Slow growth in literacy rate: Disproportionate allocation of funds is the main reason

The state of education in Pakistan has been a matter of great concern and criticism during all these over fifty years. Despite official claims, ranging from 13 percent to 40 percent people are said to be literate as they know how to put their signatures on a piece of paper or are able to read and write their names as well. Some of the literates are even able to read Urdu language or a vernacular newspaper.
What has been achieved in terms of quality of education, increase in the literacy rate, availability of cheap text books, role of private educational institutions and contribution of public sector education programme, has always been on priority list of government's propaganda programme.
But independent analysts do not agree with the claims of the government and express their dissatisfaction over the way education/literacy projects have been dealt with. In their opinion disproportionate allocation of funds by the federal and the provincial governments has been one of the main reasons for slow growth in literacy rate, in the country. Many people think that the literacy rate instead of going up, has gone down and if the trend is left unchecked there would come a stage when Pakistan would be ranked as one of the lowest literacy rate country. They think that the federal and provincial governments should review their annual allocations for education sector. So far the position remains bleak.
Annual review-2002-03- on the state of education, released by the Social Policy and Development Centre attributes the national backwardness in education to non-availability of funds and lack of political will to achieve hundred percent literacy rate in Pakistan.
NFC AWARDS: The report says that changes in the 1991 and 1997 National Finance Commission Awards have compromised provincial fiscal stability. Prior to the 1991 NFC Award, the provincial governments were able to run up deficit to finance their expenditure and the deficit were covered by the federal government in the form of deficit grants.
The 1991 NFC deleted the provision for federal deficit grants to the provinces and at the same time provinces were advised against carrying budget deficits. These provisions required the provinces to limit expenditures to available resources and directly impacted on social sector expenditures: while establishment expenditures are more or less fixed, the only scope for expenditure reduction lies in social sector expenditures.
A saving grace was that the federal government continued to cover the expenditures of the provincial component of the PSDP, which meant that provincial development activities continued to proceed.
The 1997 NFC Award incorporated three major changes with far reaching impacts on provincial finances. First, provision for federal financing of the provincial component of PSDP was withdrawn and provinces were required to finance their own development expenditure. No tax bases were transferred to the provinces to enable them to finance this additional burden. Every rupee of development expenditure incurred by the provincial governments cut into their social sector expenditures.
Second, under the 1991 NFC Award, custom duties did not form part of the divisible pool, with the federal government retaining the entire proceeds. Income tax and sales tax were part of the divisible pool, with the federal government retaining 20 percent of the proceeds and the 80 percent being distributed among the provinces.
The 1997 NFC Award readjusted the size and composition of the federal divisible pool and the revenue sharing formula. The award included all taxes in the federal divisible pool and changed the federal-provincial ratio to 62.5:37.5 percent.
Simultaneously, the federal government began to implement the remaining part of its structural adjustment reforms, scaling down customs duties drastically and expanding sales taxes significantly. Had the 1991 NFC distribution arrangement continued, the provinces would have borne no burden of the decline in customs duty revenues and would have accrued 80 percent of the additional revenues from sales tax. Under the 1997 Award, the federal government shifted one-third of the loss from customs duties to the provinces and increased its share of the larger sales tax revenue by over 60 percent. Viewed from the provincial perspective, the provinces had to bear one-third of the burden of reduction in customs duty revenues and accrued only one-third of the additional sales tax revenues.
Third, in view of the reduced provincial receipts from the federal pool and the additional PSDP expenditure burden on the provinces, provisional governments were allowed to take loans from the federal government to finance their deficits. However, the federal government retained a premium on the interest rate charged. In other words, the federal government borrowed money on lower rates and lent it to provincial governments on higher rates. In most cases this interest was significant.
Over the years, these developments have shrunk the fiscal space for the provinces, leaving little to spend on the provision of social services. The provincial share of financing the federal fiscal deficit, as a percentage of total provincial expenditures, has risen from 17 percent in FY-1991 to 29 percent in FY-203.
The transfer of provincial resources to the federal treasury has increased from Rs 87 billion in FY-1991 to Rs 318 billion in FY 2003. Had the provinces not been burdened with the responsibility of sharing the federal fiscal deficit, they would have had Rs 92 billion, or 29 percent, more at their disposal in FY 2003.
The impact of the NFC Award on provincial finances can be seen from the trend in expenditure on education. Education expenditure data for all the provinces combined have been organized along four time periods: 1975-85, 1986-89, 1990-96 and 1997-2002. The rationale for the time period is determined by four events: the 1974 NFC Award, the launching of the Five-Point Programme in FY 1986, the 1991 NFC Award, and the 1997 NFC Award. As such 1975-85 represents the pre-Five Point Programme period; 1986-89 represents the post Five-Point Programme period and pre 1990 NFC Award period: 1990-96 represents the period under the 1991 NFC Award: and,1997-2002 represents the period under the 1997 NFC Award.
The trend in annual average growth rates in real education expenditures for the four provinces combined show that growth in expenditures for all levels of education peaked across the board - for recurring and development expenditure and for all levels of education - from 1986 to 1989, ranging from 9 percent in tertiary education to 17 percent in development expenditure. By contrast, there were declines across the board during 1990-96 period, and growth collapsed from 1997 to 2002, registering declines in a number of cases. During the 1997-2002 period, real recurring expenditure on education increased only by one percent, while real development expenditure declined by 11 percent. In primary and secondary education, growth was reduced from about eight percent during the 1990-96 period to less than two percent for primary education and less than one percent for secondary education.
A province-wise situation analysis is further interesting. Compared to 1990-96 period, average growth in real recurring expenditure in education from 1997 to 2002 was half in Sindh and about 70 percent in Balochistan, while Punjab and the NWFP registered declines. Average development expenditure posted negative growth ranging from seven percent in Sindh to 13 percent in Punjab and 19 percent in NWFP. In Balochistan, growth declined from 26 percent in the preceding period to 7.5 percent during the 1997-2002 period.
Different provinces responded in their own way to the resource crunch. Punjab failed to protect its education expenditures, registering a decline in primary, secondary and tertiary education.
NWFP curtailed expenditures across the board, with the maximum burden being placed on tertiary education. Balochistan protected primary education, allowing expenditure on secondary and tertiary education to fall. This decline in education expenditure growth adversely affected growth in enrolment, with primary enrolment growth declining steadily since 1986-89 and secondary and tertiary enrolment growth collapsing to two percent and less than two percent respectively.
The low level of investment has adversely affected enrolment at all levels of education, increased drop out rates, adversely affected human resource development and infrastructure.
The situation is so depressing that claims of achievement do not stand the test of statistics and negate all figures of growth in literacy rate in Pakistan.
The provinces advocating their cases for enhancement of their share from the divisible pool have mostly vague ideas about their social sector development projects.
At a recent meeting of the NFC committee in Karachi, the finance ministers of the four provinces attended a press briefing. While talking to the press the ministers seemed to have carried out little exercise and had come with incomplete homework. All questions about increase in literacy rate and development of infrastructure for education development remained unanswered. There is still need to develop political will to make education for all a serious issue calling for increased investment for overall improvement in the education sector.