ISLAMABAD: In a desperate attempt to contain budget deficit, the government has had to cut development expenditures of various ministries, including funds set aside for critical projects of Pakistan Atomic Energy Commission (PAEC), Gwadar schemes and water and power sectors.
Various government departments and ministries were faced with cuts between 20 per cent and 82 per cent for the fiscal year 2016-17, showed official documents of the Ministry of Planning and Development.
Among the worst-hit projects were two nuclear power plants, Gwadar projects, power generation, water reservoir schemes and allocations for terrorism-hit populations.
For fiscal year 2016-17, parliament had approved Rs800 billion development budget, but the Planning Ministry and Finance Ministry sanctioned only Rs744 billion till the last day of the fiscal year. However, the actual spending is not known yet, as some projects may receive even less funding than their sanctioned budgets.
According to officials of the Ministry of Planning and Development, the main reason behind these radical cutbacks in development expenditures was the government’s desire to control budget deficit from slipping beyond the preceding year’s level.
Some projects were affected because of their slow progress.
The Finance Ministry was pushed into a corner after the foreign lending component of the federal Public Sector Development Programme (PSDP) and provincial Annual Development Plans (ADPs) exceeded their budgetary thresholds.
For the just ended fiscal year 2016-17, parliament approved a budget deficit equivalent to 3.8 per cent of GDP or Rs1.21 trillion. When the current fiscal year’s budget was announced, Finance Minister Ishaq Dar announced to relax the budget deficit limit to 4.2 per cent of GDP.
However, sources said that initial indications suggested that the budget deficit would cross 5 per cent of GDP and might even touch 5.5 per cent or Rs1.75 trillion if some payments were not deferred to new fiscal year.
From the financing side, government borrowings have already increased to Rs1.756 trillion, equalling 5.5 per cent of GDP, showed the central bank data. However, these are provisional figures and the government had some additional non-tax receipts in June such as Rs30 billion from the auction of 4G licenses.
The Aviation Division, Capital Administration Division, Defense Division, Federal Education & Professional Training Division, Pakistan Atomic Energy Commission, Planning, Development & Reform Division, Ports & Shipping Division, SUPARCO, Water and Power Division, Temporary Displacement Persons allocations and Prime Minister’s Youth package saw major cuts in their funding.
The Aviation Division budget was cut by 39 per cent to Rs2.9 billion. The worst-hit project was the New Gwadar International Airport after it got no money against an allocation of Rs1.5 billion. The Capital Administration Division budget was cut by 35 per cent to Rs2.3 billion.
The Defense Division’s development budget was cut by 68 per cent to just Rs314 million, mainly because of Rs398 million lower allocations for procurement of six Maritime Vessels.
Federal Education Division budget was cut by 24 per cent to Rs1.7 billion. National Education Reforms Initiative did not receive a penny against Rs300 million allocation.
Finance Division budget was cut by 34 per cent to Rs7.7 billion. The Public Sector Enterprises Reform project, necessary facilities for fresh water in Gwadar, fish landing jetty project also in Gwadar, Gwadar Development Authority’s projects and Lyari Expressway resettlement project also suffered because of cutbacks.
PAEC budget was slashed by 21 per cent or Rs6.1 billion, mainly because of lower allocations for Chashma Nuclear Power Plants C3 and C4 projects.
The Ministry of Ports and Shipping budget was reduced by 82 per cent to just Rs1.4 billion. This affected critical project such as Eastbay Expressway of China-Pakistan Economic Corridor (CPEC). This project was facing problems because of Chinese objections, which have lately been addressed. The coal conveying system for transportation of coal project was also affected. The Planning Ministry did not sanction funds against annual allocation of Rs735 million. SUPARCO’s Pakistan remote sensing satellite project allocation was reduced by 20 per cent to Rs2 billion.