Pakistan's govt sanctions Rs417.4b for development spending

Releases expected to stop in last quarter due to deteriorating fiscal position

Shahbaz Rana March 31, 2019
Representational image. PHOTO: REUTERS

ISLAMABAD: The government sanctioned Rs417.4 billion for development spending in first nine months of the current fiscal year and releases are expected to come to a grinding halt, except for political pet schemes, in the last quarter due to a worsening fiscal position.

About 55% of the total budgetary releases have been given to the National Highway Authority (NHA) and Water Resources Division, according to the Ministry of Planning and Development. The NHA alone has been given a lion’s share of Rs180.2 billion or 43% of the total releases in July-March of the current fiscal year, showed official statistics.

Owing to higher releases to the NHA, the foreign aid component of the Public Sector Development Programme (PSDP) has disproportionately increased. Against the annual foreign aid allocation of Rs144.3 billion, the component has already shot up to Rs160.2 billion as of end-March. Of the Rs160 billion, Rs120 billion has been given to the NHA alone.

Of the total, the share of foreign financing in development projects was equal to 38%, but it has historically remained at one-fifth of the total releases. This will force the government to cut the rupee component of the PSDP from the approved level of Rs530 billion.

The approval of Rs417.4 billion by the Ministry of Planning and Development was lower by Rs190 billion or 31% when compared with the disbursements made in the same period of previous fiscal year, according to the planning ministry.

The actual development spending for July-March of the current fiscal year is expected to remain far lower than the sanctioned Rs417.4 billion, according to sources. The Ministry of Finance might not have authorised spending of more than Rs330 billion due to fiscal constraints, they added.

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, which uses it as a tool to compensate for higher non-development expenditures.

The planning ministry foresees almost negligible sanctions in the last quarter, except for politically pet areas, due to the worsening fiscal position, according to the sources. Therefore, the planning ministry tried to sanction maximum development spending in the third quarter.

For instance, Rs17 billion was sanctioned for the Mohmand Dam project in one go in the last week of March, they added.

The slower releases are expected to affect all the ongoing schemes as chances for allocating Rs1 trillion for the development budget in the next fiscal year are very high, said the sources. The finance ministry has indicated that it will keep the PSDP allocation for the next fiscal year at the current level.

The annual development budget, which has been revised downwards, for the current fiscal year is Rs675 billion and releases in first nine months were equal to 61% of the budget.

According to the budget strategy, the ministries can spend 70% of the annual development budget in first nine months of a fiscal year. This meant that the development spending should have been Rs472 billion. The planning ministry sanctioned Rs55 billion lower than the budgetary ceiling.

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 3.5%, far less than the 5.3% expansion in the last fiscal year.

Finance Minister Asad Umar assured lawmakers in the National Assembly that the Pakistan Tehreek-e-Insaf (PTI) government would make sure that the development spending in the ongoing fiscal year did not fall below last year’s level. The Pakistan Muslim League-Nawaz (PML-N) government had spent Rs661 billion in 2017-18, which was 34% lower than the actual budget of that year.

In first nine months of the current fiscal year, Rs174 billion was released to all the federal ministries for development spending. The maximum amount - Rs45.8 billion - was given to the Ministry of Water Resources including Rs17 billion for Mohmand Dam.

The States and Frontier Regions Division got Rs18.4 billion and the Higher Education Commission got Rs18.5 billion from July through March. Pakistan Atomic Energy Commission received Rs18.5 billion for development spending in first nine months of the current fiscal year. The National Transmission and Despatch Company received Rs11.9 billion.

The planning ministry released Rs17.7 billion for the Azad Jammu and Kashmir government and Rs13.5 billion for the Gilgit-Baltistan government.

The government gave Rs11.9 billion to the military for security enhancement and Rs4.8 billion for the temporarily displaced persons. The releases for Gas Infrastructure Development Cess Fund remained zero, as was the case during the PML-N tenure.

Published in The Express Tribune, March 31st, 2019.

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