Finance ministry plans Rs600b PSDP for next fiscal

Planning ministry to face tough time as its financing needs stand at Rs1.1tr


Shahbaz Rana April 28, 2020
Adviser to the prime minister on finance Dr Abdul Hafeez Shaikh. PHOTO: EXPRESS/File

ISLAMABAD: The finance ministry has indicated an allocation Rs600 billion for the Public Sector Development Programme (PSDP) for the next budget that will keep the planning ministry walking a tightrope to meet the financing needs of ongoing projects as well as funding the new initiatives.

The finance ministry has started sending indicative budget ceilings to various departments as the government is considering announcing the budget on June 5. However, no final decision has been made about the budget date as the country is dealing with the coronavirus pandemic.

The government has also decided to shorten the approval process of the development budget and the Priorities Committee meetings might not take place this year.

The indicative budget includes Rs530 billion spending for core development activities being undertaken under the umbrella of the PSDP. The remaining Rs70 billion have been proposed for projects being administered by the finance ministry including meeting the military’s certain development needs from the PSDP.

The Rs600 billion development envelope size for the fiscal year 2020-21 is Rs101 billion or 14.4% less than the original budget of this fiscal year. The actual spending in this fiscal year, however, is likely to remain around Rs525 billion due to lower than expected revenue collection and development activities coming to a grinding halt because of the partial lockdown in the country to stem the spread of Covid-19 infections.

The proposed ceiling is also less than around Rs1.1 trillion financing needs that the planning ministry has worked out for next fiscal year starting from July.

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Planning Minister Asad Umar on Tuesday reviewed the indicative budget for the next fiscal year. The total financing needs of the ongoing and already approved projects are estimated at nearly Rs6 trillion.

The Rs600 billion is equal to 1.3% of the projected sized of the GDP in the next fiscal year, which makes it one of the lowest development spending.

However, the economic activities are expected to remain suppressed in at least the first quarter of next fiscal that will limit the spending capacity of the government ministries and departments.

The indicated development budget is largely in line with the projections made by the International Monetary Fund in its latest report on Pakistan. The IMF has projected a Rs588 billion federal PSDP for fiscal year 2020-21.

For this year, the core PSDP spending budget was Rs551 billion while another Rs150 billion was earmarked for the projects and initiatives being undertaken by the finance ministry.

Now, against Rs551 billion, a sum of Rs530 billion has been proposed for this fiscal year that will include some additional fiscal responsibilities that were earlier funded by the finance ministry.

Unlike this year when the finance ministry reserved Rs71 billion for merged districts of the Khyber-Pakhtunkhwa, it is proposed that the package for the entire province including erstwhile FATA should be part of the core PSDP.

This would further thin out the resources as Rs530 billion is hardly half of the financing needs of the ongoing projects for next fiscal year.

Sources in the planning ministry said it would be impossible to undertake new initiatives without increasing the size of the PSDP.

However, the indicated budget is subject to the approval of various forums, including the National Economic Council, which is headed by Prime Minister Imran Khan.

Usually, the planning ministry gets roughly Rs25 billion higher than what the finance ministry initially indicates. It is possible that the sum of Rs530 billion could be jacked up to Rs550 billion.

The government has decided not to convene the meetings of the Priorities Committee -- an inter-ministerial body that reviews ministries’ requests for current and development budgets. The Priorities Committee meetings take place in April every year that finalise the recommendations for Annual Plan Coordination Committee (APCC). The APCC then makes the recommendations for the National Economic Council, which is headed by the prime minister.

The government had allocated Rs701 billion for the PSDP for this fiscal year. As of April 22, the planning ministry authorised Rs526 billion for spending. But few ministries have started surrendering excess funds, as no development activities are taking place.

In the current fiscal, the government had authorised Rs30.2 billion spending on projects recommended by parliamentarians, Rs27 billion by Higher Education Commission, Rs154.5 billion by the National Highway Authority, Rs38 billion for military needs from the development budget and Rs23 billion for erstwhile FATA.

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