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hundreds of billions of rupees of public sector funds are lying unutilised - LRE - 01-25-2010 08:05 PM Public money Dawn Editorial Saturday, 16 Jan, 2010 The public interest demands that the government overhaul its spending procedures. –Photo by Reuters According to a report in this newspaper yesterday, hundreds of billions of rupees of public sector funds are lying unutilised with commercial banks and the government is seeking to claw back the money as per its commitments with the IMF. The idea behind the change is straightforward: synchronise the allocation of money to development agencies with their spending requirements, i.e. give the agencies involved in development work money when they need to pay contractors, vendors, etc and not before. While there is Rs680bn of ‘public money’ lying with the commercial banks, the government is targeting a smaller amount of approximately Rs180bn of development/PSDP-related funding. (The larger amount includes everything from endowments of public universities to money for the armed forces and it would not make sense to apply the change to those funds.) Why did Rs180bn of public funds end up lying unused in commercial banks? The answer seems to be a combination of history, bad management, corruption, incompetence and inefficiency — in short, 62 years of Pakistani governance. It also explains why the government has pushed forward by a year its original deadline of June 2009 to complete the change: the weight of history hangs heavy and revamping a decades-old system has not been easy. The new system envisages assignment accounts for the various entities involved in development work and requires tearing up the manual and coming up with a new set of rules that will encourage ‘just in time’ delivery of money to development projects. There has been speculation that the commercial banks are resisting the change because it would deplete their deposit base and generally make doing business more difficult for them. But that argument ignores the basic point: the money belongs to the government and as a depositor it has the right to withdraw its money. Of course, given the vast sums involved, a sudden withdrawal would rock the entire banking system, but the government has only talked of a phased withdrawal. In fact, the public interest demands that the government overhaul its spending procedures. We have said it before and we will say it again: in times of crisis, every little bit of help is welcome — and if the government can’t get serious about reform in the bad times, there is little hope that it will ever get it right. It is nothing short of a scandal that Rs180bn of development money is languishing in commercial banks, and now is the time to right that wrong. http://www.dawn.com/wps/wcm/connect/dawn-content-library/dawn/the-newspaper/editorial/14-public-money-610-zj-01