Planning ministry seeks raise in development budget to Rs1.3tr

Request comes after other ministries demanded almost Rs2tr for PSDP


Shahbaz Rana April 07, 2018
The planning ministry wanted that at least Rs200 billion should be reserved in the new budget so that the next government may finance projects of its choice. PHOTO: FILE

ISLAMABAD: After different ministries placed a wish list of Rs1.9 trillion worth of development spending, the planning ministry has enhanced its demand for development budget to Rs1.3 trillion - almost double the amount the treasury is ready to give for the next financial year.

The planning ministry has sought Rs1.3 trillion for the Public Sector Development Programme (PSDP) at a time when challenges have emerged to securing financing for some China-Pakistan Economic Corridor (CPEC) projects. Prime Minister Shahid Khaqan Abbasi is expected to take up the issue of CPEC financing with the Chinese leadership during his upcoming visit to Beijing.

The federal government on Thursday vowed that it would not waive penalties in case sponsors of CPEC power projects failed to timely put in place financing arrangements.

“The Rs750 billion initial indicative development budget ceiling for fiscal year 2018-19 is not sufficient to meet needs of CPEC projects, water schemes and other strategic initiatives,” said Planning Secretary Shoaib Siddiqui on Friday in an informal discussion with the media.

The finance ministry has indicated that it may increase the ceiling to Rs800 billion, but Siddiqui said anything lower than Rs1.3 trillion would hurt the ongoing development schemes. In that case, the planning ministry would also not be able to allocate funds for new projects, said the secretary.

The finance ministry was of the view that the outgoing government should not allocate funds for new development schemes and that should be left to the next government. The planning ministry, however, wanted that at least Rs200 billion should be reserved in the new budget so that the next government may finance projects of its choice.

The planning secretary said initially the planning ministry had requested the finance ministry to allocate Rs1.1 trillion. However, government ministries demanded almost Rs2 trillion for next year, he added.

Keeping that in view, “the planning ministry has now requested the finance ministry to earmark Rs1.3 trillion for the next fiscal year,” he added.

The secretary emphasised that the planning ministry did realise the fiscal constraints, but in order to keep the momentum of development activities, the allocation must match with demand.

He said out of the initially indicated Rs750 billion, the net development budget was only Rs640 billion. The remaining around Rs105 billion was proposed for other programmes, mainly for temporarily displaced persons affected by military’s operation against terrorists.

CPEC financing

Responding to a question, the planning secretary said China had assured Pakistan of honouring its commitments for concessionary financing for CPEC projects. In recent years, Pakistan has become the largest recipient of Chinese concessionary financing including grants and cheap loans.

The secretary said the issues related to financing of $2-billion Karachi Circular Railway (KCR) project and Mainline (ML-I) project had to be resolved by the executing agencies.

In both cases, Siddiqui said, Pakistan had not yet decided the kind of financing it wanted to obtain from China - either it will be a sovereign guaranteed loan or central loan.

The secretary said the Ministry of Communication had prepared a summary for taking decision on the kind of loan that the Sindh government wanted to acquire from China for the KCR project.

To a question about disagreement on the cost of phase-I of the ML-I project, the secretary said it was the responsibility of the Ministry of Railways to address these issues.

In its last meeting, the Central Development Working Party (CDWP) deferred approval of the first phase of the ML-I project. Chinese consultants have estimated the cost of the first phase at $4.1 billion while Pakistan puts it at $3.4 billion.

The secretary said in order to resolve financing issues of CPEC projects, Pakistan had also activated the diplomatic channels.

Replying to a question on delay in arranging financing for Thar coal power projects of CPEC, Siddiqui said it was the responsibility of sponsors to arrange financing from China.

If they fail to timely finalise the financing arrangements, the federal government would neither waive penalties nor would it extend commissioning dates of the schemes.

Published in The Express Tribune, April 7th, 2018.

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