BUDGET STRATEGY PAPER 2015-16 to 2017-18 - Sindhfdsindh.gov.pk/site/userfiles/ERU/Final-BSP-2015-16.pdf · BUDGET STRATEGY PAPER 2015-16 to ... Its vibrant Stock Exchange and the

E c o n o m i c R e f o r m s U n i t , F i n a n c e D e p a r t m e n t , G o v e r n m e n t o f S i n d h

BUDGET STRATEGY PAPER 2015-16 to 2017-18

B u d g e t S t r a t e g y P a p e r 2 0 1 5 - 1 6

Page I

ACRONYMS AND ABBREVIATIONS

MDGs Millennium Development Goals

GDP Gross Domestic Product

NFC National Finance Commission

FY Fiscal Year

GPP Gross Provincial Product

ACGR Annual Compound Growth Rate

CFY Current Financial Year

GST General Sales Tax

SRG Strategic Reform Group

CRG Core Reforms Group

ORGs Operational Reforms Groups

STRMP Sindh Tax Revenue Mobilization Plan

SRB Sindh Revenue Board

BOR Board of Revenue

ET&N Excise Taxation and Narcotics

GRR General Revenue Receipt

OZT Octroi Zillah Tax

GDS Gas Development Surcharge

CVT Capital Value Tax

SDM&I Sindh Development Maintenance of Infra –Structure Cess

CDLs Cash Development Loans

ADB Asian Development Bank

WB World Bank

ADP Annual Development Plan

SCARP Salinity Control and Reclamation Program /Project

GPF General Provident Fund

NEC National Economic Council

CE Current Expenditure

CRE Commercial Real Estate / Corporate Real Estate


Page II

DS Debt Servicing

FMH Fund Management House

PIBs Pakistan Investment Bonds

SPPRA Sindh Public Procurement Regulatory Authority

PIFRA Project for Improvement of Financial Reporting and Auditing

PAC Public Accounts Committee

PEFA Public Expenditure and Financial Accountability

DeMPA Debt Management Performance Assessment

OSR Own Source Revenue

BHUs Basic Health Units

RHCs Rural Health Centers

THQ Taluka Headquarters

MCHC Mother and Child Health Care Centers

MCHS Maternal Child Health Services

MNCH Maternal ,Newborn and Child Health

CMWs Community Midwifes

EFA Education for All

ECE Early Childhood Education

PFMAA Public Financial Management & Accountability Assessment


Page III

TABLE OF CONTENTS

ACRONYMS AND ABBREVIATIONS I

ACKNOWLEDGEMENT V

EXECUTIVE SUMMARY VI

1. ECONOMY OF THE SINDH 1

2. MEDIUM TERM FISCAL FRAMEWORK 4

2.1 Receipts of the Province 5

2.2 Expenditure of the Province 6

3. RECEIPTS OF THE PROVINCE 8

3.1 National Finance Commission 8

3.2 7th National Finance Commission Award 8

3.3 Receipts of the Province & Projections 8

4. REVENUE MOBILIZATION 10

4.1 The Sindh Tax Revenue Mobilization Plan (STRMP) 10

5. POLICY RATIONALE FOR TAX REVENUE MOBILIZATION 11

6. DEBT AND CONTINGENT LIABILITIES 12

7. DOMESTIC LOANS 12

8. FOREGIN LOANS 13

9. DEBT SUSTAINABILITY 13

10. FUND MANAGEMENT 14

11. PUBLIC DEBT MANAGEMENT REFORM 15


Page IV

12. EXPENDITURE OF THE PROVINCE 16

12.1 Current Revenue Expenditure 16

12.1.1 Employees Related Expenses 17

12.1.2 Employees’ Retirement Benefits 17

12.1.3 Operating Expenses 17

12.1.4 Grants, Subsidies and write of Loan 18

12.1.5 Transfer Payment 18

12.1.6 Interest Payment 18

12.1.7 Physical Assets 18

12.1.8 Civil Works 18

12.1.9 Repair & Maintenance 18

12.2 Department wise Current Revenue Expenditure 19

12.3 Current Capital Expenditure 21

12.4 Development Expenditure 21

12.5 Provincial ADP 22

13. SECTORAL PRIORITIES 23

13.1 Education 23

13.2 Health Sector 25

13.3 Energy 27

13.4 Irrigation 29

13.5 Agriculture 31

13.6 Communication and Mass Transit Sector 32

14. RISKS TO BUDGETARY PROJECTIONS AND THEIR MITIGATION 35

STRATEGIES

15. GOVERNANCE REFORMS 36

15.1 Public Financial Management Strategy 36


Page VI

Executive summary

The quest for a stable, egalitarian, robust and thriving economy is a long cherished dream of the people of Sindh. It is, therefore, the main driving impetus for us at Finance Department, Government of Sindh, to which we stand committed. Budget Strategy Paper is a vital document that gauges the extent of the ownership and participatory spirit in the realm of financial policy formulation. The main contours of Budget Strategy Paper include government’s policies, priorities, strategic allocation of resources and key macro-economic assumptions over the medium term framework. Budget formulation is a very complex exercise for resource allocation amongst the various competing ends in presence of the most pressing issues which include the energy crises; high population growth; low per capita income; prevalence of extreme and chronic poverty; low literacy level; malnutrition; social, economic, gender and regional disparities; water shortages; low productivity; inadequate pure drinking water supply and sewerage infrastructure; improper waste collection and disposal system; deficiency in housing and above all poor law and order situation which continue to remain major challenges of the Province. Besides, the Province is still grappling with destruction unleashed by natural calamities like of which have never been seen before. The super flood of 2010 and unprecedented torrential rains in year 2011 inundated vast areas of land displacing thousands of people, devastating physical infrastructure and agriculture production and paralyzing the communications systems. These disasters were unprecedented both in scale as well as the destruction left in their path. A Budget Strategy Paper provides an educated and a well deliberated foundation upon which is erected the edifice of strategic priorities and equitable allocation of resources. Budget is a fundamental financial arsenal that, in essence, belongs to the people and should therefore emanate from their ambitions, needs and aspirations for social, political and economic ascension and amelioration. Hence, the BSP is deeply entrenched and anchored in such reformative agenda. Formulation of Budget Strategy Paper, its approval by the cabinet and discussion in Provincial Assembly provides an opportunity to make the budgetary process comprehensive, participative and transparent, which is one of objectives of Public Sector Management Strategy.


Page 1

1. Economy of Sindh Sindh is the second largest province with 24 percent of the total population (growing at 2.8 percent annually) and 18 percent of total land area of Pakistan. As an industrial, commercial and financial hub of Pakistan, Sindh plays a pivotal role in the national economic and development agenda. Historically, Sindh's contribution to Pakistan's GDP has been in the range of 30% to 32%. Its share in the service sector has ranged from 21% to 27%, and in the agriculture sector from 21% to 27%. At present, the contribution of Sindh to the national GDP is estimated at 32 percent while its share in the population is 24 percent. The sectoral shares in the Gross Provincial Product (GPP) at present are Agriculture 17%, Industry 36% and Services 47%. Karachi itself generates 25 percent of the national GDP and about 42 percent of the value added in Large Scale Manufacturing.

Endowed with coastal access, Sindh is a major center of economic activity in Pakistan and has a highly diversified economy ranging from heavy industry, manufacturing, services sector and agriculture. Manufacturing includes machine products, cement, plastics, and various other goods. The Province has two sea ports handling bulk of country’s exports and imports. Its vibrant Stock Exchange and the most resilient business community have been the driving force behind country’s industrialization. The province contributes 68 percent to the overall Federal Revenue, 64 percent in the Income Tax, 80 percent in the Custom Duties, and 35 percent in Central Excise Duty.

Sindh is most industrialized province in the country and the share of industrial sector in the provincial economy is much higher than the national average. Most of the growth in the provincial economy can be attributed to the Services Sector followed by the industry sector. Large Scale manufacturing now exceeds the agriculture sector value added.

Agriculture, despite its declining share, is the largest employer with 45% labour force in the province. The total cultivated area is 4.9 million hectares of which cropped area is 3.9 million hectares. 50 percent of the cultivated land is used for foods crops and 25 percent for cash crops. In the national context, 16 percent of Pakistan’s Wheat, 42 percent of Rice, 23 percent of Cotton and 31 percent of Sugarcane are produced in the province. Wheat production has risen to average 3.8 million tons, Rice to 2.5 million tons, Sugarcane to 13 million tons and Cotton to 3 million bales.

The estimated labor force in Sindh is about 20.4 million. An unemployment rate of about 8 percent implies that 1.6 million people do not have productive jobs. 70 percent of rural inhabitants earn their livelihood from livestock, dairy, fisheries, and forestry. Another characteristic of agriculture in Sindh is high degree of fluctuations and variations in annual output because of dependence on water availability and climatic conditions. Being the lower riparian, the flows into the canals and distributaries are erratic and unpredictable. In the last few years, the province has also been hit by natural disasters such as floods. Sindh’s natural resources such as oil, Gas and Coal have not yet been fully exploited. For the last decade, a lot of talk has been going around Thar Coal but no appreciable results have so far been achieved. In a country facing acute energy shortages the substitution of country’s own natural resources over imported fuel oil would have taken priority. But this hasn’t happened so far and the level of economic activity is being suppressed because of this policy and implementation failure.


Page 2

Sindh’s public finances have improved considerably since the 2009 NFC award. The Gross Provincial Receipts in FY 2013-14 were Rs.476.33 billion of which 80% were transfers from the Federal Divisible pool and straight grants and remaining 20% were collected as Provincial taxes and non-tax revenues. Total Expenditure in FY 2013-14 was Rs.484.112 billion of which 75% was non-development expenditure and 25% was development expenditure.

Social indicators show dismal picture. The literacy rate is still low at 60 percent with 75 percent urban population of 10 years and above is literate compared to only 42 percent of their rural compatriots. The female literacy rate among urban population is 68 percent – almost three times higher than that of the rural households which is as low as 22 percent. Sindh today has 45,000 primary schools with an enrollment of 3 million. But the net enrolment ratio of 54 percent actually shows stagnancy. Not only that the access has not improved the difference between various districts in the province have sharpened. Jamshoro (33 percent), Shahdadkot (39 percent) and T.M.Khan (41 percent) lag behind while Karachi, Hyderabad, Naushero Feroz have enrolment rate above 60. In Adult Literacy, Tharparkar, Jacobabad, Thatta, Badin and Tando Mohamad Khan have the largest proportion of illiterates with Karachi having 80 percent and Hyderabad 74 percent literacy rate. Besides the issue of access, the quality of instruction particularly in government schools is less than satisfactory, the teachers’ attendance is poor and their commitment to their profession is lacking. There is a dearth of basic facilities like science labs, library, play, electricity, toilets, boundary walls etc. in a large number of schools.

Health system faces many challenges that are generally cross-cutting in nature. Health-poverty-illiteracy nexus coupled with gender inequality and regional disparities results in uneven health coverage and inadequate supply of pure drinking water and sanitation services result in spread of communicable diseases. Though Sindh’s major health indicators have shown some improvement since 2006-07, they still remain short of MDG targets to be met by 2015; such as Infant Mortality Rate was 74 per thousand lives in 2012-13 making it difficult to attain MDG target of 40, likewise Maternal Mortality Rate stood at 200 per lac live birth in the same year making it elusive to attain the MDG target of 140. Only 69 percent of children have been fully immunized compared with the national average of 78 percent.

Access to an improved source of drinking water was available to 78 percent of the overall population in the province but only 44 percent had access to tap water supplied by the local government as a main source of drinking water. Somewhat better improvement was seen in the sanitation facilities. 55 percent had access to underground, covered or open drains with urban residents benefitting disproportionately. 60 percent used flush toilets with 95 percent urban population making use of its Health facilities have expanded in the province.

The province has suffered a lot because of the polarization and multiple divides that have proved counterproductive to the goal of achieving better living standards for the majority of the population. The main stumbling block in its way to realize its full economic potential has been the tension across urban-rural lines. This tension has done more harm than good. The future strategy should be based on Rural-urban Integration by increasing agriculture productivity, investing in rural infrastructure and social services and enhancing their purchasing power. This would enable a large segment of rural consumers


Page 3

who are out of the market to buy goods and services from intermediate towns and metropolitan areas. The rising demand for goods and services would add to the economic well-being and prosperity of the urban areas. Property tax, GST on services and user charges collected from theses rising incomes can finance urban development freeing up the provincial resources for the uplift of the rural areas. This is a win-win strategy rather than win-lose strategy followed so far. But this would require Empowerment, devolution and decentralization to local governments. The provincial government should engage in enforcement of accountability and proactive monitoring. Private sector and Non-governmental organizations should be involved in the delivery of services such Education and Health but the responsibility for ensuring access to all segments of the population particularly the poor will remain with the Government. This strategy of Rural-Urban Integration will open new vistas and unleash entrepreneurial energies that will benefit all.


