WHITEPAPER 2016-17 1 Finance Department-Government of Balochistan WHITEPAPER 2016-17 2 M E S S A G E The Government of Pakistan under the leadership of Prime Minister Nawaz Sharif has successfully passed through the economic challenges that were in June 2013. The national economy is stabilized and country is on to a path of growth. Comparison of key economic indicators as at close of June 2013 with current speaks for well time response by the government. Economic growth rate is now 4.71 per cent, per capita income stood at $ 1561 against $1334 in 2013, inflation recorded is 2.82 per cent, the tax to GDP ratio for FBR that was 8.5 per cent in 2012-13 has increased to 10.5 per cent. Fiscal deficit which in 2012-13 was 8.2 per cent of GDP has been contained down to 4.3 per cent of GDP in 2015-16. Foreign exchange reserves in 2013 were $6 Billion now in 2015-16 this is at a convenient level of $21.6 Billion. Stock Exchange (KSE) index on June 2013 stood at 19,916 has now surged above 36,000. Balochistan is coming out of trauma. It is moving towards progress and prosperity and people are hopeful of a bright future. A lot of time has been wasted, enough blood has been shed. I myself rendered tremendous sacrifices for attaining peace in the province. I am determined to restore peace, peace for freedom from poverty, hunger and thrust, peace for economic development and progress. Top priorities of this government are peace, health and education. I am indebted to Pakistan Army for their meaningful contribution in the development of the province which includes development in sectors: education, health, mining, housing, provision of jobs in Army, infrastructure development and other socio-economic development. I would like to look at the future with optimism, duly remembering the great poet Henry Wordsworth Longfellow, “Look not mournfully in the past, it comes back not again. Wisely improve the present, it is thine. Go forth to meet the shadowy future without fear and with a manly heart.” Nawab Sanaullah Khan Zehri Chief Minister Finance Department-Government of Balochistan WHITEPAPER 2016-17 3 FOREWORD Government budget is very important because it is the culmination of the political process and contains most of the important decisions. Budget is the most important tool to meet the needs and priorities of a government and its people. Being key stakeholders in the budget making process, people, therefore, should be aware of the budget basics, for example, how the resources are mobilized, for what purposes they are allocated and how they are spent. With this aim, annual White papers are brought out. White paper is an official document which state and explain the government policy on budget. It also contains clarification of the key concepts of budget. It explains the rationales behind proposed allocations of resources and provides a valuable comprehension on budgetary and financial status of the Province to the readers to render deducing a well-informed opinion, easy, about various financial issues of the Government of Balochistan. The current budget has been formulated on sound principle of equitable distribution of resources among its people, employing various tools of fiscal measures. In this process guiding principles were: effective and efficient resource allocation and need based expenditure and sound financial control over expenditure. The current White Paper port rays a comprehensive picture of the Balochistan Government’s finances. Almost, all major areas have been covered. However, emphasis has been on current revenue receipts and expenditures, capital receipts and expenditures, development budget, public accounts, local government finances and debit management. I sincerely thank those who put in their best endeavor to make the publication possible. AKBAR DURRANI Secretary Finance Government of Balochistan Finance Department-Government of Balochistan WHITEPAPER 2016-17 4 TABLE OF CONTENTS CHAPTER-1 BALOCHISTAN ECONOMIC CONTEXT 8 CHAPTER 2: ESTIMATES OF RECEIPTS 13 CHAPTER 3: ESTIMATES OF EXPENDITURE 31 CHAPTER 4: OVERVIEW OF THE PSDP 2016-17 44 CHAPTER 5: PUBLIC ACCOUNT 50 CHAPTER-6: FUNDS MANAGEMENT AND INVESTMENTS 53 CHAPTER 7: DEBT MANAGEMENT 56 59 CHAPTER 8: REFORM THROUGH A STRATEGY OF PUBLIC FINANCIAL MANAGEMENT 65 GLOSSARY