Devolution and Fiscal Decentralisation

Fiscal decentralisation represents the transfer of resources from higher to lower levels of government usually accompanied by an enhancement in responsibilities and functions of sub- national governments and greater autonomy in their budget making and financial decisions. The rising demand generally for decentralisation in developing countries in recent years is a consequence of the broader processes of globalisation, liberalisation and deregulation. Political imperatives for decentralisation have been created by the urge for more effective democratisation and the need to bring governments closer to the people for greater accountability and better articulation of their needs and preferences. In a number of countries, including Pakistan, the failure of central or state/provincial governments to adequately capture local preferences and provide basic services have strengthened the case for use of local governments as delivery agents, such that the production and distribution of services is carried down to the lowest unit of government capable of capturing the associated costs and benefits.

Hidden Subsidies

Many governments use price subsidisation (total costs less total revenues from user charges) to meet social protection objectives in lieu of, or in addition to, direct income transfers. Such subsidies may be perceived as influencing behaviour to further other socially desirable policies. For example, the price response induced by lowering the price of schooling will both lower the cost of living for the beneficiaries and also increase the investment in education more than a similar income transfer would achieve. The incidences of benefits from a general price subsidy are proportional to purchases and can be deduced from the pattern of expenditures. Some goods are inappropriate vehicles for redistribution since subsidies on them will not only accrue mainly to the rich they will actually increase inequality in welfare. It is therefore important to ensure that commodities chosen for price subsidisation are largely consumed by the lower income groups. Also, detailed data on such commodities should be made public to make the extent of subsidy easily tractable. In the case of Pakistan, the problem of lack of transparency of federal and provincial budgets is vividly demonstrated by the inability of such budgets to readily highlight the subsidy on the various economic and social services, which are essentially in the nature of ‘private’ goods, provided by such governments. This is not only a reflection of the problem of the nature of budgeting practices whereby, first, revenues and expenditures on different heads are shown separately and no account is made either of depreciation of assets or the costs of capital used to finance the acquisition of assets which yield a stream of services. Second, to the extent that the subsidies largely benefit the upper income groups, political compulsions dictate that such subsidies largely remain hidden.

Pro-poor Growth and Policies: The Asian Experience

The objective of this paper is to assemble on a systematic basis the available data on Asian countries and then analyse the relationship between growth and poverty reduction in a long-term perspective, as well as the impact of different macroeconomic variables on the intensity of this relationship. The results indicate that there is not only a strong positive relationship between growth and poverty reduction, but also that this relationship is highly variable across countries and time periods. The key macroeconomic determinants of the degree of pro-poor growth appear to be the rates of employment and agricultural growth. Inflation, at least up to a certain rate, does not impact poverty negatively, while the role of exports is essentially indirect through the contribution to the overall rate of economic growth. Examination of the change in policy stance of the Asian countries during the 1990s in relation to the 1980s demonstrates that on balance the mix of policies has not been pro-poor. The apparent sacrifice of growth in pursuit of macroeconomic stability has diminished the impact on poverty reduction. Given the relatively weak trade-off between inflation and growth with regard to the impact on poverty and the fact that inflation rates are currently low in the region, it is argued that countries can be more flexible in their policy stance with regard to the adoption of more growth-oriented as opposed to stabilisation policies. In particular, a case is made for resorting to a more expansionary counter-cyclical fiscal policy, led by higher levels of public investment, supported by appropriate monetary and exchange rate policies. The paper concludes with a detailed description of the policies designed to achieve faster agricultural development and greater employment generation.