Page 4

2. Medium Term Fiscal Framework The Medium Term Fiscal Framework provides for the major object wise details of receipts and expenditure over the multiyear perspective including actual receipts and expenditures accrued in previous two years, budget and revised estimates for Current Financial Year and projections over next three years. The following table (Table-1) shows the figures of Medium Terms Fiscal Framework: Table- 1 MTFF (Rs.in Billion)

Description Actual 2012-13

Actual 2013-14

Budget 2014-15

Revised Forecast 2014-15

Forecasts

2015-16 2016-17 2017-18

RECEIPTS

Current Revenue Receipts

Revenue Assignments 266.152 302.278 381.383 353.665 413.788 484.132 566.435

Straight Transfers 54.550 81.407 82.624 82.624 90.886 99.975 109.973

Grants 12.218 8.126 10.253 8.939 9.832 10.816 11.897

Provincial Tax Receipts 35.032 39.510 58.025 49.000 56.350 64.803 74.523

Provincial Sales Tax on Services 33.665 39.438 49.000 47.000 61.000 78.000 100.000

Provincial Non-Tax Receipts 14.394 5.607 18.036 8.300 9.117 10.021 11.019

Current Revenue Receipts (i) 416.011 476.366 599.321 549.528 640.974 747.747 873.847

Capital Receipts 12.261 9.270 18.439 15.000 16.500 18.150 19.965

Foreign Project Assistance (including revalidated amount)

45.968 6.764 24.884 24.884 24.884 24.884 24.884

Federal PSDP/Dev. Grants 13.426 14.941 22.474 22.474 22.474 22.474 22.474 Other Receipts (ii) 71.654 30.975 65.797 62.358 63.858 65.508 67.323

Total Receipts (i+ii) 487.665 507.341 665.118 611.886 704.832 813.255 941.170

Carryover Cash Balance (11.904) (14.475) 5.000 8.782 2.000 2.500 2.500

Public Accounts (6.337) 17.133 2.000 3.000 1.000 1.100 1.210

Net Receipts (a) 469.424 509.999 672.119 623.669 707.833 816.856 944.881

EXPENDITURE

Employees Related Expenses 167.060 180.667 213.514 216.709 245.177 281.954 324.247

Operation Expenses 39.730 36.091 72.062 75.600 83.122 90.912 98.580

Employees Retirement Benefits 30.151 31.429 42.000 44.000 48.000 55.000 65.000

Grants, Subsidies and write off Loan

50.872 53.888 67.919 70.056 74.496 89.395 107.274

Transfer Payment 9.421 11.932 5.803 6.503 5.951 6.130 6.299

Interest Payment 11.009 13.228 13.102 13.102 13.102 13.102 13.102

Physical Assets 1.721 2.438 4.530 7.591 5.431 5.727 6.258

Civil Works 0.102 0.904 0.901 0.994 1.093 1.203

Repair & Maintenance 5.996 7.438 16.251 18.289 20.799 23.466 26.536 Current Revenue Expenditure 315.960 337.267 436.091 452.770 497.078 566.785 648.505

Current Capital Expenditure 17.530 25.922 34.730 25.000 40.000 48.000 60.000

Non-Development Expenditure 333.490 363.189 470.821 477.770 537.078 614.785 708.505

Resource Envelope 135.934 146.810 201.298 145.899 170.755 202.070 236.376

Fiscal Space for ADP 76.540 125.105 153.939 98.540 123.396 154.711 189.017

Development Expenditure 148.221 128.999 215.359 160.828 177.500 205.900 236.785

Provincial ADP 88.826 107.425 168.000 113.469 130.141 158.541 189.426

Federal PSDP/Dev. Grants 13.426 13.500 22.474 22.474 22.474 22.474 22.474 Foreign Project Assistance (including revalidated amount)

45.969 8.074 24.884 24.884 24.884 24.884 24.884

Total Expenditure (b) 481.711 492.188 711.064 638.597 714.578 820.685 945.290

Surplus(+)/Deficit(-) (a-b) (12.287) 17.811 (14.061) (14.928) (6.745) (3.830) (0.409)

Net State Trading (2.487) (9.387) - - - - -

Cash Balance (Closing) (14.774) 8.424 (14.061) (14.928) (6.745) (3.830) (0.409)


Page 5

2.1 Receipts of the Province The net actual receipts of the province for financial years 2012-13 and 2013-14 remained at Rs.469.42 billion and Rs.510 billion respectively as against budget estimates of Rs.570.8 billion and Rs.595.5 billion showing (-)variance of 17.76% in year 2012-13 and 14.37% in year 2013-14. The variation is attributable to shortfall in federal transfers, provincial own receipts, federal developmental grants and foreign project assistance. The sluggish economic growth rate, inefficiencies in tax administration and tax collection, ban on disposal of government land and delay in execution of donor funded projects were mainly responsible for less than target receipts of province. For the Current Financial Year 2014-15, the total provincial receipts are revised downward at Rs.623.66 billion from Budget Estimates of Rs.672 billion reflecting decrease of 7%. The total receipts of the province over the next three years are expected to grow at the annual accumulated growth rate of 15% on revised estimates of current financial year with annual accumulated growth rate of 17% in Revenue Assignment, 10% growth in Straight Transfers, 15% growth in provincial tax receipts, 28.62% growth in Provincial Sales Tax on Services and 10% growth in provincial non-tax receipts.

The current revenue receipts of the province for financial years 2012-13 and 2013-14 remained at Rs.416 billion and Rs.476 billion respectively as against budget estimates of Rs.478 billion and Rs.529 billion showing (-)variance of 13% in year 2012-13 and 10% in year 2013-14. Whereas, the (-) variance in federal transfers on account of divisible pool, straight transfer and grants remained 13% in year 2012-13 and 4.2% in year 2013-14 and it is estimated at 6% for the CFY 2014-15.

The graph below shows trend of total provincial receipts (net) and current revenue receipts on actuals for FY 2012-13 and 2013-14, Budget and Revised Estimates of CFY and projections for the next three years.

(Rs.in Billion)

The revenue transfers from federal divisible pool, straight transfer and grants constituted 80% of total provincial current revenue receipts in year 2012-13 and 82% in year 2013-14. The revised estimates of revenue transfers from federal divisible pool, straight transfer and grants for current financial year amount to 81% of Provincial current revenue

571

469

596

510

672624

708

817

945

479416

529476

599550

641

748

874

0

100

200

300

400

500

600

700

800

900

1000

BUDGET2012-13

ACTUAL2012-13

BUDGET2013-14

ACTUAL2013-14

BUDGET2014-15

REVISED2014-15

FORECAST2015-16

FORECAST2016-17

FORECAST2017-18

PROVINCIAL RESOURCE ENVELOPE

NET PROVINCIAL RECEIPTS CURRENT REVENUE RECEIPTS


Page 6

estimates as against budget estimates of 79%. The Provincial Government is trying to reduce dependence on federal receipts with focus on own resource generation effort through Sindh Tax Revenue Mobilization Plan with aim to reduce share of federal transfers from 81% at present to 78.7% in Year 2017-18. The graph below shows the share of federal transfers and provincial own receipts in Current Revenue Receipts of the Province.

(Rs.in Billion)

2.2 Expenditure of the Province The total expenditure of the province for financial years 2012-13 and 2013-14 remained at Rs.481.7 billion and Rs.492 billion respectively as against budget estimates of Rs.578 billion and Rs.617 billion showing (-)variance of 16.66% in year 2012-13 and 20.26% in year 2013-14. The major variation was seen in development expenditure with 36% (-) variance in actual and budgeted expenditure in year 2012-13 and 44% in year 2013-14. Followed by Development Expenditure, variance was observed in Current Capital Expenditure with 44% (-) variance in actual and budgeted expenditure in year 2012-13 and 17% decrease in year 2013-14. The Current Revenue Expenditure witnessed negligible variance in year 2012-13, whereas there was 5% (-) variance in actual and budgeted expenditure in year 2013-14.

The revised estimates of total expenditure for current financial year are estimated at Rs.638.5 billion as against budget estimates of Rs.686 billion indicating (-) variance of 7%. The major variance is expected to be observed in development expenditure which is revised downward from Rs.215.359 billion to Rs.160.828 billion showing decrease of 25%. Likewise Current Capital Expenditure will decrease by Rs.9.73 billion from budget estimates of Rs.34.73 to Rs.25 billion in revised estimates showing decrease of 28%. Whereas, the Current Revenue Expenditure is estimated to grow in CFY 2014-15 by 3.8% from budget estimates of Rs.436 billion.

The shortfall on account of actual revenue receipts as against budgeted revenue receipts mainly upset provincial development expenditure and Current Capital Expenditure; whereas the Current Revenue Expenditure mainly comprising salaries, pension, grants and operating expenses remain inflexible part of budget and are to be essentially funded in spite of volatility of or fluctuations in revenue receipts.

479416

529476

599550

641

748

874

382 333

409 392

474 445 515

595

688

97 83 120

85 125 104 126 153 186

0

100

200

300

400

500

600

700

800

900

1000

BUDGET2012-13

ACTUAL2012-13

BUDGET2013-14

ACTUAL2013-14

BUDGET2014-15

REVISED2014-15

FORECAST2015-16

FORECAST2016-17

FORECAST2017-18

FEDERAL TRANSFERS & PROVINCIAL OWN RECEIPTS

CURRENT REVENUE RECEIPTS FEDERAL TRANSFERS PROVINCIAL OWN RECEIPTS


Page 7

The total expenditure of the Province is projected to grow at Annual Accumulated Growth Rate of 14% on the revised estimates of current financial year over the next three years with annual accumulated growth rate of 13.76% in development expenditure, 18.63% in provincial ADP, 12.72% growth in current revenue expenditure and 34% growth in current capital expenditure.

The graph below shows trend of total provincial expenditure, Current Revenue Expenditure, Current Capital Expenditure and Development Expenditure of the Province on actuals for FY 2012-13 and 2013-14, Budget and Revised Estimates of CFY 2014-15 and projections for the next three years.

(Rs. in Billion)

The graph below shows trend of total provincial receipts and expenditure on actuals for

FY 2012-13 and 2013-14, Budget and Revised Estimates of CFY 2014-15 and projections for

the next three years.

(Rs. in Billion)

578482

617

492

686639

715821

945

315 316 356 337436 453 497

567649

32 18 31 26 35 25 40 48 60

231148

230129

215161 178 206 237

0

200

400

600

800

1000

BUDGET2012-13

ACTUAL2012-13

BUDGET2013-14

ACTUAL2013-14

BUDGET2014-15

REVISED2014-15

FORECAST2015-16

FORECAST2016-17

FORECAST2017-18

TOTAL PROVINCIAL EXPENDITURE

TOTAL EXPENDITURE CURRENT REVENUE EXP

CURRENT CAPITAL EXP TOAL DEVELOPMENT EXP

571

469

596

510

672

624

708

817

945

578

482

617

492

686

639

715

821

945

0 100 200 300 400 500 600 700 800 900 1000

BUDGET 2012-13

ACTUAL 2012-13

BUDGET 2013-14

ACTUAL 2013-14

BUDGET 2014-15

REVISED 2014-15

FORECAST 2015-16

FORECAST 2016-17

FORECAST 2017-18

TOTAL PROVINCIAL RECEIPTS & EXPENDITURE

TOTAL EXPENDITURE NET PROVINCIAL RECEIPTS


Page 8

3. Receipts of the Province

3.1 National Finance Commission Article 160 of the Constitution lays down the provision for the establishment of NFC at a regular interval of every five years. Its main objective is to set revenue sharing formula of the divisible pool taxes between federation and provinces. National Finance Commission comprises Federal and Provincial Finance Ministers and other persons appointed by the President.

3.2 7th National Finance Commission Award The 7th NFC was historical because it broke the status quo of single criterion of revenue sharing formula among the provinces that was based solely on population, which remained intact since the inception of 1st Award. All four provinces unanimously agreed on a multi-criteria formula based on population, backwardness, geographic size, revenue collection/generation. No doubt, it was a signal for an accommodative approach among the provinces.