Finance Department-Government of Balochistan WHITEPAPER 2016-17 5 EXECUTIVE SUMMARY The people of Balochistan constitute the truest example of democratic function that can be found in a fledgling democracy. As a province with a vast and valuable reserve of natural resources, yet to be utilized, perhaps its greatest resource is its population. A rugged and courageous people embodying the indomitable spirit of the region, they have stood time and time again to face the variety of challenges and obstacles in their path. The need of the hour is a comprehensive and cohesive plan, to deliver the basic amenities of life to every citizen, in every corner of the province. The government‘s untiring efforts to provide clean water to an immense area, speak to the province‘s invincible nature. In the near future, with Gwadar port becoming operational and the advent of CPEC, Balochistan can expect to see a massive influx of economic activity. The government is now dedicating its resources to preparing both its infrastructure and its people to absorb this activity. In keeping with this movement towards a higher standard of living, Balochistan is attempting to improve the quality and accessibility of its healthcare. This is vital if Pakistan‘s largest province is ever to become entirely self-sufficient in a manner that would guarantee its inhabitants the same quality of life that other provinces enjoy. Balochistan has yet to take full advantage of its large mines of gold reserves, a valuable safety net for any economy. With tremendous reserves of coal, gas, and minerals, and the potential to generate solar and wind energy, Balochistan‘s inherent local wealth is undeniable. It is in the unique position to leverage these resources to cater the needs of its own population, and simultaneously, to be able to contribute significantly to Pakistan‘s economic well being. Additionally, the extensive rangelands found in the province are capable of supporting a tremendous number of livestock, creating the potential for an international market for wool, and a thriving local market for dairy and meat. The Government of Balochistan is also well aware of the inadequacies in the present transportation system and plans are underway to launch buses as well as begin work on improving the rail transit system. This will help upgrade the system of transport within cities and also provide additional facilities for the movement of cargo. This is the fateful hour for Balochistan where it is the dire need to avoid confusion and disorder. The aspired way of life distinguished by the guaranteed individual liberty and freedom from destitution, stands for bare minimum needs of life, honor, self and customs. In order to avoid growing mistrust and hatred among the people, the hopes for better life should be kept alive. Investment is needed for happiness and living of people struggling against overwhelming odds since long. Finance Department-Government of Balochistan WHITEPAPER 2016-17 6 Balochistan: An Overview Area in Sq Km 347190 Division Area Districts Quetta 64,310 Quetta, Pishin, Qilla Abdullah, Chagai, and Nushki Zhob 46,200 Zhob, Musakhail, QillaSaifullah, Loralai, Barkhan, and Sherani. Kalat 140,612 Kalat, Mastung, Khuzdar, Kharan, Washuk, Awaran, and Lasbela. Sibi 27,055 Sibi, Ziarat, Dera Bugti, Kohlu, and Harnai Nasirabad 16,946 Nasirabad, Jaffarabad, Jhal Magsi, Sohbatpur, and Kachi Mekran 52,067 Kech, Panjgur, and Gwadar Population in Million 1998 Census 6.567 Million Division Population Quetta 1.700 Zhob 1.004 Kalat 1.458 Sibi 0.495 Nasirabad 1.077 Mekran 0.833 Male Population 53.37 p er cent Female Population 46.63 per cent Population Density 1998 Census 19 per Sq Km Literacy Rate PSLM 2014 44 per cent Number of Educational Institutions Schools Category Male Female Total Primary 8080 3087 11167 Middle 721 512 1233 High 572 264 836 Higher Sec 26 17 27 Colle ges Category Male Female Total Degree 24 11 35 Inter 40 22 62 Cadet C olleges Cadet colleges BRCs 8 3 Eleme ntary Male Female Total 13 4 17 Finance Department-Government of Balochistan WHITEPAPER 2016-17 7 Universities General Female campuses 5 1 3 Health Facilities Dispensaries 567 Basic Health Units 553 Rural Health Centers 89 MCH centers 89 TB clinics 23 Health Auxiliary 23 Sub Health centers 11 Mobile