Devolution and Fiscal Decentralisation

Fiscal decentralisation represents the transfer of resources from higher to lower levels of government usually accompanied by an enhancement in responsibilities and functions of sub- national governments and greater autonomy in their budget making and financial decisions. The rising demand generally for decentralisation in developing countries in recent years is a consequence of the broader processes of globalisation, liberalisation and deregulation. Political imperatives for decentralisation have been created by the urge for more effective democratisation and the need to bring governments closer to the people for greater accountability and better articulation of their needs and preferences. In a number of countries, including Pakistan, the failure of central or state/provincial governments to adequately capture local preferences and provide basic services have strengthened the case for use of local governments as delivery agents, such that the production and distribution of services is carried down to the lowest unit of government capable of capturing the associated costs and benefits

Hidden Subsidies

Many governments use price subsidisation (total costs less total revenues from user charges) to meet social protection objectives in lieu of, or in addition to, direct income transfers. Such subsidies may be perceived as influencing behaviour to further other socially desirable policies. For example, the price response induced by lowering the price of schooling will both lower the cost of living for the beneficiaries and also increase the investment in education more than a similar income transfer would achieve. The incidences of benefits from a general price subsidy are proportional to purchases and can be deduced from the pattern of expenditures. Some goods are inappropriate vehicles for redistribution since subsidies on them will not only accrue mainly to the rich they will actually increase inequality in welfare. It is therefore important to ensure that commodities chosen for price subsidisation are largely consumed by the lower income groups. Also, detailed data on such commodities should be made public to make the extent of subsidy easily tractable

Fiscal Equalisation Among Provinces in the NFC Awards

Fiscal equalisation refers to attempts within a federal system of government to reduce fiscal disparities among jurisdictions, which emerge due to variation in sub-national jurisdictions ability to raise revenues to meet the public expenditure needs of their residents. This is because of an imbalance in the assignment of revenue sources to sub-national levels and their expenditure needs, given the allocation of the inter-governmental fiscal powers and responsibilities. In the Pakistani context, the need for transfers is highlighted by the fact that while provincial governments generate only about 8 percent of total national resources, their share in total public spending is 28 percent. Also the fiscal capacity of the four provinces varies, with the relatively more developed provinces being able to self-generate a higher proportion of their resource requirements. As such, transfers take place, according to the provisions of the National Finance Commission (NFC) awards, with the objective of removing both vertical and horizontal imbalances between own-revenues and expenditure

Budgetary Consequences of the 7th NFC Award

The 7th NFC Award of 2009 has generally been recognised as a historic achievement of the present democratically elected government. Not only was consensus achieved after a gap of 12 years among the Federal and Provincial Governments but major strides have also been made in furthering the process of fiscal decentralisation in the country. The Federal Government will be transferring substantially more resources to the provinces by a major enhancement in the collective share of the latter from the divisible pool taxes. In addition, the provinces have agreed to a horizontal sharing formula that includes multiple criteria and promises greater fiscal equalisation in favour of the more backward provinces. Straight transfers have also been rationalised and the Federal Government has agreed to pay in instalments the substantial arrears that had accumulated under different heads

Medium Term Business Cycles in Developing Countries

We build a two country asymmetric DSGE model with two features: (i) endogenous and slow diffusion of technologies from the developed to the developing country, and (ii) adjustment costs to investment flows. We calibrate the model to match the Mexico-U.S. trade and FDI flows. The model is able to explain the following stylized facts: (i) U.S. and Mexican output co-move more than consumption; (ii) U.S. shocks have a larger effect on Mexico than in the U.S.; (iii) U.S. business cycles lead over medium term fluctuations in Mexico; (iv) Mexican consumption is more volatile than output.Business Cycles in Developing Countries, Co-movement between Developed and Developing economies, Volatility, Extensive Margin of Trade, Product Life Cycle, FDI.

Amberlite IR-120 catalyzed, microwave-assisted rapid synthesis of 2-aryl-benzimidazoles

An expeditious synthesis of 2-aryl-benzimidazoles by the condensation of o-phenylenediamine with various araldehydes is described. This greener protocol is catalyzed by Amberlite IR-120, and proceeds efficiently in the absence of any organic solvent under microwave irradiation within 3-5. min. © 2011 King Saud University

Zinc Chloride-Catalyzed Expeditious Route to Nitriles

Zinc chloride has been found to be an excellent catalyst for a one-pot synthesis of nitriles from araldehydes and hydroxylammonium chloride under solvent-free conditions. The features of the present method are short reaction time, easy workup procedure, and good yields of the nitriles