A landmark achievement of the 7th NFC Award for Sindh was the right for collection of sales tax on services. The Provincial Government also managed to get the right to receive service taxes, which were till then being collected by the Federal Government erroneously in the Excise mode, thus depriving the provinces of their due shares of this tax. The Government of Sindh established a separate department namely "Sindh Revenue Board" (SRB) for the collection of Sales Tax on Services during 2011-12.

The divisible pool taxes under 7th NFC Award are tax on income, sales tax, central excise, custom duties, wealth tax, capital value tax and export duties. Vertical sharing between Federal and Provinces during first year of the Award (2010-11) was fixed at 44% for federation and 56% for provinces and for the remaining period of award from 2011-12 to 2014-15, the share of the federation and provinces was fixed at 42.5% and 57.5% respectively. Horizontal distribution of the provincial allocable amount for 7th NFC Award was determined as under:

Punjab 51.74% Sindh 24.55% Khyber Pakhtunkhuwa 14.62% Baluchistan 9.09%

Multiple criteria adopted for 7th NFC Award for distribution of provincial allocable amount of divisible pool was assigned following weight ages: Population 82.0% Poverty 10.3% Revenue Generation 5.0% IDPs 2.7%

3.3 Receipts of the Province and projections The financial year 2014-15 commenced with a positive cash balance of Rs. 8.782 billion (As on 2nd July, 2014). The total budget outlay was of Rs. 686.18 billion with an estimated receipt of Rs. 672.12 billion. Thus the budget projected a deficit of Rs. 14.06 billion. The trend in actual Federal Transfers remained unpredictable indicating shortfall in monthly receipts. The cash balance position of the province remained almost positive during major period of FY 2014-15. It is expected that the Account I (Non Food) would close with a positive cash balance on 30th June 2015. The main reasons are the good financial


Page 9

management, prudent release policy, increase in provincial own receipts and improvement in the receipts on account of Federal Transfers in financial year 2014-15.

The details of the Budget Estimate (BE) and Revised Forecast (RE) 2014-15 and Forecast 2015-18 for current revenue receipts, current capital receipts, receipts on account of federal PSDP and foreign project assistance, carryover cash balance and public accounts have been shown at Table 2. The Current Revenue Receipts (CRRs) of the province comprise federal transfers and provincial own receipts. Federal transfers consist of Divisible Pool (DP) share and Straight Transfers. The DP includes Revenue Assignment and 0.66% of Provincial share to offset the losses of the abolition of OZT Grant. The straight transfers are remitted to respective provinces on actual basis. Straight transfers include Royalty on Natural Gas and Crude Oil, Gas Development Surcharge (GDS), and Excise Duty on Natural Gas. These are provincial receipts which are collected by the Federal Government and transferred to Sindh, after deduction of 2% collection charges. Provincial own revenues include tax and non-tax receipts. Major Provincial Tax receipts include sales tax on services, infrastructure development cess, stamp duty, registration, provincial excise, motor vehicle, capital value tax, agriculture income tax, cotton fee, and electricity duty. Major Non-Tax receipts include interest income, fees/charges from education, health, works, police, irrigation, mines and minerals, extraordinary and miscellaneous receipts. The current capital receipts (CCRs) of the province of Sindh consist of funds received on account of new loans and recoveries of loans extended to Provincial Autonomous Bodies/Agencies and employees of Government of Sindh. Provincial governments also receive development grants from the Federal Government under federal public sector development program (PSDP) and other receipts on account of foreign project assistance (FPA). Carryover cash balance is the cash balance of the Provincial Government available in Non-Food Account No.1 maintained with State Bank of Pakistan as on 30th June of the Fiscal Year. Public Account consists of those moneys for which the Government has fiduciary duty but it is not at liberty to appropriate for its general services of the Government. It is composed of trust accounts and special deposit accounts.

The current revenue receipts for RF 2014-15 has been estimated with a negative growth of 8.3% against the Budgeted target due to recent downward revision in divisible pool taxes by FBR and low trend in provincial receipts during eight months. However, the forecasts for 2015-18 have been estimated at the growth of 16.72% against RF 2014-15 and 13.39% over BE 2014-15. The trend in current capital receipts, federal PSDP, FPA, carryover cash balance and public accounts are unpredictable however forecasts under these heads have been made based on previous trend. It is expected that RF 2014-15 would witness a negative growth of 7.2%.


Page 10

Table- 2 Receipts (Rs.in Billion)


Actual 2013-14

Budget 2014-15


Forecasts

2015-16 2016-

17 2017-18

RECEIPTS

Current Revenue Receipts

Revenue Assignments 266.152 302.278 381.383 353.665 413.788 484.132 566.435

Straight Transfers 54.550 81.407 82.624 82.624 90.886 99.975 109.973

Grants 12.218 8.126 10.253 8.939 9.832 10.816 11.897

Provincial Tax Receipts 35.032 39.510 58.025 49.000 56.350 64.803 74.523

Provincial Sales Tax on Services 33.665 39.438 49.000 47.000 61.000 78.000 100.000

Provincial Non-Tax Receipts 14.394 5.607 18.036 8.300 9.117 10.021 11.019

Current Revenue Receipts (i) 416.011 476.366 599.321 549.528 640.974 747.747 873.847

Capital Receipts 12.261 9.270 18.439 15.000 16.500 18.150 19.965

Foreign Project Assistance (including revalidated amount)

45.968 6.764 24.884 24.884 24.884 24.884 24.884

Federal PSDP/Dev. Grants 13.426 14.941 22.474 22.474 22.474 22.474 22.474 Other Receipts (ii) 71.654 30.975 65.797 62.358 63.858 65.508 67.323

Total Receipts (i+ii) 487.665 507.341 665.118 611.886 704.832 813.255 941.170

Carryover Cash Balance (11.904) (14.475) 5.000 8.782 2.000 2.500 2.500

Public Accounts (6.337) 17.133 2.000 3.000 1.000 1.100 1.210

Net Receipts (a) 469.424 509.999 672.119 623.669 707.833 816.856 944.881

4. Revenue Mobilization Government of Sindh believes that there is tremendous potential to enhance resources which can be utilized for improvement in service delivery. At present, Own Source of Revenue of Sindh comprises 20 per cent of total receipts of the province. Therefore, the Government of Sindh (GoS) attaches great importance to resource mobilization to pursue developmental goals through investment in human capacity and public infrastructure for improved economic growth and human development.

4.1 The Sindh Tax Revenue Mobilization Plan (STRMP) has been formulated to undertake wide-ranging tax reforms in the province. It is designed as a set of feasible actions to generate higher revenues for the Government of Sindh while lowering the costs of compliance for taxpayers and enhancing equity and efficiency of taxation. With the implementation of STRMP, tax collection is expected to increase from Rs.91.37 billion in FY2013-14 to Rs.200 billion in next three years.

The Key Reform Components include: (i) Institutionalizing evidence-led tax policy and administration and coordination mechanism; (ii) Institutionalization of IT-based business processes for efficient tax administration; (iii) Strengthening of tax facilitation and enhancement of taxpayer education for higher compliance and (iv) Generation of a policy dialogue to create and sustain impetus for tax reforms seeking revenue adequacy, efficiency and equity in taxation.

The tax agencies have executed impressive and meaningful IT initiatives through indigenous resources; these will form a foundation of further reforms and SRMP implementation. SRB has very effectively deployed the FBR system for sales tax automation during the transition from federal to provincial collection. At present, it has sales tax collection automated through e-filing, invoice cross-matching and payment reconciliation. The E&T Department has had a system for Motor Vehicle Registration


Page 11

since the early 1990s. This system has a province-wide footprint and no motor vehicle transaction is done outside of the system. Recently in Karachi the property register has been computerized and computer generated demand notices (challans) will be served as a first step towards automating the Urban Property Tax System. BOR has made progress to ensure that land records since October 2010 are digitally scanned, indexed and stored securely. A system of land transaction registers (patwari registers) with elaborate SOPs on ensuring integrity and completeness of records has been put in place. BOR is executing an ambitious Land Administration and Revenue Management Information System (LARMIS) project, as part of which all the historical land records of Sindh have been digitized; the data entry of these records has started and is expected to be completed within one year. The Registration and Stamps Wing of BOR has also initiated a scheme for automation of registration of documents.

5. Policy Rationale for Tax Revenue Mobilization During the last eight years, Sindh has struggled to generate sufficient revenue to meet investment requirements for its development objectives. Tax revenue mobilization has been attenuated by a weakening tax administration in Sindh. In the period from 2004 to 2009, own source revenue (in real terms) was mostly stagnant. The composition of OSR in Sindh did not change very much either during the same period. On average, tax revenues were 73 percent and non-tax revenues averaged 27 percent of total provincial own source revenue over the eight years 2004 to 2013. There is realization in GoS that low revenue mobilization should be addressed in order to meet expenditure targets under its development policy. A continued reliance on non-tax sources of revenue was not likely to be sustainable. Furthermore, the GoS recognized that closer alignment of tax burdens and expenditures to residents’ preferences would lead to higher social welfare and gain wider political support.

In 2010, the seventh National Finance Commission (NFC) Award substantially enhanced the provinces' share in federal funding. Specifically it devolved the responsibility of power to collect sales tax on services to the provinces from the federal government. This has given impetus to efforts in the provinces - particularly Sindh and Punjab - to streamline their tax organizations to meet this challenge. To maximize its revenue potential under the new delegated power, the GoS passed the Sindh Revenue Board Act in 2010, and subsequently the Sindh Sales Tax on Services Act in 2011, to create an exclusive authority for collecting sales tax on services, namely the SRB. At the same time, the GoS gave SRB considerable administrative and financial autonomy over the management of human resources, design of organizational structure, strategic planning, and administration of its budget. This resulted in significant additional resource mobilization in Sindh.

The GoS levies the Infrastructure Cess which is collected by ET&N Department. This new tax has also contributed to increased gross tax revenue in the province of Sindh. This has led to earnest efforts by the political leadership and senior management of Sindh to streamline tax policies and tax administration in the province. Taxes collected by BOR, particularly on the transfer of property, have not made a significant contribution compared with other provincial taxes.


Page 12

6. Debt and Contingent Liabilities Article 167 of the Constitution of Pakistan relates to borrowing by Provincial Government. After 18th Amendment, a Province may raise domestic or international loan, or give guarantees on the security of the Provincial Consolidated Fund within such limits and subject to such conditions as may be specified by the National Economic Council.

The public debt portfolio of the Government of Sindh comprises of domestic debt and foreign debt. The domestic debt portfolio comprises Cash Development Loans (CDLs) namely as CDLs-Normal and CDLs-SCARP. Its external debt portfolio includes soft-term and commercial loans. The major donors are World Bank (IDA-Credit), Asian Development Bank Loans (ADB-Loans) and it also procures foreign loans from other international agencies also. Currently, the Government of Sindh is not taking normal CDLs however, the SCARP is automatically shifted from the Federal Government once a SCARP is completed and handed over to the Provincial Government. All foreign loans are procured under the guarantee of the Federal Government however the exchange rate risk is borne by the respective Provincial Government

7. Domestic Loans The Normal CDLs are development loans extended by Federal Government to provincial government for financing its Annual Development Programme (ADP). In case of SCARP CDLs, the situation is different as new loans for SCARP are routine feature which directly channelized from Federal Government to WAPDA for the execution of these projects for Sindh. The interest rates on CDLs range from 7.42% to 17.71% per annum. These loans include a total amortization period of twenty five years including a five years of grace period. During grace period, the borrower is required to pay interest on original loan only and thereafter the payment of principal amount is started. Table-3 shows the total outstanding loans on account of domestic debt as on 30th June, 2014.

Table-3 Domestic Loan as on 30th June, 2014 (Rs in Billion)

Normal CDLs 2.101

SCARP CDLs 15.408

Total 17.509


Page 13

8. Foreign Loans Table 4 shows that external funding has been obtained mostly through World Bank (WB) and Asian Development Bank (ADB) that constitute 63.5% and 30.0% respectively of the total foreign loan. The third major source of funding comes through Japan indicating a share of 5.6%. Rest of the loans hold almost negligible share.

Table-4 Foreign Loans as on 30th June, 2014 (Rs in Billion)

Type of Loan Interest Rate Outstanding Loan

World Bank 0.75% 97.702

Asian Development Bank 1.00% 46.128

Japanese Loans 2.60% 8.597

IBRD 1.00% 0.393

IFAD 1.00% 0.204

OPEC 1.50% 0.727

TOTAL 153.751

In addition to domestic and foreign debts, the General Provident Fund is another big component of Sindh Government’s liabilities which is the second biggest component. The total debt liability of the Government of Sindh comprising of foreign and domestic loans and GPF liability is given in Table-5.

