Development spending bears brunt of deficit reduction

Amount restricted to Rs629b against allocation of Rs700b for FY16

ISLAMABAD: For the third year in a row, the PML-N government has curtailed development spending to restrict budget deficit within permissible limits, as the releases stood at roughly Rs629 billion till the last day of the fiscal year.

The Public Sector Development Programme (PSDP) releases amounted to Rs628.8 billion till June 30, according to the Ministry of  Planning and Development.



The amount was Rs71.2 billion or 10.2% less than the fiscal year 2015-16 budget of Rs700 billion National Assembly had approved. The government due to various reasons slashed allocations of two critical road projects of China-Pakistan Economic Corridor and releases for Temporarily Displaced Persons (TDPs) also fell short of the budget.

The releases to Pakistan Atomic Energy Commission (PAEC) were also 9% lower than the budget and stood at Rs38 billion.

Actual development spending always remains below releases. The Planning Ministry has booked the foreign loans up to April 2016 due to delay in compilation of foreign economic assistance data. From July through April last year, the country received Rs89.7 billion in foreign economic assistance for development projects against the annual estimates of Rs146.3 billion.

The rupee component releases of the PSDP also remained below the budgeted allocation of Rs553.7 billion till June 30. The actual releases remained at Rs539.1 billion - Rs14.6 billion less than the approved budget.

However, even after including the releases of the remaining two months on account of foreign economic assistance, overall spending figure is likely to remain in the range of Rs630 billion due to historical trend of spending less than the released development budget.

It was the consecutive third year, when the PML-N government cut development budget to meet the budget deficit target assigned by the International Monetary Fund (IMF).

In its first year, 2013-14, the government spent Rs435 billion against the National Assembly approved budget of Rs550 billion. In fiscal year 2014-15, the government spent Rs489 billion on development projects against the annual budget of Rs525 billion.

For the last fiscal year 2015-16, the IMF had set the budget deficit target at 4.3% of Gross Domestic Product (GDP) or Rs1.292 trillion including Rs100 billion room for spending on Temporarily Displaced Persons (TDPs).

Pakistan and the IMF are scheduled to hold talks by the end of this month in Dubai for the last review of $6.2 billion bailout programme.

However, the Planning Ministry bulletin showed that the government released Rs92 billion for rehabilitation of the TDPs and security establishment spending, which was Rs8 billion less than the budget approved by the National Assembly.

The government has been collecting 4% extra tax on the incomes of banks and 3% extra from those individuals who earn annually more than Rs500 million in the name of incurring additional expenses on the TDPs.

For the new fiscal year 2016-17, the government has again allocated Rs100 billion for the TDPs and security spending.

Two important road projects of China Pakistan Economic Corridor (CPEC) also faced huge cuts. For Thakot-Havelian section of eastern route, the government had originally allocated Rs20.5 billion budget but the actual releases stood at only Rs6.9 billion. The project’s budget allocation was slashed by 66%.



Similarly, for Multan-Sukkur section of eastern corridor, the government had allocated Rs50 billion but the releases till the last day of the fiscal year stood at only Rs5.2 billion.

The National Highway Authority’s budget saw a reduction of 30% to roughly Rs112 billion. This would affect hundreds of projects that the authority has undertaken under various initiatives.

The government also cut the water sector budget by 7.1%, as the actual release for water sector projects stood at Rs30.2 billion. The budget has been slashed despite growing concerns of water shortages in the coming years.

The government also cut the Water and Power Development Authority’s (WAPDA) budget by 7% to Rs114 billion.

However, releases for parliamentarians’ schemes remained higher than budgetary allocations. The government gave Rs20.9 billion for parliamentarians’ schemes -Rs900 million more than the allocations.

Published in The Express Tribune, July 3^rd, 2016.

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