Development spending slashed to Rs225.4 billion

Sanctioned amount is 32% lower than previous year, which can hurt growth

Shahbaz Rana January 08, 2019
Sanctioned amount is 32% lower than previous year, which can hurt growth. PHOTO: FILE

ISLAMABAD: The government has drastically reduced development spending which could hurt economic growth as it sanctioned Rs225.4 billion for development projects in the first half of current fiscal year, which was equal to just one-third of the revised annual development budget.

The approval of Rs225.4 billion by the Ministry of Planning was lower by Rs105.6 billion or 32% when compared with the disbursements made in the first half of previous fiscal year, according to the figures released by the planning ministry on Monday.

The actual development spending for the July-December 2018 period is expected to remain far lower than Rs225.4 billion as the Ministry of Finance has not authorised the expenditure, according to the sources.

Of the total, the share of foreign financing for development projects was Rs86 billion or 38%. Historically, this ratio remained one-fifth of the total releases.

The Ministry of Planning’s approval of funds has to be cleared by the Ministry of Finance before the central bank releases funds for spending. This gives a huge leverage to the finance ministry that uses it as a tool to compensate for higher non-development expenditures.

Because of this mechanism, the finance ministry had allowed only Rs50.8 billion spending in first quarter of the current fiscal year.

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The less development spending could lead to a situation where the government’s desire to increase investment for creating jobs may remain unfulfilled. This year, the economic growth is expected to be around 4%, far less than the 5.8% expansion in the last fiscal year.

According to the budget strategy, the ministries can spend 40% of their annual development budgets in the first half of a fiscal year. This meant that the development spending should have been Rs270 billion. The planning ministry released Rs45 billion less than the budgetary ceiling in the first half.

For the current fiscal year 2018-19, the Pakistan Tehreek-e-Insaf (PTI) government has revised downward the annual Public Sector Development Programme (PSDP) to Rs675 billion.

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Finance Minister Asad Umar assured lawmakers in the National Assembly that the PTI government would make sure that the development spending during the ongoing fiscal year did not fall below last year’s level.

The PML-N government had spent Rs660.8 billion in 2017-18, which was 34% lower than the actual budget of that year.

The PTI government faces the challenge of balancing the budget books after it recorded Rs541-billion deficit in the first quarter. Umar has cautioned the federal cabinet that if the current spending trend continued, the budget deficit by the end of the fiscal year may exceed even last year’s level, according to the sources.

According to a presentation given to the federal cabinet by the finance ministry, the spending patterns of a majority of the federal ministries were not in line with their annual allocations, said the sources. The Ministry of Human Resource Management and Ministry of Defence were among those that were spending more than their ceilings.

In the first half of the current fiscal year, Rs85.6 billion had been released to all the federal ministries for development spending. This was exactly at the level of the last fiscal year. The maximum amount - Rs18.4 billion - was given to the Ministry of Water Resources.

The States and Frontier Regions Division got Rs11.2 billion and the Higher Education Commission got Rs11.8 billion.

Pakistan Atomic Energy Commission received Rs10.8 billion for development spending in the first half. The National Highway Authority got the lion’s share of Rs101.5 billion against annual allocation of Rs185.2 billion. The National Transmission and Despatch Company received Rs9.6 billion.

The planning ministry released Rs11 billion for the Azad Jammu and Kashmir government and Rs8.1 billion for the Gilgit-Baltistan government.

The government gave Rs6.9 billion to the military for security enhancement and Rs1.3 billion for the temporarily displaced persons.

Published in The Express Tribune, January 8th, 2019.

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