Table 5 Total Debt Liability (Rs.in Billion)

Category of Loans Amount Percentage

Foreign Loans 153.751 55.55%

Cash Development Loans 17.509 6.33%

Accumulated GPF Liability 105.517 38.12%

Grand Total 276.777 100%

9. Debt Sustainability In general, it is useful to monitor external debt and debt services measures in relation to GDP, exports, and fiscal revenue. In most of countries, the need for such analysis may arise at national level as external borrowing and its servicing rest at federal/central level. Pakistan also comes under this category as federation here is also a sovereign guarantor however recent 18th Amendment in Constitution authorizes federating units to opt for external borrowing through the forum of National Economic Council (NEC). Provincial Government has been discharging its domestic as well as foreign debt servicing obligations through at source adjustment against its monthly share of divisible pool taxes. Actually, the Federal Government makes payments on account of servicing of all foreign debt of provincial to the Donors. The Sindh Government uses Current Expenditure (CE) ratio and the General Revenue Receipts (GRR) ratio for this purpose. As earlier mentioned, the CRE includes all operational expenses of the Provincial Government and GRR includes divisible pool taxes, straight transfers and provincial own tax and non-tax revenues. Table 6 depicts the


Page 14

position of debt servicing (DS) as percentage of Current Expenditure (CE) and Current Revenue Receipts (CRR). The trend shows that in percentage term during 2012-2014 and in growth term estimation for revised forecast 2014-15 and forecast 2015-18, the debt sustainability of GoS does not pose any threat in near future. Table 6 Debt Servicing Vis-a-Viz CRR and GRR (Rs. in Billions)

Description Actual Actual BE

Revised Forecast

Forecast

2012-13 2013-14 2014-15 2014-15 2015-16 2016-17 2017-18

Current Revenue Expenditure 315.96

337.26

436.09

452.77

497.07

566.78

648.505

Debt Servicing (Principal+ Interest) 11.81

11.97

21.08

13.17

14.48

15.93

17.53

% of Current Revenue Expenditure 3.74

3.55

4.83

2.91

2.91

2.81

2.70

General Revenue Receipts 429.43 485.06 624.20 574.41 665.85 772.63 898.73 % of General Revenue Receipts

2.75

2.46

3.37

2.29

2.17

2.06

1.95

10. Fund Management In order to manage the affairs of fund investment and meet its other investment related requirements, the Finance Department has established the Fund Management House (FMH), which is equipped with a dedicated and expert team hired from the market (private sector), having the requisite technical expertise of investment management. During the year 2013-14 Sindh Fund Management House Act was promulgated in September 2013. The House is working under Finance Department, Government of Sindh.

It is worth mentioning that the fund under management of Sindh Government led to considerable increase in total worth, despite a general reduction in the amounts being allocated and released to these investment funds annually, over the last two years. This increase in total value, despite huge expenditures, has been made possible because of the significant amounts being received as profit over the invested amounts. Following are some of the reasons which have contributed towards the improvement in the return on such investments. The returns on the investment have been higher during the year 2013-14 due to efficient fund management by the Sindh Government through rapid and viable reinvestments of these funds from the very next day of their maturities / releases.

The funds were invested with best available options. All the fixed income and other capital market investment options were minutely studied and the best available options were adopted which resulted in the efficient growth of the funds.

During the last three years, funds were invested in long-term Pakistan Investment Bonds (PIBs) at high yields and also in mutual funds / collective investment schemes, which brought about an augmented outlook in the fund growth. However equity investment was also approved during the year which proved to be fruitful investment so far. Moreover, the yield offered by PIBs has also been quite high during the year, even touching 13%.


Page 15

In order to achieve a competitive rate of return and while retaining the investment safety of the funds as a priority, funds were appropriately placed into suitable investment avenues. Thus, it would be right to conclude that the various investment funds of the Government of Sindh are performing efficiently and taking advantage of the available investment opportunities by ‘locking’ higher yields for longer periods at attractive rates by investment in long-term Pakistan Investment Bonds (PIBs) on the one hand and suitably diversifying into other avenues like mutual funds, corporate bonds and equity investments on the other. Table 7 depicts the net asset value of various investment funds of the Government of Sindh as on April 15, 2015.

Table- 7 Funds Position as on April 15, 2015 Amount in Rupees

Name of Fund Net Asset Value

Sindh Pension Fund 73,506,290,275

Sindh Social Relief Fund 13,620,790,110

Sindh GP Investment Fund 36,331,612,095

Viability Gap Fund 6,129,084,817

People's Housing Cell 1,119,167,397

Provincial Disaster Mgmt Fund 63,454

SASO Pensioner's Fund 178,645,844

Sindh Flood Relief Fund 553,213

Sindh Coal Development Fund 9,156,053,610

Sindh Project Development Facility 304,744,774

Endowment Fund For PPHI 425,394,449

Sindh Govt Employee Grp Insurance Fund 1,418,860,212

Education City Fund 116,555

SPPRA Investment Fund 50,011,759

Investment Fund for SCSHF 1,824,940,372

Sindh Alternative Energy Fund 54,604,369

Total 144,120,933,306

11. Public Debt Management Reform Finance Department Sindh is very keen on strengthening provincial debt management. Debt Management is one of the key areas of reform within over all Public Financial Management Reform agenda being envisioned by the provincial authorities. In order to understand operational, institutional and policy level environment governing this area, provincial authorities in collaboration of the World Bank has recently completed diagnostic of provincial debt management by using Debt Management Performance Assessment (DeMPA) diagnostic toolkit which is a drill down of PEFA assessment. This diagnostic has allowed comprehensive assessment of debt management function along with highlighting its strength, weaknesses and existing gaps. Based on this assessment Finance Department, through the non-lending technical assistance of the World Bank, has prepared a detailed reform action plan of provincial debt management encompassing six dimensions, namely, co-ordination with fiscal policy, operational risk assessment, cash management, strategy formulation, legal and institutional framework, and debt reporting and recording.


Page 16

This Reform Programme is being implemented through a Non-Lending Technical Assistance from the World Bank and the funding for this purpose will be provided by the Bank as a grant which will be non-refundable. The Program includes following major activities:

Support for strengthening the Debt Management Unit in Resource Wing of Finance Department.

Knowledge sharing i.e. introduction of tools/concepts/international best practices on debt management particularly at sub-national level.

Improving co-ordination between entities involved in debt management through preparation and implementation of procedures manual for foreign borrowing.

Capacity building of technical staff and policy makers related to debt management area through focused trainings MTDS/DeMPA/DSA etc.

Support for effective and efficient recording and reporting sub-national debt in coordination with CGA (pilot phase).

Enhancing transparency of debt management functions by publication of Annual Debt Statistical Bulletin.

Other activities relevant to the Sub National Debt Management of Sindh.

It is expected that the Debt Management System (DMS) of Government of Sindh would become more effective and efficient after implementation of the current Reform Program. The DMS would start working with a professionally designed Debt Management Unit equipped with dedicated and professionally skilled staff ensuring dissemination of more accurate information on sub-national debt integrating with DMS of the Federal Government.

12. Expenditure of the Province The expenditure of the province is generally classified in three major categories which are Current Revenue Expenditure, Current Capital Expenditure and Development Expenditure.

12.1 Current Revenue Expenditure Current Revenue Expenditure comprises employees related expenses (salaries), employees retirement benefits (pension and gratuity), operating expenses, grants and subsidies, interest payments, transfer payments, physical assets, civil works and repair maintenance expenses. Table-8 below shows major object wise details of Current Revenue Expenditure on actual expenditure in FY 2012-13 and 2013-14, budget and revised estimates for CFY 2014-15 and projections for next three years (2015-16 to 2017-18):

Table-8 (Rs. In Billion)


Actual 2013-14

Budget 2014-15


Forecasts

2015-16 2016-17 2017-18

CURRENT REVENUE EXPENDITURE

Employees Related Expenses 167.060 180.667 213.514 216.709 245.177 281.954 324.247

Operation Expenses 39.730 36.091 72.062 75.600 83.122 90.912 98.580

Employees Retirement Benefits 30.151 31.429 42.000 44.000 48.000 55.000 65.000

Grants, Subsidies and write off Loan 50.872 53.888 67.919 70.056 74.496 89.395 107.274

Transfer Payment 9.421 11.932 5.803 6.503 5.951 6.130 6.299

Interest Payment 11.009 13.228 13.102 13.102 13.102 13.102 13.102

Physical Assets 1.721 2.438 4.530 7.591 5.431 5.727 6.258

Civil Works

0.102 0.904 0.901 0.994 1.093 1.203

Repair & Maintenance 5.996 7.438 16.251 18.289 20.799 23.466 26.536

Current Revenue Expenditure (vi) 315.960 337.267 436.091 452.770 497.078 566.785 648.505


Page 17

12.1.1 Employees Related Expenses

The employees’ related expenses on an average constitute 50% of total current revenue

expenditure as shown in graphical presentation (from 2012-13 to 2017-18) given below.

Allocations for Employees Related Expenses have been revised upward by 1 % during

CFY 2014-15 from Rs.213.514 billion to Rs.216.7 billion. The employees’ related expenses

are projected to grow at the annual growth rate of 14.94% over the next three years.

12.1.2 Employees’ Retirement Benefits Employees’ Retirement Benefits comprising pension and gratuity amount paid to retired employees is liability of the Government of Sindh, which is increasingly growing fast with new retirements and increase in their pensions. Allocations for CFY 2014-15 for employees’ retirement benefits are revised upward by 4.5% from Rs.42 billion to Rs.44 billion which is 40% greater than actual expenditure in FY 2013-14. On an average expenditure on Employees Retirement Benefits constitute 9.5% to 10 % of total current revenue expenditure as shown in graphical presentation (from 2012-13 to 2017-18) given above. For the next three years (2015-16 to 2017-18), Employees Retirement Benefits are projected to grow at annual accumulated growth rate of 13.9% on revised estimates of CFY 2014-15.

12.1.3 Operating Expenses: The operating expenses on an average constitute 15% of total current revenue expenditure as shown in above graphical presentation (from 2012-13 to 2017-18). Operating Expenses are crucial to gear up the official structure/machinery by providing Communication, Utilities, Transportation and General charges. In this regard, Rs.72.062 billion has been

0%

20%

40%

60%

80%

100%

54% 53% 54% 54% 49% 48% 49% 50% 50%

15% 13% 15% 11% 17% 17% 17% 16% 15%

17%16%

16%16% 16% 15% 15% 16% 17%

7%10% 8%

9% 10% 10% 10% 10% 10%

7% 9% 7% 10% 9% 10% 9% 9% 8%

Employees Related Expenses Operation Expenses

Grants, Subsidies and write off Loan Employees Retirement Benefits

Other Major Obejct


Page 18

earmarked in CFY 2014-15. This amount is 100% greater than actual expenditure in FY 2013-14, which is mainly because of substantial increase in allocations for drugs and medicine, repair and maintenance and lump sum provisions kept for specific purposes in health, education and security. Allocations under Operating Expenses are revised upward by 5% during CFY 2014-15. For the next three years (2015-16 to 2017-18), Operating Expenses are projected to grow at annual accumulated growth rate of 9.25% on revised estimates of CFY 2014-15.

12.1.4 Grants, Subsidies and write off Loan For Grants to local bodies and non-financial institutions, wheat subsidy and financial assistance to the families of government servants who die while in service, Rs.68 billion have been allocated in CFY 2014-15 which is increase of 26% over actual expenditure in FY 2013-14. Grants to Local bodies constitute 63%, which amounts to Rs.43.3 billion in current financial year 2014-15. Allocations for the grants and subsidies for CFY-2014-15 are revised upward by 3% from Rs.68 billion to Rs.70 billion which is 30% more than actual expenditure in FY 2013-14. On an average expenditure on the grants and subsidies constitute 15 % of total current revenue expenditure (from 2012-13 to 2017-18). For the next three years (2015-16 to 2017-18), the grants and subsidies are projected to grow at annual accumulated growth rate of 15.26% on revised estimates of CFY 2014-15.

12.1.5 Transfer Payment Transfer payments constitute contribution to reserve funds for Sugar cane cess and Entertainment & Gifts. In current financial year 2014-15, Rs.5.803 billion has been earmarked for transfer payments, which is projected to increase by 12% in R.E.

