MDGs Financing

A crucial question was raised on last Monday in Islamabad at the National Consultation on Millennium Development Goals (MDGs) Costing seminar: Do we have enough resources to meet the targets set for 2015?

 

Pakistan has committed with the United Nations and SAARC to achieve the MDGs. But ironically nobody worked out what would be the cost of meeting the ambitious, though noble, targets. The credit goes to Ministry of Finance to finally initiate a study to find out the cost of meeting four most important goals – education, health, safe water and sanitation. Since improvement in all these sectors would contribute in the reduction of poverty, the ultimate goal the findings would be used by the finance managers in developing the poverty reduction strategy.

 

(The good omen is that poverty reduction has emerged an area of concern at the radar of the financial managers. This is a sign that the government is moving away from the market economy fundamentalists’ position that growth alone would take care of poverty to the position that affirmative intervention is needed. Some of my skeptic friends do not want to give this credit to the government and believe that all is being done because the elections are around the corner in, hopefully, in 2007. But then that is all democracy is about — where the ruling classes are forced to do right things because of the public pressure.

 

The team leader of the economists, Dr. A.R Kemal, who were assigned to find out how much it would cost to meet only four goals out of eight MDGs feels that given the present revenue stream of the government and resource allocation trend the required funds are not available. His team has worked out the costing of achieving MDGs on extensive modules taking all the cost heads into account. These costing are based on constant price hence one of the criticism made by some seminar participants was that the inflation should have been factored in. Other criticism was on the chronic issue of credibility of the data used as a baseline. While most participants from civil society and provincial governments were willing to live with data on health and education, they disputed the safe water and sanitation baseline figures.

 

Dr. Kemal explained that his team has extrapolated revenues till year 2015 on the basis of possible growth rates of 6%, 7% and 7.6%. In all the scenarios the combined federal and provincial revenue is not expected to have space to provide financial resources for meeting the four MDGs. So what are the options? The fiscal space provided by reduction in debt servicing thanks to 9/11 is already exhausting. According to Dr. Kemal to provide funds for the MDGs the government has four options: One, accept high fiscal deficit; two, restructure government expenditure priorities for instance slash defense expenditure and debt servicing; three, go to the donors who had committed to the world at the time of setting MDGs that they will raise their foreign aid; and four scale down the targets to the level the country can realistically achieve remaining within its own means.

 

Let’s briefly examine these options in the same order. Letting the fiscal deficit rise would be self defeating. The purpose of the whole exercise is reduction of poverty and nothing is more deadly for the poor than the inflation spurred by rise in fiscal deficit. As it is the government’s fiscal maneuvering space is shrinking because of rising trade imbalance. It is relying heavily on the inflow from foreign investment and privatisation proceeds. And then the government has passed a bill putting cap on fiscal deficit. So this option is out.

 

The second option is of having a fresh look on resource allocation priorities. Undoubtedly, there is ample room in whittling down the defense budget. Pakistan has to decide a trade off between having a healthy, educated and satisfied people, and having more toys of destruction. It is well known that without investing in human resource capital no country can defend itself. Dissatisfied poor people do not defend countries no matter how heavily they are armed. There are other wasteful expenditures in the government and undertaken by its associate organisations which can be diverted for right cause once the priorities are clear and everybody is moving in that direction instead of working cross purpose.

 

The third option is indeed open. Pakistan may get some foreign assistance but not to the extent to meet the entire gap between the funds required for meeting the MDG goals and available revenue.

 

The fourth option of scaling down the targets is the easiest and many in the government may like to go for it in the name of localization of target and realism. But the issue is our human development indicators are pathetic and if improvement is not on the top of the priority all dreams of maintaining economic growth and reduction in poverty would be evaporated. The rising crime rate, civil commotion expressing in the form of increasing in terrorism, brewing regional discontent and expanding quagmire of fundamentalism are nurturing on poverty.

 

And poverty, as Noble laureate Amartya Sen says “must be seen as deprivation of basic capabilities rather than merely as lowness of incomes, which is the standard criterion of poverty.” So meeting MDGs is quintessential for development and these goals can only be scored if there is strong political will behind the commitment of the government. Young Minister of State for Finance Omar Ayub says that the constituents’ pressure ensures that the leadership delivers these goals. See democracy does influence the ruling elite>

 

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