PSDP spending to remain 14% less than budget

Finance ministry reveals no room to increases salaries of govet employees before budget

Shahbaz Rana March 12, 2020
Scarcity of resources cuts number of projects to 1,252 from over 1,900.

ISLAMABAD: The Public Sector Development Programme (PSDP) spending will remain around Rs600 billion - 14% less than the budget - and there was no room for increasing salaries of the government employees before budget, the top mandarin of finance ministry briefed a parliamentary panel on Wednesday.

It will be the second consecutive year when the Pakistan Tehreek-e-Insaf (PTI) government would remain unable to fully utilise the PSDP despite repeated assurances from the top.

In an in-camera briefing on next year's budget contours, Finance Secretary Naveed Kamran Baloch also disclosed that the centre would transfer many fiscal responsibilities to the provinces from next fiscal year 2020-21. He also said that from next fiscal year, the government will start making Rs806 billion of the circular debt part of the public debt.

Baloch also advised the federating units to come out of their "dependency syndrome" and start generating their own resources, as provinces still receive around 85% of their resources under the National Finance Commission Award.

The top bureaucrat gave a briefing to the National Assembly Standing Committee on Finance, headed by PTI's Faizullah Kamoka. But he remained tight lipped on the conditions agreed with the International Monetary Fund (IMF), except saying that the IMF has not agreed to further reduce the Rs5.238 trillion FBR target. He also said that there might be a demand from the IMF to increase electricity prices but Prime Minister Imran Khan has already given a policy statement "not to increase the prices".

The finance secretary told us that the PSDP spending will be around Rs600 billion as against the budget of Rs701 billion, said Faizullah Kamoka while briefing the media persons after the in-camera meeting.

Kamoka said that the federal government may consider launching diaspora bonds to raise money from abroad - an initiative that badly failed last year when the government could attract only $26 million. The finance secretary also said that Sukuk bonds might be launched in international market on expectations of better response.

The chairman standing committee further said that the government's non-tax revenue receipts jumped to over Rs1.025 trillion in eight months while the tax revenues fell short of target.

The Rs600 billion spending will be 86% of the approved budget, although Planning Minister Asad Umar has repeatedly said that the full PSDP will be utilised this year.

A mid-term budget review report of the finance ministry showed that from July through December the PSDP utilisation remained at Rs167 billion or 24% of the approved annual budget. The breakup of the utilisation showed that 81% of the utilisation was made by only five government departments. The NHA consumed Rs82.5 billion or half of the total utilisation.

As compared to Rs82.7 billion utilisation by the NHA, the Higher Education Commission utilisation amounted to only Rs3.7 billion. It was 12% of the HEC budget and only 2.2% of the total half year utilisation.

"In spite of financial uncertainty three quarters (July-March) PSDP releases were made against wishes of my colleagues," said the finance secretary while giving an in-camera briefing. "Going forward, we have to manage the fourth quarter releases to ensure financial prudence, as cheques are being issued in May and June every year against fiscal prudence principles," he added.

"We would not release funds after April 15 and I have written letters to the planning ministry and concerned ministries, asking to share details of their utilisation of earlier released funds to release more money only whether it is required," said Baloch.

The Rs806 billion circular debt, being parked in the Power Holding Private Limited, will be made part of the public debt by staggering it while keeping in mind the debt sustainability aspect, said the finance secretary.

The PML-N's Ali Pervez differed with the finance secretary's assessment about implications of the circular debt on the budget, saying the finance ministry's obligations were not only limited to power subsidies.

The finance secretary also spoke about the utilisation of subsidies, mainly for the power sector. There has to be impact analysis of the Rs270 billion subsidies allocated in the budget and we have to see whether these are reaching to the targeted people, said the finance secretary.

The government was adhering to the core principles of the IMF by not resorting to fresh borrowings from the SBP, ensuring that no new sovereign guarantees are issues, except Rs250 billion sukuks, and no supplementary grants are given, said the finance secretary.

Fiscal arrangement

"Provinces need to enhance resources and come out of dependency syndrome," said the finance secretary while giving a realistic picture of volatile fiscal position of the federal government. The provincial governments should have some role and this will be one of the areas of the next budget, he added.

He said that in the next budget some of the responsibilities will be shifted to the provinces.

Baloch said that the provincial governments increased salaries of the employees by one and half times without caring for the impact on the federal government. "We cannot do this (to increase 150% salaries)".

Kamoka said that the finance secretary told the committee that the salaries of the employees will be increased in the next budget. The Pak Secretariat employees have been observing one-hour strike every day, demanding increasing their salaries at par with the provinces and some 27 federal government departments.

People do not want to serve in the federal government because of better monetary benefits in Punjab and Khyber-Pakhtunkhwa, said finance secretary. He said that the salaries of grade 17 to 22 employees of the federal government do not commensurate with market trends but the low-paid government servant salaries were better than the market.

"We would review this aspect in the budget," said Baloch.

"There was distortion as Balochistan government was receiving its share under the NFC according to budgetary projections of FBR's revenues while actual collection remains low," said Baloch. He said in the last fiscal year there was negative growth in the FBR collection but Balochistan government was paid its share according to projected revenues.

He said that because of the current wheat crisis, the federal government has to make allocations for agriculture sector in the next budget for contingencies.

Increase in inflation was more an administrative issue than a cyclical issue, said the finance secretary while promising to also address this aspect in the next budget.

He said that debt payments were on target and the actual spending in this fiscal year would remain below Rs2.9 trillion of annual allocation. During first half of the fiscal year, Rs1.29 trillion was spent on debt servicing, according to the finance ministry.

"If we get reprieve from the SBP in shape of cut in interest rate, it will reduce our debt servicing," said Baloch.

The secretary finance said that the BISP allocations doubled in this budget to Rs195 billion but we would have to see whether there was some additional space available in the next budget.

Kamoka told the media persons that the BISP spending was less than the budgeted amount and the government will have to relax certain criteria to enhance spending.

The finance secretary said that the issue of Rs2 trillion outstanding debt against the National Highway Authority will have to be sorted out in the next budget.

While commenting on the budget financing, Baloch said that the government would enhance reliance on long-term Pakistan Investment Bonds and would reduce dependency on market treasury bills. 

Published in The Express Tribune, March 12th, 2020.

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