12.1.6 Interest Payment Rs.13.102 billion is allocated for Interest Payment to Foreign Loans and to Federal Government, which is slightly less than actual expenditure of Rs.13.228 billion in FY 2013-14. Expenditure on account of interest payments in revised estimates of current financial year and also for next three years (2015-16 to 2017-18) is expected to remain at the current level.

12.1.7 Physical Assets For purchase of physical assets, such as Computer, I.T equipments, Vehicles, Plant & Machinery, Furniture & Fixture, Government of Sindh has allocated Rs.4.53 billion for CFY 2014-15, which is 163% and 86% more than actual expenditure in FY 2012-13 and FY 2013-14 respectively. While an increase of 68% in R.E is anticipated over B.E 2014-15 due to significant release of funds outside budget to Sindh Police for procurement of physical assets. However, for next three years, no significant increase is projected.

12.1.8 Civil Works Allocations for Civil Works during CFY 2014-15 are slightly revised downward from Rs.0.904 billion to 0.901 billion which is however 786% more than actual expenditure in FY 2013-14. For the next three years (2015-16 to 2017-18), the allocations for civil works are projected to grow at annual accumulated growth rate of 10.1% on revised estimates of CFY 2014-15.

12.1.9 Repair & Maintenance With an objective to improve service delivery, allocations for repair and maintenance budgets has been substantially enhanced for repair and maintenance of existing infrastructure of roads and buildings and also for plants and machinery in hospitals. During CFY 2014-15, an amount of Rs.16.251 billion have been earmarked for repair and


Page 19

maintenance of infrastructures, machinery & equipment, vehicles and furniture fixture, which is 118% more than actual expenditure in FY 2013-14. With the increase of 13% in CFY 2014-15 revised estimates, Repair and maintenance expenses are projected to grow at annual accumulated growth rate of 13.21% on revised estimates of CFY 2014-15 for the next three financial years (2015-16 to 2017-18). 12.2 Department wise Current Revenue Expenditure

Department wise Current Revenue Expenditure on actual basis for financial years 2012-13 and 2013-14, budget estimates and revised forecasts for CFY 2014-15 and projections for next three years are tabulated as under:

Table 9 (Rupees in Billion)


Actual 2013-14

Budget

2014-15

Revised Forecast

2014-15

Forecasts

2015-16 2016-17 2017-18

AGRICULTURE SUPPLY & PRICES DEPARTMENT

5.806 6.576 5.481 5.082 6.015 6.843 7.791

AUQAF, RELIGIOUS AFFAIRS ZAKAT & USHR DEPARTMENT

0.199 0.329 0.385 0.344 0.430 0.482 0.540

BOARD OF REVENUE 4.781 2.530 1.894 2.100 2.076 2.280 2.512

CHIEF MINISTER'S SECRETARIAT 1.255 1.239 4.465 4.546 5.169 5.810 6.534

COOPERATION DEPARTMENT 0.202 0.225 0.307 0.273 0.351 0.402 0.460

CULTURE, TOURISM & ANTIQUITIES DEPARTMENT

1.194 1.911 1.025 1.041 1.151 1.295 1.458

EDUCATION & LITERACY DEPRTMENT

86.838 92.129 126.117 126.336 142.715 161.830 183.666

ENERGY DEPARTMENT 0.089 0.101 6.964 6.363 7.535 8.155 8.829

EXCISE ,TAXATION & NARCOTICS DEPARTMENT

1.096 1.224 1.894 2.062 2.038 2.258 2.507

FINANCE DEPARTMENT 86.737 92.614 113.189 114.569 123.521 137.760 162.765

FOREST, ENVIRONMENT & WILDLIFE DEPARTMENT

0.398 0.545 1.381 1.365 1.566 1.778 2.019

GOVERNOR'S SECRETARIAT/HOUSE

0.007 0.013 0.411 0.411 0.472 0.543 0.627

HEALTH DEPARTMENT 35.051 38.921 46.845 49.020 58.169 71.177 80.168

HOME DEPARTMENT 44.109 49.855 58.721 64.567 71.527 82.570 94.212

INDUSTRIES & COMMERCE DEPARTMENT

0.458 0.524 0.551 0.646 0.628 0.707 0.797

INFORMATION & ARCHIVES DEPARTMENT

2.501 3.987 4.454 4.905 5.137 5.434 5.752

INFORMATION, SCIENCE & TECHNOLOGY DEPARTMENT

0.026 0.040 0.211 0.361 0.234 0.259 0.287

IRRIGATION DEPARTMENT 20.691 16.203 15.974 16.617 17.904 20.100 22.583

KATCHI ABADI DEPARTMENT - - 0.034 0.035 0.038 0.043 0.049

LABOUR & HUMAN RESOURCES DEPARTMENT

1.107 0.914 0.421 0.441 0.482 0.550 0.627

LAW/PARLIAMENTARY AFFAIRS, HUMAN RIGHTS DEPARTMENT

5.317 5.670 7.184 7.922 8.150 9.059 10.330

LIVESTOCK & FISHRIES DEPARTMENT

2.103 2.292 2.596 2.693 2.909 3.261 3.661

LOCAL GOVERNMENT, RD, PHE & HTP DEPARTMENT

1.995 3.517 10.093 15.048 11.186 12.405 13.760

MINES & MINERAL DEV. DEPARTMENT

0.417 0.535 0.187 0.183 0.212 0.242 0.277

MINORITIES AFFAIRS DEPARTMENT

0.105 0.123 0.143 0.148 0.159 0.178 0.198


Page 20


Actual 2013-14

Budget

2014-15

Revised Forecast

2014-15

Forecasts

2015-16 2016-17 2017-18

PLANNING DEVELOPMENT & SPECIAL INITIATIVE DEPARTMENT

1.664 2.097 0.832 0.747 0.929 1.042 1.170

PROVINCIAL ASSEMBLY OF SINDH

0.692 1.086 1.281 1.301 1.471 1.665 1.885

PROVINCIAL OMBUDSMAN (MOHTASIB) SINDH

0.163 - 0.315 0.316 0.350 0.393 0.450

REHABILITATION DEPARTMENT 0.014 0.015 2.611 2.615 0.663 0.672 0.682

SERVICES GENERAL ADMINISTRATION & COORDIATION DEPARTMENT

4.500 5.192 7.175 7.996 8.752 9.885 11.182

SOCIAL WELFARE DEPARTMNET 0.550 0.599 0.786 0.766 0.906 1.038 1.190

SPECIAL EDUCATION 0.899 1.007 0.566 0.617 0.645 0.738 0.843

SPORT AND YOUTH AFFAIRS DEPARTMENT

0.132 0.164 0.354 0.364 0.397 0.446 0.500

TRANSPORT & MASS TRANSIT DEPARTMENT

- - 0.157 0.135 0.180 0.201 0.226

WOMAN DEVELOPMENT DEPARTMENT

0.040 0.060 0.088 0.085 0.099 0.111 0.124

WORKS & SERVICES DEPARTMENT

4.824 5.033 10.999 10.748 12.913 15.179 17.846

TOTAL 315.960 337.267 436.091 452.770 497.078 566.785 648.505

The Education and Literacy Department stands at the top in terms of resource allocation with its share of 27% in total Current Revenue Expenditure (RE). It has been allocated Rs.126.117 billion in CFY 2014-15 and revised estimates are anticipated at Rs.126.336 billion. The actual expenditure of the department was Rs.92.129 billion in FY 2013-14 against Rs.86.838 billion in FY 2012-13, which is an increase of 6%. The government is anticipating increasing the department budget up-to 183.666 in next three years with an accumulated growth rate of 13.28%.

The second largest department in terms of resource allocation is Home Department (including security agencies) with its share of 14% in total current revenue expenditure in FY 2014-15(R.E). Home Department has been allocated Rs. 58.721 billion in CFY 2014-15 and revised estimates are anticipated to increase by 10% to Rs.64.567 billion. The actual expenditure in FY 2013-14 stood at Rs.49.854 billion with increase of 13% over the actual expenditure of Rs.44.109 in FY 2012-13. In the next three years, Current Revenue Expenditure of Home Department is projected to increase to Rs. 94.121 billion with an annual accumulated growth rate of 13.42% on revised estimates of CFY 2013-4-15. Substantial funds have been allocated to the Sindh Police in order to equip it with most sophisticated weapons, besides information technology has been employed to come to grips with the law and order menace in Karachi. In order to cope with worsening law and order situation in the province especially Karachi, the Government of Sindh has launched reform process in the police department by appropriately increasing number of police personnel and increasing their salaries and equipping them with most modern gadgets (APCs, Bullet Proof Jackets, CCTV Cameras, etc.). Modern techniques to combat crime and fast investigation and punitive systems will be introduced. Using the latest available technology, close circuit cameras are being installed at various locations in Karachi to get maximum coverage for surveillance.


Page 21

Local Government & PHE Department and Local Bodies (budget reflected in Finance Department) stand at third in terms of resource allocation with their share of 13% in CRE. Grants to Local bodies amounts to Rs.43.3 billion in current financial year 2014-15, which are expected to grow at the accumulated rate of 16.47% over the next three years The fourth largest department in terms of resources allocation is Health Department with its share of 11% in the total current revenue expenditure (RE). The current revenue expenditure of Health Department was estimated at Rs. 46.845 in FY 2014-15 which is projected to increase by 4.6% to Rs.49.02 billion in revised estimates. Over the next three years, the resource allocation for current revenue expenditure of Health Department is projected to increase to Rs.80.168 billion with annual accumulated growth rate of 17.82%. With an objective to improve service delivery, sufficient allocation of funds amounting to Rs. 6,576.755 million has been made for operating expenses including drugs and medicine, repair & maintenance, POL for generators during current financial year 2014-15 which is 42.79% higher than the last year’s budget. The Irrigation is also one of the important departments and it consumes 6% of total current revenue expenditure (RE). The Budget estimates of the department in FY 2014-15 was Rs.15.97 billion and it is expected to increase to Rs. 16.61 billion in revised budget. The next three years projections under current revenue expenditure of the department are projected to grow at annual accumulated growth rate of 10.77%.

12.3 Current Capital Expenditure Current Capital Expenditure includes expenditure on repayment of loans, loans extended to local bodies and autonomous institutions and investment funds. Expenditure on repayment of principal amount of loans is charged expenditure, while remaining expenditures are voted expenditure. As against Budget Estimates of Rs.31.5 billion in FY 2012-13 and Rs. 31.3 billion in FY 2013-14 respectively, the actual expenditure remained at Rs17.81 and Rs. 25.92 billion indicating decrease of 44% in FY 2012-13 and 17.19% in FY 2013-14. Again in current FY 2014-15, Current Capital Expenditure is expected to decrease by Rs.9.73 billion from budget estimates of RS.34.73 to Rs.25 billion in revised estimates showing decrease of 28%. Over the next three years, Current Capital Expenditure is expected to grow at the accumulated growth rate of 20% on current year budget estimates.

12.4 Development Expenditure Development expenditure comprises provincial ADP, federal funded projects/grants for development and foreign project assistance. On account of shortfall in revenue collection by FBR due to sluggish economic growth and inefficiencies in tax administration and tax collections and delay in execution of foreign project assistance due to lack of capacity in provincial executive agencies, the actual expenditure on provincial ADP remains much less than budgeted expenditure. The actual development expenditure remained at Rs.148.22 billion in year 2012-13 and Rs.128.99 billion in year 2013-14 as against Budget Estimates of Rs.231.17 billion in FY 2012-13 and Rs.229.93 billion in FY 2013-14 indicating decrease of 36% in FY 2012-13 and 44% in FY 2013-14. Actual expenditure on foreign funded projects in FY 2012-13 remained at Rs.45.96 billion indicating increase of 29% against the budgeted amount of Rs.35.65 billion; whereas in year 2013-14, the actual expenditure stood at Rs.8.07 billion as against budgeted amount of Rs.29.55 billion


Page 22

indicating decline of 73%. The expenditure on federal funded projects in year 2013-14 remained at Rs.13.426 billion indicating decline of 7% against budgeted amount; while in year 2013-14, the actual expenditure stood at Rs.13.5 billion against the budgeted amount of Rs.15.379 billion showing significant decrease of 12%. For the next three years, it is expected that funding for federal funded projects/grants and foreign funded projects will remain at the existing level.

12.5 Provincial ADP As against Budget Estimates for provincial ADP of Rs.181 billion in FY 2012-13 and Rs.185 billion in FY 2013-14, the actual expenditure remained at Rs.88.826 billion and Rs.107.425 billion indicating decrease of 51% in FY 2012-13 and 42% in FY 2013-14. For the CFY 2014-15, the Government has earmarked Rs.168.00 billion for Annual Development Programme, which is 47% more than actual expenditure in the FY 2013-14, but the same has been revised downward by 32% to Rs.113.47 billion in revised estimates. This decline is due to expected shortfall of Rs.29 billion in federal transfers and anticipated shortfall of Rs.21 billion in provincial tax and non-tax receipts on one side and increase in current revenue expenditure on the other.

