Development outlay pegged at Rs800b

Govt slashes CPEC allocations by Rs9b

ISLAMABAD: The government on Friday unveiled a Rs800 billion development budget, which seems very small when compared to huge financing requirements of about 866 projects, including those of the multibillion-dollar China-Pakistan Economic Corridor (CPEC).

The Public Sector Development Programme (PSDP) book that the government tabled in parliament reveals the government has further slashed allocations for the CPEC projects by Rs9 billion to only Rs115 billion for the fiscal year 2016-17.

Instead the Rs9 billion has been diverted towards other infrastructure projects, which the government thinks are more important. It has heightened concerns that financial constraints may hamper progress on critical projects of CPEC, a network of roads and rail links that will connect China to the Arabian Sea through Gwadar port.

The PSDP is proposed at Rs800 billion – higher by Rs100 billion or 14.3% over the outgoing fiscal year’s development budget. However, out of this Rs800 billion, the share of planning ministry-administrated PSDP will be Rs655 billion. The PSDP includes Rs143 billion foreign loans, which are almost 22% of the actual federal development budget of Rs655 billion.

As many as 866 projects, having an estimated cost of Rs6 trillion, will be financed under the PSDP during 2016-17. An amount of Rs2 trillion has already been spent on these schemes. The government has included 227 new projects in the PSDP document, having an estimated cost of Rs762 billion.

The government proposed Rs467 billion for infrastructure projects – 14.4% higher than this fiscal. Within infrastructure, Rs157 billion have been proposed for the power sector; Rs260 billion for transport and communications; Rs32 billion for water; and Rs18 billion for physical planning and housing.

The National Highway Authority (NHA) will get a share of Rs188 billion, mainly to complete the road projects of CPEC. The allocation, however, remains far below the requirements.

An allocation of Rs89 billion is made for the social sector projects in health, population, education and training. The social sector allocation is only 11% of the total PSDP.

An amount of Rs27.6 billion has been set aside for the Pakistan Atomic Energy Commission. National Health Services, Regulations and Coordination Ministry will get Rs25 billion, Kashmir Affairs and Gilgit-Baltistan Division will get Rs25.8 billion, the Interior Division Rs11.6 billion, Ports and Shipping Ministry Rs12.8 billion, States and Frontier Regions Ministry Rs22.3 billion and Ministry of Water and Power Rs31.7 billion. The Water and Power Development Authority will get Rs130 billion budget in the new fiscal year.

Allocations for CPEC

The total cost of the CPEC infrastructure projects is estimated at Rs820 billion and an amount of Rs693 billion is required during the execution period of these schemes. Three out of every four CPEC projects are in the energy sector. These projects include coal, hydro and wind projects. The government expects that 5,304 megawatts will be added in the national grid in the fiscal year 2016-17.

The CPEC projects will enter into their second year of implementation during 2016-17. The planning ministry says enough funds have been allocated for these projects so that they take off this year and reach a maturity stage by end of the next fiscal year.

“The government is fully cognizant of the importance of appropriately financing the CPEC projects at all costs and no CPEC project will get delayed due to resource constraints,” said the Annual Plan 2016-17 document.

Due to special security requirements of the CPEC projects, 1% of the total cost of these projects has been earmarked for security.

Six projects of Pakistan Railways are also included in the CPEC projects and Rs2 billion have been earmarked for them. About 90% or Rs104 billion of the CPEC allocations are going for infrastructure projects, administered by the NHA. NHA’s next year’s total development budget is Rs188 billion.

There are eight CPEC schemes under the NHA having an estimated cost of Rs762 billion and the proposed allocation is just 16% of the remaining financial requirements. For Multan-Sukkur section of the Lahore-Karachi Motorway, only Rs19 billion are proposed for next fiscal year against the remaining financing requirements of Rs247.7 billion. The total cost of this project is Rs298 billion.

For Lahore-Abdul Hakeem section, Rs34 billion have been proposed for next fiscal year against the outstanding requirements of Rs130.7 billion. The total cost of this project is Rs150.7 billion.

For the construction of recently approved Burhan-Hakla motorway of the CPEC’s western route, the Planning Commission has slashed down the proposed allocation by Rs3.2 billion to Rs22 billion. The total cost of this scheme is Rs124.2 billion. For compensation to the people affected by Burhan-Hakla road, the government has also reduced the proposed allocation to Rs1.8 billion.

For the construction of Thakot-Havelian road of the CPEC’s eastern route, the government has increased the allocation to Rs16.5 billion against the remaining requirements of Rs116 billion. For land acquisition of this project, the government has proposed Rs1.8 billion.

For construction of Burhan-Havelian Expressway, the government has proposed Rs4.7 billion against the remaining requirements of Rs22 billion. For Gwadar International Airport, Rs1.5 billion have been proposed against the remaining requirements of Rs20 billion. The government has proposed Rs4.7 billion for construction of Eastbay Expressway project of Gwadar against the remaining requirements of Rs14 billion. For other port related projects of Gwadar the proposed allocation is only Rs1.6 billion against the requirement of Rs17.6 billion.

An amount of Rs730 million has been proposed for three power sector projects of the CPEC. For Prime Minister’s Youth package Rs20 billion has been allocated. A new initiative, Special Gas Infrastructure Development Fund with Rs25 billion allocation, is also part of the PSDP. The fund will be utilised for supply of gas in the remote areas of the country.

Published in The Express Tribune, June 4^th, 2016.