For the current fiscal year, the National Economic Council, headed by Prime Minister Nawaz Sharif, had approved Rs700 billion for federal development spending. PHOTO: FILE
ISLAMABAD:
The government slashed development spending by 43% or Rs120 billion in the first half of the current fiscal year including slowing down releases for temporarily displaced persons (TDPs) and security enhancement aimed at meeting the budget deficit target.
Against the requirement of Rs280 billion, actual development spending stood at Rs158 billion from July to December of fiscal year 2015-16, according to sources in the Ministry of Finance. The spending was Rs122 billion less than the target.
It was also roughly Rs120 billion less than the amount the Ministry of Planning and Development sanctioned for the period. From July to December, the ministry had sanctioned Rs277.8 billion spending for various federal ministries.
The restricted spending was aimed at keeping expenditures within the limit agreed with the International Monetary Fund (IMF) for achieving the first-half budget deficit target of Rs625 billion or 2% of gross domestic product (GDP). However, this has put a question mark over claims of fiscal discipline.
For the current fiscal year, the National Economic Council (NEC), headed by Prime Minister Nawaz Sharif, had approved Rs700 billion for federal development spending. It also allowed spending of 20% of the total in each of the first two quarters of the year.
Under this strategy, development expenses should have been Rs280 billion, which is 40% of the annual PSDP.
The cut in expenditures is almost in line with the IMF’s projection that Pakistan’s overall development budget will undergo a steep cut of Rs402 billion or 27% of the allocation in the current fiscal year. The budget deficit target for the year is Rs1,292 billion or 4.3% of GDP.
Against the NEC-approved budget of Rs1,513 billion for provinces and the federal government, the IMF has shown development expenditures at Rs1,111 billion. The bulk of the reduction will be borne by the provinces, which will collectively see a cut of Rs313 billion, or 38.5% of the budgeted Rs813 billion.
The federal development budget, in comparison, will be slashed by 12.7%, or Rs89 billion, of the budgeted Rs700 billion.
However, the pace of spending shows that the cut might be steeper than projected by the IMF. Against their cumulative annual development budget of Rs813 billion, the four provinces spent Rs227 billion in the first half, said the sources.
For 2015-16, the government has allocated Rs100 billion for the rehabilitation of TDPs affected by the on-going Zarb-e-Azb operation and security enhancement.
The planning ministry did not treat the amount as development spending, although it was part of the annual Rs700 billion PSDP.
From July to December, the ministry’s documents showed, sanctions under this head stood at Rs60 billion. However, the sources said the spending remained far below than the sanctioned amount.
Although official figures were not available, National Assembly Standing Committee on State and Frontier Regions Chairman Muhammad Jamaluddin recently claimed that actual spending on the TDPs and security enhancement stood at Rs10 billion.
He said against the annual allocation of Rs55 billion for the TDPs, only Rs1 billion was given while from the military’s component of Rs45 billion, Rs9 billion was spent.
However, the Ministry of Finance has denied blocking any funds, saying the difference between overall spending and the budget is due to the pace of development activities.
“Nothing notable has been stopped by the Ministry of Finance,” said a senior ministry official.
He said allocations for raising 28 wings of the civil armed forces had been placed at the disposal of the Ministry of Interior. Any shortfall in the first half would be compensated in the second half of the year, he added.
The official said the Rs158 billion development spending was still 25% higher than the spending in the comparative period of last fiscal year.
Published in The Express Tribune, February 11th, 2016.
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