An important hallmark of development expenditure in Sindh, is that actual expenditure on projects has mostly remained significantly lower than the budget estimates. Consequently, each year, the throw forward amount of uncompleted schemes keeps on growing. The throw forward is the unreleased and unspent amount of allocation for development schemes in a year, which is transferred to the subsequent year leaving a little space of new initiatives, policies and programs. The throw forward amount as on 01.07.2014 stood at Rs. 703.77 billion, which has risen rapidly by 242.3% since 2010 (Rs290.438bn). Government of Sindh has therefore accorded utmost priority to release of funds on on-going schemes, and releases are (only) being made for new schemes which are of utmost importance.

231

148

230

129

215

161

178

206

237

181

89

185

107

168

113

130

158

189

5059

45

22

47 47 47 47 47

BUDGET 2012-13

ACTUAL 2012-13

BUDGET 2013-14

ACTUAL 2013-14

BUDGET 2014-15

REVISED 2014-15

FORECAST 2015-16

FORECAST 2016-17

FORECAST 2017-18

DEVELOPMENT EXPENDITURE

TOAL DEVELOPMENT EXP PROVINCIAL ADP FEDERAL PSDP/ DEV. GRANT & FPA


Page 23

During Current Year, Rs.90 billion have been earmarked for 1658 ongoing schemes and Rs.52.96 billion for 1279 new schemes. In terms of allocations, 53% amount has been earmarked for ongoing schemes as against 47% for new schemes. For the next three years, Provincial ADP is projected to grow at the accumulated growth rate of 18.63% on the revised estimates of CFY 2014-15. The throw Forward amount of provincial ADP is so enormous that next three years projections for provincial ADP taken together would fall short of by more than 32% with zero allocations for new schemes/initiatives.

13. Sectoral Priorities Government of Sindh has prepared Vision 2025 and under Public Financial Management Strategy recently approved by the provincial cabinet, a medium to long term provincial development plan presenting high level government priorities and long term ambitions about socio economic development of province, will be developed. Long term development strategy is essential for allocating limited resources to the highest priorities of society and to support effective service delivery. In order to set developmental priorities and formulate policies, there needs to be in place a development priority committee comprising public representative and technical experts for setting priorities, ensuring proper resource allocations for sectoral plans and attending to needs of all the constituencies across the board. Planning and Development, with the assistance of Administrative Departments, has developed sectoral plans for key departments of Government of Sindh. These include Education, Health, Agriculture, Irrigation, Energy and communication & mass transit. These sectoral plans take stock of existing situation, state goals and objectives to achieve and lay out policies, priorities, programs, projects and schemes to be implemented in medium term framework. Efforts will be concentrated to integrate these plans into long term provincial developmental strategy setting unambiguous policies, priorities and programs in synchronization with resource availability to attain socio economic goals and improve service delivery. The sectoral plans developed by Planning and Development Department are discussed hereunder:

13.1 Education The Government of Sindh envisages providing quality education to all children to realize their full potential and contribute to the development of society and economy thus creating sense of nationhood and inculcating values of tolerance, social justice and democracy.

The overall literacy rate in Sindh in year 2012-13 stood at 60 per cent making it elusive to attain MDG target of 88 per cent by year 2015. The literacy rate in rural areas and in female population is low indicating prevalence of regional and gender disparity. Sindh’s education system faces three basic challenges i.e. access, quality and governance. Besides, low resource allocation, highly politicized environment, trust deficit between public and private partners remain key weaknesses of the system.


Page 24

The Government of Sindh (GoS) is implementing the Sindh Education Reform Programme (SERP) costing US $2600 million including World Bank Loan of US $400 million to address key constraints and improve quality, equity and efficiency in education service delivery. In order to achieve SERP objectives, The key activities of the program include effectiveness of educational expenditure, rehabilitation of schools, provision of SMC funds and school specific funds, distribution of free text books, stipend for girls, consolidation of schools, conduct of student achievement tests, merit based recruitment of teachers and teachers’ training. In addition under Sindh Basic Education Reform Program funded by USAID, more than 100 consolidated schools are being built across the province. The Government of Sindh is also putting in place a comprehensive Sindh Education Information and Management System based on Geographic Information System (GIS) to streamline the department on modern lines. Many schools and colleges will be upgraded to the next level. On the higher education side, a good number of new universities are being established across the province. Besides, Education & Literacy Department is taking following measures to promote literacy in the Province.

Implementation of development schemes relating to elementary education, secondary education and higher education for providing buildings and missing facilities.

Consolidation / up-gradation / merger of schools for proper management and better access.

Establishment of Directorate of Literacy & Non Formal Education in 2002 for attaining Education for All (EFA)

Implementation of Sindh Community Mobilization Program to increase enrolment specially girls.

Implementation of same curriculum throughout Sindh / improved access of students to supplementary reading material.

Appointment of Teachers merely on merit basis through NTS and capacity building of Teachers.

Establishment of Modern computer labs in High Schools and Colleges. Construction of buildings for the shelter less schools. Operationalization of closed Schools. Increase in participation rates in Government Schools at various levels through Public

Private Partnership under “Adopt a School Intervention”.

The Government of Sindh is implementing Sindh Education Sector Plan 2014-18 approved by Chief Minister Sindh. The objectives of the plan are: (i) to increase equitable access to quality ECE (early childhood education), primary and secondary education with focus on eliminating social exclusion of marginalized segments of society, especially the girls, increasing primary and secondary and higher secondary enrollment, expanding provision of secondary and higher secondary education, increasing retention rate; (ii) to improve quality of education through merit based recruitment, teachers’ training, professional development, adoption of contextually relevant and broad based curriculum and quality standards for improved quality of learning outcomes; and (iii) to strengthen the governance and service delivery through increase in resource allocation, effectiveness of monitoring and control mechanism to eliminate high absenteeism, effectiveness of educational expenditure and enhanced credibility, transparency and accountability in use of public resources. The overall cost of Sindh Education Sector Plan (SESP) (2014-18) has been worked out at Rs.940 billion and accordingly Rs.188 billion will be required for FY 2015-16 for continuation of on-going and new policies to achieve following enrolment targets.


Page 25

Technical education is an independent stream. Mono- and polytechnic institutes and colleges of technology (including private sector institutes) offer three-year diploma programmes (Degree of Associate Engineer) in over twenty fields of specialization. The Sindh Technical Education and Vocational Training Authority (STEVTA) is responsible for technical and vocational educational affairs in the province, with 469 institutions enrolling around 58,000 students. In addition to this, the Government of Sindh has launched the Benazir Bhutto Shaheed Youth Development Programme for skills development of young people in pedagogy, mathematics, English, and ICT, with approximately 100,000 youth enrolled. Tertiary Education The Government of Sindh has taken steps to accelerate process by involving degree colleges, universities and degree awarding institutions (DAIs). There are 260 degree colleges in Sindh in both public and private sectors and 37 universities and DAIs. Degree colleges enroll 81,541, while universities and DAIs enroll 151,099 students

13.2 Health Sector Province of Sindh ranks the lowest in Public Sector Healthcare facilities in comparison with other provinces as only 22 per cent of the population in Sindh benefits from these facilities, juxtaposed to 29 per cent in Pakistan, in spite of having considerable public sector infrastructure in primary, secondary and tertiary as well as Preventive Health care systems. The key challenges to Health system include: (i) system challenges such as high out-of-pocket expenditure (78% including 53% on medicine); (ii) governance challenges such as weak monitoring and evaluation, shortage of specialists and female staff in rural areas, transitional issues of devolution function and lack of transparency and accountability; (iii) service delivery challenges such as low skill birth attendance (60.5% vis-à-vis MDG target of more than 90%), high rate of child under-nutrition (40%), low contraceptive prevalence rate (29% vis-à-vis MDG target of 55%), low rate of immunization (71% vis-à-vis MDG target of more than 90%),the availability of drugs and equipment (61-71% and 31-60% respectively), low lady health workers coverage (45-40%) and shortage of nurses, paramedic and pharmacists; and (iv) financial constraints such as capping on releases for vertical programs to the level of releases in 2011. The Government of Sindh has significantly increased allocation of financial resources for development and non-development expenditure of health sector in recent years and has also made significant investment on construction and rehabilitation of health facilities. During Current Financial Year, Government of Sindh has allocated Rs.13.2 billion for 209 development schemes in health sector. To extend the outreach of health services, there is focus on rehabilitation of Infrastructure with establishment of additional services in existing Health outlets including Teaching Hospitals, District and Taluka Hospitals. Under ongoing DHQ and THQ Rehabilitation and Up-gradation Program, 80% work has been completed on up-gradation of 7 Taluka Headquarter Hospitals (THQs) to the level of District Headquarter Hospital (DHQ), strengthening of 10 District Headquarter Hospitals (DHQs), up-gradation of 39 Taluka Headquarter Hospitals (THQs), and construction of 41 Emergency cum Trauma Centers in Taluka Headquarters. In addition, a 200 bedded


Page 26

hospital is being built in Jacobabad with the help of USAID; further, Children Hospitals in Karachi and Sukkur will be constructed with the assistance of JICA and Korean Exim Bank respectively. Besides, Six New Medical Colleges will be established at Karachi, Lyari, Hyderabad, Mirpurkhas, and Sukkur Government of Sindh is incessantly endeavoring to maximize reforms in the health sector to accentuate the strengthening of Healthcare facilities in Districts, particularly the newly created districts and focuses on Public Private Partnership towards licensed practice and standardization of care and proper utilization of health infrastructure by upgrading Human Resource Management practices. In this connection, district based contractual hiring of doctors has been started to ensure the availability of doctors at grass root level. Along with this, capacity building of the Provincial and District Health Mangers has been planned and in this regard, 30 officers have joined the Health Service Academy where around 60 officers will be awarded Masters in Public Health. In order to improve service delivery in primary health care service, Government of Sindh has entrusted the management and operation of the most of Basic Health Units, Rural Health Units and Mother and Child Health Care Centers to the PPHI, a private company. Besides setting up endowment fund for PPHI, Government of Sindh has allocated Rs.2.379 billion for PPHI. In addition, following policies and initiatives are also being implemented to improve primary healthcare services: A System of Lady Health Workers/Lady Health Visitors and the associated program

management unit are regularized.

Community Midwives (CMWs) are being continuously trained and deployed in the targeted

areas of the districts.

Health Department has given motorcycles and additional POL to strengthen and mobilize the

EPI vaccinators.

To control the Nutrition deficiency, Nutrition Support Program in Sindh (09 Districts) with the

support of World Bank IDA loan, will start in second or third quarter of 2015.

Breast cancer is looming in the province and remains undetected especially in the medically

inaccessible areas of the province. The Health department plans to provide Mobile Health

Units, equipped with mammography machines.

In addition to tertiary health care facilities in the public sector, Government of Sindh provides recurring grant in aid to a number of health institutions with a view to improve the level of research in medical science and to provide free of cost or subsided rates medical facilities to patients from all across the country. Furthermore, in CFY, Government of Sindh has earmarked Rs.2,000 million for Sindh Institute of Urology and Transplantation Karachi; Rs.700 million for National Institute of Cardiovascular Diseases, Karachi; Rs.500 million for Gambat Institute of Medical Sciences Khairpur; Rs.200 million for Indus Hospital Karachi, RS.175 million for Institute of Medical Science Shahdadpur; Rs.250.00 million for Thalassemia, Rs.250.00 million for Dialysis; Rs.82.00 million for PCR test; RS.398.955 million for Tuberculosis; Rs.109.741 million for EPI vaccination; Rs.314.791 million for prevention of Malaria; Rs.412.058 million for remuneration of Polio workers and Rs.1.00 billion for Medical Kits, Diet and Instrument.


