In 2006/07, these and other non-PFC development transfers amounted to Rs.14.5 billion or larger than the local government’s allocation under the block development grant.<sup>8</sup> The analysis of district expenditure priorities has to take into consideration this large provincial presence, particularly in the sectors that have been de jure devolved to local governments.

Local governments are also involved in executing provincial development schemes through the provincial Account 1. Specifically, the concerned department will, through the respective EDOs, implement these projects. There is no involvement of the district political leadership in the execution of these schemes.

On the recurrent side, the province also transfers resources for the recruitment of government employees against vacant posts, and to fund salary increases mandated by the federal government that cannot be financed under the provincial allocable amount.

# _District development priorities in Punjab_

Four stylized facts emerge from an analysis of provincial and district development expenditures in Punjab. First, physical infrastructure, in particular roads, is by far the highest priority of the district governments; second, these infrastructure schemes are small and largely neighborhoodspecific; third, district policy-makers appear to attach a lower priority to operations and maintenance than their provincial counterparts; and finally provincial interventions in education and health appear to have provided additional incentives for districts to prioritize the physical infrastructure sectors.<sup>9</sup> As Figure 6 shows, roughly 32% of the Rs.22.6 billion allocated collectively by the districts in their ADPs for 2006/07 was devoted to the roads sector.<sup>10</sup> Citizen Community Boards were the second biggest component, but this was not by choice due to the stipulation of the Local Government Ordinance that 25% of the ADP annually be reserved for CCBs.<sup>11</sup> Other major allocations included water and sanitation, Rs.1.8 billion (8% of the ADP), rural electrification Rs.1.3 billion (6%), education Rs.1.15 billion (5%), and health Rs.0.4 billion (2%).<sup>12</sup> In total, the three infrastructure sectors of roads, water, and electrification received 46% of the total ADP, and

- 8 Government of Punjab (2007)

- 9 This paper focuses on budget allocations as opposed to actual expenditures.  The reason is that only the budget data allows for a separation of what development schemes in the district ADB are being financed by the district (i.e from the block development grant, own source revenues, and any savings from the recurrent grant) and what are being financed by the province.

- 10  Given that only Rs.12 billion was transferred by the province under the Development Grant in the PFC, it is likely that actual utilization of the district ADPs would be much less.

- 11  As per the LGO, a CCB is to be a non-elected voluntary organization, consisting of at least 25 members, which can be established for a variety of purposes, including initiating and improving development projects, establishing cooperatives, forming monitoring bodies over police and other service providers and reinforcing the capacity of monitoring committees at the behest of the concerned council.  At least 25 percent of the total development budget of each tier of local government (district, tehsil, and union) must be earmarked for projects identified by CCBs, and each CCB has to make a cash contribution of 20 percent in order to tap into these funds for a specific project.

- 12  As per the LGO, water and sanitation is the responsibility of tehsils; however district governments’ are also spending in the sector

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