dispensaries 22 Leprosy centers 13 Secondary Health Facilities i. District Headquarter Hospitals 24 ii. Divisional Headquarter Hospitals 5 Tertiary Health Facilities i) Bolan Medical College ii) Sandman Provincial Hospital iii) Fatima Jinnah Chest Hospital Quetta iv) Helper High Hospital Quetta v) Benazir Shaheed Hospital Quetta vi) SNGB Hospital Mastung vii) Shiekh Zaid Hospital Siryab Quetta viii) GDA Hospital Gwadar ix) CHQ Hospital Quetta Indicator Nati onal Balochistan MMR 272/ 100,000 live 785/ 100,000 live birth birth IMR 74/ 1000 live 97/ 1000 live birth birth <5 Mortality 89/ 1000 live 111/ 1000 live birth birth Antenatal 73 % 21 % Coverage Birth by Skilled 52 % 18 % Birth Attendant Birth in Health 48 % 16 % Facility Full 54 % 16 % immunization Hospital Beds 3415 ( 2 354 persons per bed) Finance Department-Government of Balochistan WHITEPAPER 2016-17 8 CHAPTER-1 Balochistan Economic Context Macroeconomic Background Balochistan is Pakistan's largest province, with an area of 347,190 sq km, which represents 43.6 percent of Pakistan's total land area. However, it is also the least populated province of the country with only 9.3 million (5 percent of total population) residing in the province. Apart from the urban centers, such as Quetta and Khuzdar, rest of the population of this province is scattered over a large swath of arid and mountainous train. These peculiar geographical and population density features, along with the governance structure of the province create substantial bottlenecks for public service delivery. Consequently, Balochistan is one of the least developed provinces of Pakistan, with weak macroeconomic and social indicators. Balochistan despite having a key strategic Figure-1: Sectoral Share in Balochistan's GDP 100% location and rich natural resource base 80% contributes only 8.0 percent to national 60% GDP.1In FY2015-16 Balochistan‘s GDP at 40% constant factor was estimated at US$ 8.6 20% billion. Balochistan‘s GDP primarily depends 0% 2007/08 2009/10 2011/12 2013/14 2015/16P upon agriculture, transport &wholesale and Agriculture Mining and Quarrying Manufacturing Transport and Wholesale Others manufacturing sector (Figure-1). These three P:Provisional sectors contributed on average 77 percent in Balochistan‘s GDP during the last decade. However during this same time period mining sectors average contribution in Balochistan‘s GDP was 5.5 percent. This contribution is insignificant looking at the endowment of minerals that Balochistan is blessed with. The province contains one of the largest deposits of copper in the world—a resource that has barely been touched to date—and substantial barely-developed deposits of gold, marble, granite, onyx, and other minerals. It underpins the fact that historically Balochistan‘s economy has largely underperformed compared to its potential. The underlying facts behind this weak economic performance of the province include; volatile political and security environment, and structural bottlenecks. Figure-2: Balochistan Gross Domestic Product Constant Factor Cost (Base= 2005-06) The structural challenges, such as energy 12.0% 900 shortages, low public and private investments, 10.0% 750 8.0% and weak financial flows have not only curtailed 6.0% 600 Pakistan‘s economic growth but also had an 4.0% 450 2.0% extreme adverse effect on Balochistan‘s 0.0% 300 2007/08 2009/10 2011/12 2013/14 2015/16P GDP (Rs Billion) GDP Growth Rate (%) P:Provisional 1World Bank staff calculations based on Balochistan Needs Assessment (2013). Finance Department-Government of Balochistan WHITEPAPER 2016-17 9 economic output (Figure-2). In the aftermath of global financial crisis of 2007-08, Balochistan‘s economy was struck hard by the spur in domestic violence and political instability coupled with the macroeconomic imbalances. As a result provincial economy grew anemically. However with substantial improvement of macroeconomic indicators and law and order situation at national level, Balochistan‘s economy has also began to show signs of positive turnaround. Notwithstanding, the narrow economic base of the province makes it extremely hard for the provincial government to develop buffers, which can safeguard the economic growth of the province against negative external and internal shocks. The key