Pakistan: BBL Decentralization

1
Pakistan BBL Decentralization
2
Overview of Pakistan Economy

• When democracy was restored in November 1988,
  Pakistan faced 3 major issues. It needed to
• reduce the high fiscal deficits that had led to
  massive growth in debt--result of the
  expansionary policies of the 1970s and 1980s
• improve the quality and access to social services
  and address issues of gender imbalance to
  accelerate the impact of growth on poverty
  reduction.
• rebuild democratic institutions repressed through
  decades of military governments

3

• There was a common understanding that to cope
  with these issues Pakistan needed to
• Raise more taxes to reduce the fiscal deficit and
  generate resources for priority development
  spending
• Liberalize markets, privatize, and more strongly
  integrate its economy with the rest of the world
  and
• Protect expenditures for human development during
  adjustment and establish mechanisms to improve
  service delivery.

4

• For more than ten years, all governments vowed to
  implement this agenda of reforms. Between 1988
  and 1999 Pakistan had nine IMF programs and the
  Banks (IBRD and IDA) lending totaled close to
  US7 billion, of which, US1.5 billion were in
  the form of five adjustment operations.
• Throughout this period, many reforms were
  initiated. To protect social sector expenditures
  and improve their delivery a nation-wide Social
  Action Program was launched with strong support
  from the donor community. In the area of
  economic reforms, initial progress was achieved
  in privatization, banking sector reform, trade
  liberalization, and the deregulation of the
  investment regime. Some fiscal adjustment also
  took place.

5

• Overwhelmed by governance problems, however, both
  the scope and impact of the reforms fell well
  short of expectations. At the core of the
  governance problem was the political leaderships
  inclination to politicize all aspects of
  institutional and economic life. Political
  instability ensued, and between 1988 and 1999
  Pakistan had seven governments.
• May 98 Nuclear test and ensuing sanctions plunged
  the country in a serious economic crisis which
  was further exacerbated by Nawaz autocratic
  regime and his attempts to weaken the judiciary
  and other state institutions as well rising
  tensions with India.

6
The Military Take Over

• Put here sentence from spring brief.
• When the military took power through a bloodless
  coup in October 1999, they put governance
  improvement at the heart of their reform agenda.
• Although the coup was very popular, the military
  were anxious to portray themselves as savior of
  the nation and pushed through a program of
  reforms which would resonate well with Pakistans
  poor and under-privileged.
• They started their drive to improve governance by
  prosecuting former corrupt politicians and big
  loan and tax defaulters--which earned them
  further popular support.

7
Reform Program

• They then moved quickly with the devolution plan
  which they saw as a crucial and lasting mechanism
  to make a real and possibly irreversible
  difference to the lives of Pakistans poor who
  depend on the district administration for access
  to crucial services (e.g. education, health,
  security, justice, and important infrastructure
  including irrigation). Ninety per cent or more
  of these services are located at the district or
  sub-district or community level in Pakistan.

8

• The devolution plan main strengths are (i) its
  specifies a political process that would weaken
  central and provincial governments discretion by
  devolving more powers to nonpartisan local
  governments elected officials (ii) emphasizes
  the need for an importance of grass-roots
  accountability of local government (iii) puts in
  place checks and balances and external
  accountability mechanisms including citizen
  monitoring committees, the District Ombudsman,
  clear procedures for selection and removal of
  senior officials and elected representatives.

9
Devolution

• (iv) incorporates provisions to promote popular
  participation at the local level (v) reserves
  30 of elected positions at the union and tehsil
  level for women thus attempting to break with
  traditional non-representation of women in the
  political process (vi) provides for
  representation of peasants/workers and minorities
  to prevent capture by the current power blocks.
• But there are weaknesses
• not enough consultation with the provinces risk
  to alienate the latter
• no clear fiscal framework for financing the new
  administration
• no clear road map for the new administrative set
  up and the use of the current cadre of highly
  competent civil servants (DC, etc.)