Budget 2012: Development budget gets nod as Punjab CM boycotts

Balochistan protests discrepancy between allocations and disbursements.

ISLAMABAD:

The nation’s highest economic decision-making body approved a Rs730 billion development budget for the fiscal year 2012 on Saturday, even as Punjab Chief Minister Shahbaz Sharif refused to attend the meeting where the matter was decided.

The National Economic Council, headed by Prime Minister Yousaf Raza Gilani, approved the allocation for the fiscal year ending June 30, 2012. The council comprises the prime minister, the four provincial chief ministers and four federal ministers.

Punjab, however, was not represented by its chief minister but instead by its commerce minister, Sardar Dost Muhammad Khosa, and its chief secretary (the highest ranking civil servant in the province). Sharif is reported to have also barred his party’s economic policy expert, former finance minister Ishaq Dar, from attending.

The Rs730 billion development budget is 58% higher than the outgoing year’s actual spending, but only 2.2% higher than last year’s allocated budget, which was drastically reduced as the government struggled with a ballooning fiscal deficit.

Like last year, however, most of the allocation was made for provincial development budgets, with the federal government taking a backseat as it devolves more of its powers to the provinces as a result of the 18th Amendment to the constitution and the 7th National Finance Commission award.

The provinces are slated to get Rs430 billion for their budgets, while the federal government will spend Rs300 billion through its development budget.

Balochistan, however, protested that the federal government disburses far less than it announces for the provinces. Quetta claims that billions of rupees of funds that were promised to the province have not yet been disbursed.

The dissatisfaction of Balochistan – the absence of the Punjab chief minister – have raised question marks about the government’s ability to implement next year’s macroeconomic framework (a series of economic reforms), which were also approved at the NEC meeting.

Of the Rs300 billion in federal spending, about Rs155 billion is to be spent on infrastructure, with social sector spending accounting for another Rs122 billion.  The rest is split between all other sectors, including Rs10 billion for the Earthquake Reconstruction and Rehabilitation Authority (Erra).

Development priorities

The government also announced its prioritisation matrix for development projects, with the most funds going to projects in their advanced stages, followed by foreign-funded projects, then those in underdeveloped areas and finally projects deemed to be ‘of national importance’.

Finance Minister Abdul Hafeez Sheikh said that close to 90% of the federal development budget would be spent on ongoing projects and only about Rs32 billion would be used to launch new projects. Meanwhile, the Planning Commission has been authorised to scrap all projects that had been delayed due to a lack of resources.

“The public sector development programme’s size has been reduced to Rs2.6 trillion,” announced Planning Commission Deputy Chairman Dr Nadeem ul Haq, a decision that he said would affect over 700 projects.

Currently, the total size of the PSDP is Rs4.4 trillion out of which Rs400 billion worth of projects have been transferred to provinces under the devolution plan.

The Prime Minister’s Inspection Commission had called for a reprioritisation of the PSDP after finding that the average completion cycle of a project has increased to an alarming 21 years due to a lack of funding.

Provincial development budgets

Of the Rs430 to be allocated to provincial governments for their development spending, the largest chunk is to be spent in Punjab: about Rs200 billion. Sindh has been allocated Rs120 billion, followed by Rs80 billion for Khyber-Pakhtunkhwa and Rs30 billion for Balochistan.

The allocations for the provinces for 2012 are 61% higher than the actual spending in the outgoing year but only 1.4% higher than the allocations for the outgoing year.

Provincial development budgets had been set at Rs424 billion for fiscal year 2011 but were reduced to Rs266 at the request of the federal government as Islamabad struggled to make ends meet.





Published in The Express Tribune, May 29^th, 2011.