Punjab Budget 2016-17 A policy win?

Punjab Budget 2016-A policy

For long, the trickle-down theory has held its appeal for the economists around the world with the countries adopting policy instruments that were generally favourable to big businesses and wealthy elite. The idea governing the preference for this model has been a single-minded focus on achieving growth at any cost; secure in the belief that it will automatically lead to poverty reduction. This explains the emergence of the notion of ’22 Families’ that dominated the political discourse of Pakistan during 1960s-80s.

Another equally potent and reasoned theory challenged the efficacy of trickle-down model of growth; holding that to assume that this model will automatically pave the way for poverty reduction through inclusive growth was not a given. The economists subscribing to this line of economic thinking believe that it depends on which sectors of economy grow; whether they have the potential to accommodate the poor in productive jobs and whether the poor and middle classes have the requisite skills to take advantage of economic opportunities so afforded by sectoral growth.

There is, then, a third view which advocates strong governmental interventions aimed at lifting people out of extreme poverty through affirmative policy actions. It says that by virtue of the social contract, it is one of the government’s fundamental duties to take care of the poorest of the poor in a manner that they are not left at the mercy of market forces.

This is what brings us to reviewing the Punjab Budget 2016-17 on the above parameters as nothing reflects a government’s priorities better than a budget for the upcoming fiscal year. How much gets allocated for what determines the overall direction of the budget and by extension that of the government as well.

Before we actually get down to decoding the Punjab’s budget 2016-17, it is important to mention that a budget would remain a collection of abstract facts and figures unless it seeks to advance the objectives of a core policy framework that is more holistic, long-term and comprehensive in nature. Therefore, trying to review budget in isolation without connecting the dots that define its raison d’être is a risky business to begin with as it robs the analysists of the ability to impartially opine on its pros and cons.

This is where the objectives outlined in Punjab Growth Strategy become most relevant. Punjab has set the targets of achieving 8% economic growth by 2018; creating one million quality jobs every year in the province; training two millions skilled graduates; increasing its exports by 15% till 2018 and achieving targeted Sustainable Development Goals (SDGs).

At the face of it, these are ambitious goals that require a balanced policy focus on improving the productivity of human resource, employment generation, governance reforms, bettering investment climate, infrastructure development and human capital formation through renewed emphasis on provision of quality education, healthcare and social protection.

With this in view, if we have a look at the Punjab budget 2016-17, it becomes apparent that the provincial government seems to have departed from its focus on infrastructure to social sector development. The combined allocations for education, health, agriculture, clean drinking water and law and order are Rs 804 billion, which is 57% of the total budget for 2016-17. Likewise Rs 550 billion have been set aside for public sector development, which represents an increase of 37.5% compared to Rs 400 billion of FY2015-16. A total of Rs 168.87 billion have been earmarked for various social sector projects such as education, health, water supply and sanitation, women development and social protection, which is 31% of the development budget 2016-17.

The budget speech of the provincial finance minister, Dr Aisha Ghaus Pasha, devoted a considerable amount of time to detailing the steps the Punjab government has taken to improve education sector in general and school education in particular. School education department happens to be the recipient of Rs. 56.76 billion, which is 71% more than what was allocated during the previous financial year. Together with an allocation of Rs. 31 billion in terms of ongoing expenditure at provincial level and Rs. 169 billion for school education at district level, a grand total of Rs. 256 billion has been earmarked for uplift of school education. This is in addition to allocation of Rs. 46.87 billion for higher education. The government has planned to spend Rs. 312 billion on the education sector during the next financial year.

The key initiatives announced in the budget include ongoing project of providing missing facilities in schools, repair and rehabilitation of the dilapidated buildings, construction of new class rooms, recruitment of 45,000 new educators, provision of financial assistance to students studying in private schools through Punjab Education Foundation, increase of seed money for Punjab Educational Endowment Fund by Rs. 4 billion more, establishment of 4 new Danish Schools, and initiation of Shahbaz Sharif Merit Scholarship.

The Punjab government has earmarked Rs. 52.3 billion for the development of agriculture sector. This is half the amount of Rs. 100 billion package announced by the Punjab Chief Minister for development of agriculture sector. For the first time in last 25 years, our agriculture has registered negative growth of 0.19pc during FY 2015-16 thereby eroding 0.4pc from overall GDP growth. This becomes all the more critical if seen in the context of employment of 40pc of people in the farm economy with real threats of many more millions slipping down the poverty line. Khadim-e-Punjab Kissan Package represents an overdue effort to address the malaise in agriculture sector on the part of the Punjab government.

A total of Rs. 23.30 billion have been set aside for various youth-related projects, which include technical and vocational training and education, provision of laptops and sports facilities, E-libraries and self-employment schemes. The government has planned to impart technical and vocational education to two million youth under Punjab Skill Strategy by 2018. So far, 4,50,000 youths have been equipped with technical training. An allocation of Rs. 30 billion for provision of clean drinking water to people is another significant aspect of the budget. This is part of Rs. 300 billion project which is aimed at provision of clean drinking water throughout the province.

Together with increased allocations for health and other key sectors that impact people’s lives directly, the Punjab budget does represent a conscious policy shift. Some commentators have ascribed the reasons of the shift to populism with an eye on the next elections. This is a welcome departure nevertheless, which could not have been possible without clarity and resetting of priorities at the top leadership level.

While social protection programmes have their own value in sharing the hardships of the poorest segment of society through cash transfers, they, in no way, can lead to poverty alleviation. The best way to lift the people from acute poverty is to educate them and equip them with the skill-set that can employ them in the job market. The role of knowledge in fostering economic growth and job creation is well-documented. If people are properly educated and healthy with access to other basic necessities of life, they are more likely to end the poverty trap and change their economic conditions. An investment in education and health is basically an investment in expanding opportunities and making life better for the most vulnerable.

As social sector allocations have been hiked considerably, a word of caution may be added here. In order to fully and optimally benefit from the shift towards social sector development, the capacity of relevant institutions and departments will have to be enhanced and their performance regularly monitored. Secondly, the government will have to make sure that the funds are timely released and wholly utilized to create an impact.

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