stakeholders, inter-ministerial and inter-provincial rapport, including assistance from the World Bank in three areas capacity building, structural reforms and infrastructure support. These are important steps in the right direction. However, for realizing PSDP objectives fully, improvement in many other areas is required as discussed below.

For a country like Pakistan facing resource constraints, major issue is not just how to raise sufficient funds, but how to ensure value-for-money while spending these funds for implementation of PSDP projects. It is therefore imperative that the whole process of PSDP from project initiation to implementation might be critically reviewed and revamped on priority basis. Participation of the prospective beneficiaries, transparency in the purchase of land and award of contracts, use of information technology for robust design of the projects and subsequent monitoring, intensive training of the officers manning the project teams and their motivation coupled with accountability are some of the priority areas. The government might assign this revamping task to the Planning Commission, with support from the ADB and other international agencies. The Planning commission might be suitably strengthened for the assignment. Some of the priority areas for revamping the PSDP system are discussed below.



PSDP projects are handled at different layers of the government such as the union council, the town council, the district government, the provincial governments and the federal government. A large number of agencies/institutions attached to the federal ministries, provincial departments and the district governments also implement such projects. In addition, development funds are allocated to the members of the national/provincial assemblies for carrying out development projects in their respective constituencies. The federal government and the international financing institutions are the main funding sources for financing these projects. Federal government funds are allocated to the ministries as well as the provinces from which part of the funds percolate down to the districts and union councils. These projects generally aim to improve the living conditions of the people, provide employment and to help alleviate poverty. Due to resource constraints, it is imperative that PSDP includes only priority projects, which are completed on time and within the budget.

The Project Teams/Project Management Units (PMUs) are the key for successful implementation of development projects. The officers on these teams have to be selected on pure merit, well-trained and emotionally motivated for realizing the objectives of the projects. Training has to be extensive to enable them handle diverse activities in the project implementation. Initially training may include discussion on project parameters and project approval process, prescribed requirements in the award of contracts, procurement procedures for ensuring value-for-money and requirements and authorizations for seeking disbursement including documentation prescribed by the government for the purpose as well as by the international lending agencies. Adequate funding for training has to be earmarked out of the big allocation made for the development projects. Delays in allocation of funds for training and the revamp process may run the risk of compromising proper utilization of the bulk of the allocations for PSDP projects.

The training of the officers and the revamp of the system has to be for all the layers and for all areas in the country. The task may preferably be handled by the Pakistani experienced professionals. However, in special circumstances help and guidance may also be sought from institutions such as the ADB and other international agencies.



Motivation plays a big role in improving the performance of the officers on the Project Teams. The officers must be made aware of the benefits both financial and otherwise that they can expect with the successful implementation of the project. This is expected to enhance the effectiveness and the efficiency with which the project would be undertaken. The reward to the team as well as the people at the higher levels may be made known. They should also be made aware of the accountability in case the projects fail to meet the prescribed goals and there are overruns in capital cost or the time taken for project implementation. Responsibility might be matched with authority and sufficient number of officers may be assigned to the teams. As a policy, the names of the Project Teams, their supervisors and the project contractors to be displayed at the project site for posterity. Transfer of team members and other similar adverse actions mentioned earlier must be avoided during the implementation of PSDP projects.

Existing procedures and formats of project documents might be revised to make compatible with the present day needs. Project details might be finalized after open discussion particularly with the potential beneficiaries of the project. Only those projects may be included in the PSDP that meet the proper eligibility criteria. Project details must be posted on the website of the agency implementing the project as well as the concerned Ministry/Department. This would help in the better design and appropriateness of the project. The bases for determining cost and time might also be reviewed. It has to be ensured that the projects are prepared well and the resources for implementation are earmarked on timely basis. A proper mechanism has to be in place for removing on timely basis, through appropriate corrective measures, any weaknesses in the design, approval, implementation or operation of the projects. Remedial measures may be specifically considered for tackling the reasons listed earlier for slow implementation of PSDP projects.

The selection criteria for PSDP projects as well as other allied procedures might be improved in line with the practices presently followed by the international financing agencies. Areas that are generally considered by the ADB and other international financing agencies for providing lending assistance include: economic viability, technical feasibility, and financial soundness; effect on development activity in the country concerned; contribution to the removal of economic bottlenecks; introduction of new technologies to raise productivity; expansion of job opportunities; strengthening of institutions according to criteria of good governance and integration of environmental and social considerations into the projects. These agencies periodically arrange meetings with the project teams largely to explain the procurement practices and the documentation required for seeking disbursement of funds. Full use may be made of the experience and resources at the disposal of these institutions.



The Finance Minister, while announcing the national budget, had said that the main thrust of the budget was to meet challenges such as the accelerated growth designed to reduce poverty and create employment; an increased outlay on education, health and human development; and the development of proper infrastructure in the areas where it is inadequate. The government might have better chances of success in meeting these challenges if the entire PSDP system is thoroughly reviewed and revamped for improved implementation of public sector projects.