Page 27

The Government envisages an integrated approach on the primary health care system of the province which constitutes 90 percent of the total health services provided across the province. To improve quality and coverage of health services, Government of Sindh envisages to progressively implement a number of measures which include: development of operational plan on Health Sector Strategy Sindh 2012-20; strengthening and up-gradation of secondary level hospitals; establishment of modern blood banks and a trauma center in each district; development of Human Resource Strategy and Integrated Health Information System (IHIS); establishment of Monitoring & Evaluation Unit and Logistic Management System; establishment of Health Regulatory Authority, Provincial Health Services Academy and Non-communicable Diseases Centers; formulation and implementation of essential health service packages including Polio Plus; implementation of Sindh Nutrition Support Program assisted by World Bank, European Union WHO; integration and scaling up of Communicable Diseases Programs (TB, Malaria, Dengue, HIV/AIDS, Hepatitis); integration of public health care with preventive health services for improved immunization converge; strengthening and up-gradation of Nursing Schools and Paramedical Institutes; and establishment of an Institute of Neurosurgery in JPMC Karachi.

13.3 Energy Energy Generation, Transmission, and Distribution policy – A move towards improved self-reliance - Pakistan is currently electricity starved and is faced with a load shedding of more than 7000 MW in peak summer time, due to which, the country is experiencing economic slowdown and a much lower growth rate than the actual potential. Pakistan is looking for new investments in the power sector and offers variety of fiscal and monetary incentives to the investors. The country as a whole and the Province of Sindh in particular, have acute shortage of electricity. Sindh is blessed with vast resources of renewable and non-renewable energy. These include a significant wind corridor, round the year sunshine and abundant coal, gas and oil reserves. With 95 percent of the entire coal deposits of the country, the province has the proven capacity to meet energy demands of Pakistan for over 200 years. Sindh’s natural gas reserves amount to 16 trillion cubic feet out of Pakistan’s total reserves of 24 trillion cubic feet. Around 60 percent of the country’s oil fields and 40 percent of gas fields are located in the province contributing 44 percent and 71 percent in Pakistan’s daily oil and gas production respectively. The province has one of the largest coal reserves of the world in the Thar Desert estimated at approximately 185 billion tons. Other coal reserves found at KhoreWah (Badin), Lakhra (Jamshoro), Sonda (Thatta), have an approximate capacity of 1.358, 1.328 and 7.112 billion metric tons, respectively. Of these, 175 billion tons, estimated to have a worth of US$ 425 trillion in 2009, is located at Thar field over an area of 9000 sq. km. Government of Sindh has already spent billions of rupees to build infrastructure at Thar coal field. At present, road access, water supply, airport, Reverse Osmosis plants, and other facilities have either been completed or are near completion. However, further works on ‘installing transmission line for power evacuation from the Thar field’, ‘constructing railway track for transportation of coal to different power plants and for exporting coal’, ‘exploring indigenous resources at Thar and other fields’, and ‘prioritizing


Page 28

the Thar coal for use in local coal based power plants’ are in the pipeline and would require federal Government’s support. To attract foreign direct investment in Thar Coal, the Government is creating conducive environment through development of physical infrastructure for power generation and mining and institutional infrastructure necessary for setting tariff, pricing and other concessions.

The Government of Sindh is also focusing on alternative resources including wind, solar, gas, oil, and shale gas for power generation to meet energy needs of the country. Huge reserves of shale gas / oil available in Sindh and the wind corridor at Keti Bander and Jhampir will be exploited for power generation. The wind corridor is 80 km long along the coast and 170 km deep towards land with potential wind power generation capacity of 60,000MW. By strengthening the existing grid system and transmission network, massive wind power can be generated in very short period. Moreover, Sindh has the capacity to generate 0.320 to 0.400 MW of electricity through solar energy and 178 MW from hydro power.

Sindh has taken an initiative to formulate Policy Guidelines for Power Generation. The Objectives of the proposed Sindh Power Policy are as follows:

To transform Sindh from power deficit to power surplus province

To create enabling environment for private sector to set up power projects

To provide competitively priced electricity to all sectors of the economy

To achieve 10% of electricity produced through renewable energy resources such as

wind, solar, biomass, etc. by 2015

To provide electricity to 100% of the population of Sindh by 2020

To initiate an energy efficiency program in all public sector entities

The main thrust of the Power Policy is to magnetize private sector investment. Only strategic projects will be developed in the public sector in case of no interest and initiative from the private sector. The Government of Sindh will, in no way, act as a competitor to the private sector but merely as their facilitator. The Policy covers (i) Private Sector Power and/or Transmission Line Projects, (ii) Public-Private Partnership Power and/or Transmission Line Projects and (iii) Public Sector Power and/or Transmission Line Projects with a definitive time frame for divestment. In Sindh, two private companies Hydro-China and Dawood Power are working on $130m joint venture of 50MW wind power project near Gharo. The provincial government has already allocated 1720 acres of land for this project which is scheduled to begin power production from July 2016. Another 50MW wind power project of China, by the Three Gorges Company, has already started operations. Besides, more than 40 companies are pursuing wind power projects of a combined capacity of 3000MW in the province and it is expected that each year, a few 100MWs of wind power would be added to the electricity grid.


Page 29

13.4 Irrigation Irrigation system of Sindh comprises three barrages (Guddu, Sukkur and Kotri) and fourteen major canals with total command area of 13.238 million acres and designed capacity of 134,000 cusecs. The total length of irrigation canals including distributaries and minors is approximately 13,235 miles. There are 109 Branch Canals, 1400 Distributaries and Minors and 42000 Watercourses / Outlets. In addition the department owns and operates more than 6200 Tube wells for utilization of ground water to supplement the irrigation water for enhanced agricultural production. Besides, the Irrigation department is responsible for Flood Protection, Drainage and Salinity Control, Rain Water harvesting and maintenance of ground water table at optimum level. At present, all the barrages and downstream irrigation systems are more than half century old and have completed their useful life and require significant rehabilitation. The Government of Sindh envisages rehabilitation of three barrages and old irrigation systems. The rehabilitation of Guddu, Sukkur & Kotri barrages will be undertaken with the assistance of World Bank. Government of Sindh also envisages conversion of diesel operated tube wells to Solar or Wind Power. Introduction of high efficiency irrigation systems is underway to conserve water for putting additional 30,000 acres of land under cultivation. Irrigation Department envisaged short term & long term development plans, which include: Rehabilitation of Barrages, beginning with Guddu Barrage; Rehabilitation, Protection & Capacity Enhancement of Irrigation and Drainage Network; Restoration / Rehabilitation of Irrigation & Drainage Network affected by Flood 2010 & 2011; Rehabilitation / Restoration of LBOD System; Reduce Water-logging & Salinity; Land Reclamation through lowering the Water table; Improve Water Sector Reforms through Sindh Water Sector Improvement Project (WSIP); Control on Sea Water Intrusion; Conservation of Water through Lining of Channels & building Small Dams. Sindh Province, being lower riparian, is facing acute water shortage problems; efforts are under way to improve irrigation supplies and harness / conserve maximum quantity of water. Initiatives have also been taken to revive the Freshwater bodies, which are affected by salts or eutrophication; provide water for Thar Coal Projects for Electricity Generation, enhancement of water supply to urban cities and flood mitigation measures. The current Annual Development Program consists of 310 Schemes out of 160 are On-going and 150 have been initiated during current financial year. The program has a throw-forward of Rs. 100 Billions, which is needed during forthcoming years to complete the existing schemes in hand. The Annual Development Program 2015-16 and onwards may add another 90 schemes which will require further investment of Rs.25 Billion. Irrigation Department intends to achieve Rehabilitation of 1500 Miles of Canals / Channels; Re-modeling of 700 Miles Canals / Channels; Diversion of 373 Miles of Channels – Excavation / Compaction; Lining of 586 Miles of Channels; Construction of 2426. Permanent & 2328 Temporary Modules; Construction of 50 Nos. of Bridges; Installation of 49 New Tube wells; Rehabilitation of 100 Tube wells; Construction of 4 Nos. of Small Dams, etc. Major Interventions are as under:


Page 30

1. Drainage Sub – Sector; Rs.26, 284.577 Million

Construction of Surface Drainage Scheme in Dobi & Akan Wari, District

Sanghar.

Boring & Installation of 250 Tube wells of 2.0 Cusecs on Solar Energy.

Boring & Installation of 250 Tube wells on Solar Energy for Assured Supply of

100 cusecs for Thar Coal from LBOD Spinal Drain RD-362.

Construction of Two (02) Link Drains from Sanjar Chang to Sorahadi, District

Badin.

Restoration/Rehabilitation of LBOD and Kotri Drainage Network System

including activation of Dhoras - Phase-II.

Rehabilitation of SCARP Drains & Allied Structure Works in Larkana

Shikarpur Drainage Project.

Installation of 50 Tube wells Deh Fareedabad Barani District Dadu and Re-

boring of 13 Nos. Bore Failure.

Restoration of 70 Tube wells closed due to transformers defect and 48 Nos.

closed due to 11 KVA Line including Rehabilitation of Ruk Gharhi Yaseen &

Masiti Pumping Station.

2. Open Canal Sub – Sector; Rs.65, 509.374 Million

Assuring Water Supply for Karachi- upgrading Kinjhar Lake System (under

Urban Water Supply).

Sindh Water Sector Improvement Project Phase-I (WSIP-I) (Revised Cost Rs.

30,353 Million - World Bank Loan).

Sindh Flood Emergency Reconstruction Project for Bunds & Canals (Flood

2010-11) ADB Loan Scheme (Revised Cost Rs. 26,905 Million).

Re-construction Rehabilitation of Regulator at RD- 45 B.S Feeder

Constructing stone pitching along Rohri Main Canal, Earth work along Rohri

Main Canal & Stone pitching and raising strengthening banks of RMC.

Restoration & Rehabilitation of Irrigation Network of Guddu Barrage Region

affected during Heavy Monsoon Rains 2012, Rehabilitation of Unhar Canal

System RD-7 to 17 both sides, Khariro Distry, Nasir Branch, Nar Minor and

Anees Minor both sides & Constructing flank wall at D/S Head Regulator of

Allahabad Moosa Branch and Re-sectioning & stone pitching along B.S Feeder

RD- 50 to 78 NIP 61 to 78 IP 82 to 90 NIP 228 to 250 IP side various portions.

Rehabilitation of X-Regulators Warah Branch and Head Regulators along

Dadu Canal and Stone Pitching and Raising & Strengthening along Dadu

Canal and Construction of C.C Lining Along Nasrat Minor.

Rehabilitation / Lining of Irrigation Channels in Shaheed Benazirabad

Rehabilitation of Tajo Dero Sub Branch RD-0 to 90, Garhi Chand Distry RD-0

to 100 & Lund Minor RD-0 to 20.5.


Page 31

3. Small Dams Sub – Sector; Rs.3,928.529 Million

Construction of Mohan & Haleli Recharge Dam in Central Kohistan

Construction of Ashoro Kach Diversion Bund Dam in Central Kohistan

Construction of Recharge Dam across Kali Das Nain & Vera Wah (Turio

Sindh) in Nagarparkar.

Construction of Gravity Weir / Recharge Dam across Gamrach Dhoro in

Central Kohistan & Construction of Guwari Recharge Dam in Central

Kohistan.

Sindh Province has geographical area of about 34 million acres, out of which 20 million acres are culture able. Through Indus river source, only 13 million acres can be irrigated due to feasible levels, which have already been brought under command of surface irrigation system. For irrigating the remaining balance of 7 million acres, innovative means are needed to be explored. Irrigation department has worked on the sub sector and proposed rain water harvesting to bring the un-irrigated land under cultivation. Small Dam Organization, under the department, has taken up feasibility study of 140 Small Dams and Detention Weir sites, out of which 80 sites has been found feasible for execution. These schemes will contribute to ground water recharge, from rain water, and render the ground water level feasible for tube well irrigation. Another avenue for development is water conservation, which can be achieved by Rehabilitation and Lining of Channels. The department proposes to line at least 50 Channels every year, which will prevent irrigation water from going waste and conserve it for additional cultivation. The Budget requirements for existing and new initiatives/policies for irrigation are as under: Drainage Sub – Sector at the cost of Rs. 26, 284.577 Million

Open Canal Sub – Sector at the cost of Rs. 65, 509.374 Million

Small Dams Sub – Sector at the cost of Rs. 3,928.529 Million

13.5 Agriculture: Agriculture is the mainstay of Pakistan economy. Economy of Sindh has historically been based on a well-developed agriculture supported by an effective irrigation network on the River Indus. The economic development of Sindh is therefore largely dependent on the growth of agriculture sector. In Agriculture sector, priority is being given to research, extension, certified seed production, water resources management, farm mechanization and rural livelihood through value addition in agriculture produce in order to meet the challenges of food and nutrition security in the country. Provincial ADP 2014-15 carries 33 development schemes of Agriculture and Food sectors (23 on-going & 10 new schemes) at total cost of Rs.63531.00 million with current years allocation of Rs.4836.24 million having throw forward of Rs.57907.30 million as of July, 2014. The development portfolio includes following major interventions: Providing subsidy assistance to the small and medium sized agriculture growers for

purchase of Tractors, Tube wells and agricultural implements.