buffer for the provincial economy is fiscal space, which requires provincial prudent fiscal management at the provincial level. Balochistan like the rest of the country is affected by the on-going energy crisis in Pakistan. However this problem is magnified in the province due to line losses incurred by QESCO, the leading power supplies DISCO of the province. QESCO is one of the leading losses making DISCOs in the country, and its losses are a direct burden on the provincial exchequer. B. Economic Growth in Balochistan and its Key Challenges In Pakistan, income account is only estimated at the national level. Pakistan Bureau of Statistics conducts this exercise and it is yet to be conducted at the provincial level. Therefore provincial governments formulate their respective economic policy in absence of this vital information, which has direct and profound impact on its effectiveness. Balochistan is no exception in this regard and its provincial government is faced with this challenge while preparing annual budget. Given this structural constraint, this section is an attempt to build on the existing work of the World Bank on Balochistan‘s economy, and identify its major contributing sectors and document some of the key challenges faced by these sectors2. Historically Balochistan‘s economy has relied on the following sectors; o Agriculture (including livestock and fisheries) o Transport/ Storage and Wholesale o Manufacturing 2 This existing work includes Balochistan Needs Assessment (2013). Finance Department-Government of Balochistan WHITEPAPER 2016-17 10 These three sectors contributed approximately 77 percent to Balochistan‘s economy during FY 2005-06 to FY 2015-16. It is well document fact that Balochistan has large deposits of minerals; however during the aforementioned time period mining sector contributed only 5 percent on average to provincial economy. Irrespective of these contributions Balochistan‘s economic performance during this time Figure 3: Provincial Development Expenditure (Rs Billion) period remained volatile. A major part of this 800 volatility is associated with the narrow 600 economic base of the province, which leads 400 to large spikes in growth rates. It also 200 highlights that Balochistan‘s economy is 0 2009/10 2010/11 2011/12 2012/13 2013/14 performing way below its potential and thus Punjab Sindh KP Balochistan it transpires into poor socio economic development. It is therefore important to understand what is ailing these key sectors of provincial economy. Increasing investment rate in any economy is a key towards its sustainable economic growth. Historically Pakistan has failed to achieve that goal and Balochistan is no exception in this regard. They key worrying feature of this phenomenon is low private investment. This becomes more visible in case of Balochistan because of an extremely small size of the private sector. Therefore it becomes necessary for government to increase the size of its development budget to bolster investment. Historically Balochistan government has struggled to achieve this goal due to a continuous resource crunch. However the 7th NFC award has helped in enhancing the provincial revenue receipts by increasing its share in federal transfers. Consequent it has had a positive impact on provincial development expenditure (Figure-3). However compared to other provinces, Baluchistan‘s development budget still lags behind considerably. The other factor, which must be considered while analyzing this increase, is how it is being allocated different key segments of the provincial economy. Agriculture: Agriculture sector is the Figure-4: Balochistan Agriculture Sector Growth and Investment leading contributor in Balochistan‘s 12% 11.0 9% GDP. During the last decade its 8.5 6% average share in provincial GDP was 6.0 3% recorded at 34 percent. It is also one of 0% 3.5 -3% 1.0 the leading employment generation 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 sectors of the provincial economy. Agriculture PSDP(Rs billion/RHS) Agriculture Growth (Percent) Key contributors to this sector are farming, livestock, and fisheries. Balochistan is blessed with a natural geographical landscape, which can be used for orchard farming, and cattle grazing. Finance Department-Government of Balochistan