Page 32

Improvement of water courses for minimizing water losses up to 30% at farm level.

Infrastructure rehabilitation for agriculture research and extension.

Rehabilitation and construction of raised platforms for increasing capacity of food

grain storage, especially wheat by improvement of existing silos and construction of

new storage infrastructure.

Following mega projects of Agriculture sector are in the pipeline, with the financial assistance of the World Bank through IDA credit:

(1) Sindh Agriculture Growth Project is recently approved at total cost of Rs.8,867.43 million for five years from 2014-15 with its main objectives to improve the productivity and market access of small and medium producers in important commodity value chains and Strengthening public sector institutions to enhance the enabling environment for sustained sectoral growth.

(2) Sindh Irrigated Agriculture Productivity Enhancement Project is under active consideration for approval of ECNEC at total estimated cost of Rs.29121.94 million for six years from 2014-15 with its main objectives to improve the agriculture productivity among small and medium sized farmers in Sindh with major emphasis on improvement of water courses, mitigation of flood risks, introducing high efficiency irrigation system and improved agriculture practices.

13.6 Communication and Mass Transit Sector Safe and faster transport enhances inter and intra district/division mobility and increase farm to market access, which in turn improve farm income, reduce poverty, diminish rural-urban migration and alleviate phenomena of rapid urbanization. At present, Sindh has road infrastructure of 47000 Kilometers. The majority of inter and intra district roads in rain affected areas were washed away in super flood of 2010 and unprecedented torrential rains in 2011. Therefore, Government of Sindh, under FERP for road sector, has completed rehabilitation/reconstruction of 900 km of roads. Under PPP Mode, Government of Sindh has recently completed construction of Hyderabad-Mirpur Khas Road and is constructing Jhirk Mullah Katiyar Bridge over River Indus and Karachi Dual Carriageway. Both political ownership and commitment and donors’ support are very high for communication sector; but quality of construction and safety of road, faulty design of road for drainage of flood/storm water, repair and maintenance of road, transparency in procurement process and contract management for timely completion of projects remain key weaknesses. Besides, there is Huge backlog of road maintenance works due to inadequate funding in past. Government of Sindh in current financial year has made available significant resources for repair and maintenance of roads and is committed to significantly increase allocations in coming years.

The government’s policy is focused towards new construction as well as on maintenance of roads. It has been divided into Short Term, Medium Term and Long Term policies and is given in detail below. In order to cultivate Public Private Partnership, Works & Services has initiated and planned new projects that will be offered to the private sector. For sustainability of projects and for their maintenance and operation, Works & Services Department, has also proposed different packages to be taken up by private sector. The initial investment may be procured from donor agencies like Asian Development Bank (ADB), JICA, Chinese Govt, etc. and maintenance and operation functions may be given to the private sector.


Page 33

1. Building a Road Map for Future: Key Initiative & Drivers of Growth Short Term 2-3 years Construction of 3000 Kms of Road Network with asphalt surface.

Rehabilitation / Reconstruction/Improvement of 2400 Km connecting market places

and major towns.

Development/Rehabilitation of 900 Km intercity road network with the assistance

of Asian Development Bank (ADB).

Construction/Rehabilitation of Nawabshah-Sanghar road with the help of Chinese

Government.

Construction of Manned Railway Crossings for improved road safety

Creation of Asset Management System.

New Projects to be taken up on Public Private Partnership (PPP) mode.

Legislation for establishment of Road Management Fund and Axle Load Regulation.

Improving Road Safety and introducing Accident/Crash Data Management System

Medium Term 3-5 years

Construction of 5000 Kms of Road Network of good quality.

Rehabilitation / Reconstruction/Improvement of 4000 Km road network.

Establishing Road Maintenance Management System (RMMS) and Bridge.

Management System (BMS).

Introducing Road Policing System.


Construction of overhead Bridges on Railway Crossings.

Improving Road Safety and removing Black Spots.

Long Term 10 years

Construction of 12,000 Kms of Road Network.

Rehabilitation / Reconstruction/Improvement of 8000 Km road network.

Converting Highways Department into a “Road Agency” in service of the people.


Providing flyovers, bypasses and under-passes and dual carriageways at

approaches to all major cities / town with a population of 15,000 and above.

Attracting foreign/donor investment for construction and rehabilitation of more

roads through partnership with donor agencies.

Operation of Safe roads and minimizing the number of road accidents by taking

appropriate measures.


Page 34

Road Maintenance Services – Minimum Standards Road maintenance may be given top priority so that the road assets are preserved and are functional. Performance based maintenance contracts may be awarded to contractors. International Roughness Index (IRI) should be the criteria to measure the quality of works carried out for maintenance purposes. Initially minimum IRI that should be maintained for Sindh Roads be in the range of 2 to 5. A separate Directorate will be set up in Works & services Deptt. to plan, award and monitor maintenance and rehabilitation works.

List of Proposed Schemes to be taken up with local funding or Donor Assistance:

Construction of Bridge over River Indus between Qadirpur (Ghotki) – Kandhkot

(Estimated Cost Rs. 10.1 Billion) (Length 42 Kms)

Construction of Hyderabad Southern Bypass (Estimated Cost Rs. 16.244 Billion)

(Length 46 Kms)

Provision of Overhead Bridges on 35 busy Railway Crossings in Sindh (Estimated

Cost Rs. 7 billion)

W/R of road from Kotdiji to Sanghar via Sorah, Tajal and Jamrao Head (Estimated

Cost Rs. 5.19 billion) (Length 173 Kms

W/R of Thatto-Hyderabad Section of National Highway (Estimated Cost Rs. 3.24

Billion) (Length 108 Kms)

W/R of road from Hala to Sanghar via Shahdadpur & Jhol (Estimated Cost Rs 1.47


W/R of Ubaro – Guddu – Kashmore Road (Estimated Cost Rs. 3.3 Billion) (Length

42 Kms)

W/R of Dadu – Moro – Bandhi (Estimated Cost Rs 1.77 Billion) (Length 59 Kms)

W/R of road from Dokri to Phulji via Radhan and Piaro Goth (Old Sher Shah Suri

road) (Estimated Cost Rs. 2.4 Billion) (Length 80 Kms)

W/R of road from National Highway to Tando Adam via Bhit Shah (Estimated Cost

Rs. 700 Million) (Length 27.2 Kms)

Construction of road from Ali Bunder to Nagarparkar (Estimated Cost Rs. 5.43


Upgradation of road Database available with Road Sector Development Directorate

by engaging consultants. (Estimated Cost Rs. 300 Million)

Mass Transit -To address the Public Transport need of the mega city of Karachi and to ensure safe comfortable and efficient Public Transport service at affordable fare on sustainable basis, a study for Karachi Transport Improvement Project (KTIP) to formulate a Plan for Karachi City up to 2030 has been conducted with JICA assistance. The KTIP study recommends following Mass Transit facilities for Karachi:

a) Rail Based Mass Transit Scheme: KCR 43 Km.

Metro Rapid Transit System (MRTs).

02 Corridors (Blue Line – 22.4 Km and Brown Line – 18.5 Km.).


Page 35

b) Road Based Mass Transit Scheme: 06 Bus Rapid Transit Line (Green, Red, Yellow, Purple, Orange, and Aqua Line)

covering 90 Km network.

For a proper management better coordination, regulation and control of the above Mass Transit System Sindh, Mass Transit Authority (SMTA) will be established and legislation to bring it in place is under submission to Provincial Assembly for approval. A concrete headway on following three (3) BRT Lines has been initiated: Green BRT – 17.80 km long stands approved for implementation through Federal

Government funds and is likely to start in the next financial year (2015-16).

Yellow Line BRTs – 26.0 Km long has been initiated on Public Private Partnership

basis. The project is likely to start in next financial year.

Orange Line BRTs – 4.77 Km long has been approved for implementation through

Government of Sindh ADP resources. The schemes is likely to initiate during

current year and will continue in the next year (2015-16) for completion.

Besides above headways, possibilities are being explored to tap the resources to take up the Red Line BRTs, 21.5 km long. The improvement of road infrastructure was also financed through Federal. Provincial and District resources in the last decades. For the road infrastructure a sizeable funds, around Rs.2.5 billion, for rehabilitation and provision of new construction would be needed during 2015-16.

14. Risks To Budgetary Projections and their Mitigation Strategies The Key risks to budget and their mitigation strategies are indicated hereunder.

Federal Transfers – Federal transfers have always remained uneven in past and mostly fall short of targets; however projections of receipts from government have been made keeping in view historical trend in federal transfer, which is a realistic basis of projections. The probability of actual receipts from federal transfers is more than 95%. Besides, Government of Sindh has started implementation of Sindh Tax Revenue Mobilization to generate own resources to ensure timely availability of resources for service delivery and development needs.

Pay and Allowances increase by Federal Government – The Government of Sindh has built in provision of 15% on gross salary bills in the projections for next three years, which is enough to absorb the impact of annual increments, 10 per cent increase in gross pay and creation of new posts.

Ways and Means clearance- The release of funds by Finance Department is made in accordance with policy approved by the Finance Secretary. Such policy is adopted keeping in view ways and means position of the Province. Past trends of transfers from federal Government and provincial own receipts are also kept in view and different scenarios for cash flows are discussed and weighted. However, Finance Department cannot make proper estimations of expenditure incurred out of the released funds for development schemes.

Change of budget priorities during the year – Significant in-year changes in budget priorities occasionally take place on account of exterior circumstances beyond the control of provincial government such as natural calamities - torrential rains, floods


Page 36

and drought, sluggish economic growth and law and order situation; these unfortunately have been frequent in at least last five years. Special care has been taken for making provision for specific needs of the departments. However, for emergent and unforeseen expenditure of the departments, lumps sum provisions have also been built in the projections. The departments often come up with demands for additional funds or new expenditure outside the budget; the challenges therefore remain great to avoid unnecessary expenditure outside the budget.

15. Governance Reforms Sindh Government is implementing Sindh Public Sector Reform Management Program with the support of the World Bank and Public Financial Management Support Program for Pakistan with technical assistance of European Union. The objectives of these programs are mobilization of revenues and expenditure Management. Under these programs, Sindh Tax Revenue Mobilization Plan, as discussed before, has been developed and approved by the Chief Minister Sindh and Public Financial Management Strategy has also been approved by the provincial cabinet. As part of Sindh Public Sector Reform Management Program, the Tax Reform Unit has been established in Finance Department to coordinate with all the revenue collecting agencies and to engage academia in evidence based tax policy formulation and conduct studies for tax analysis for informed decision making. Similarly Debt Management Unit has also been established in Finance Department.

15.1 Public Financial Management Strategy: Government of Sindh has formulated Public Financial Management Strategy (PFMS) based upon recently conducted PEFA-2013 with the assistance of donor agencies. The PFM Strategy will address systematic weakness and missing links in the Public Financial Management such as credibility of the Budget, budget predictability, policy-based budgeting, transparency, predictability, accounting and reporting. Based on the PFM reform strategy, action plans and program interventions could be designed for addressing the priority areas across the spectrum of PFM reform in Sindh. The identified core areas for intervention include: (i) Medium Term Budgetary Framework; (ii) Output Based Budgeting; (iii) Integration between Current and Development budgets; (iv) Participative Budgeting involving all the stakeholders; (v) user-friendly Budget Execution Reports for the policy makers to make strategic decisions; (vi) Revenue Mobilization (vii) the system based audit of pay and pension and introduction of Direct Credit System for pension payment; (viii) Advancement in Procurement Practices for harmonization of procurement laws and procedures and updating the rules and procedures in conformity with best practices and capacity building of SPPRA and procuring entities; (ix) Strengthening of Monitoring and Evaluation to provide feedback to the decision makers for better management for taking corrective actions, in time, to improve service delivery to the masses (x) Instituting Internal Audit Function (operational audit, managerial audit, performance audit, systemic audit); (xi) An Effective Public Accounts Committee (PAC) to keep watch on Government’s performance; The objectives of Public Financial Management Strategy are to improve financial management, improve efficiency, and enhance transparency and accountability.

Documents

BUDGET STRATEGY PAPER 2015-16 to 2017-18 - Sindhfdsindh.gov.pk/site/userfiles/ERU/Final-BSP-2015-16.pdf · BUDGET STRATEGY PAPER 2015-16 to ... Its vibrant Stock Exchange and the