The federal and four provincial governments have proposed Rs1.3 trillion for development spending in the next fiscal year, which is 18% less than the outgoing fiscal year’s original budget, underscoring the lack of fiscal space that will hamper economic growth.
The scarcity of funds has exposed the discontent between the Centre and federating units as Balochistan chief minister staged a walkout from the meeting called to endorse development budgets for fiscal year 2020-21. Sindh too raised objections over ignoring the province while distributing money among the federally funded projects.
The Annual Plan Coordination Committee (APCC) on Thursday recommended a Rs1.312-trillion National Development Budget for fiscal year 2020-21 to the National Economic Council (NEC). Over Rs233 billion will be borrowed from foreign lenders to finance the country’s development needs in the next fiscal year. The Planning Commission deputy chairman heads the APCC meeting. Budgetary allocations for the new fiscal year are lower by Rs292 billion as compared to the original allocation of Rs1.61 trillion for the outgoing fiscal year.
However, in an official statement, the Ministry of Planning said under the special programme for improving the quality of life of common people, Rs100 billion had been proposed. “The total proposed outlay of the PSDP (Public Sector Development Programme) 2020-21 is Rs630 billion,” said the planning ministry. But this Rs100 billion is not officially part of the PSDP until the finance ministry increases the budget allocation and the prime minister approves it.
The APCC proposed Rs536 billion for the PSDP, down Rs165 billion or 24% over the current year’s original budget.
The amount of Rs536 billion is not sufficient to meet requirements of ongoing projects and the government is under pressure to start some new development schemes as well. The NEC has the authority to increase the federal PSDP.
The combined development budget of the four provinces is estimated at Rs783 billion, which is 14% or Rs127 billion less than the outgoing fiscal year’s original allocation.
The government’s decision to cut the federal PSDP by nearly one-fourth highlights the fiscal challenges to its efforts to revive the stalled International Monetary Fund (IMF) programme. The IMF has so far not agreed to allow Pakistan to announce a major fiscal stimulus in the next fiscal year due to unsustainable public debt levels. The IMF has proposed 0.4% of gross domestic product (GDP) as the primary deficit target - the deficit that excludes interest payments.
This leaves no room for the federal and provincial governments to announce big development programmes.
Even the proposed Rs1.32-trillion federal and provincial development outlay would hinge on the FBR’s abilities to achieve the Rs5.1-trillion tax collection target.
Balochistan Chief Minister Jam Kamal boycotted APCC proceedings while protesting against “less preference and strategy for Balochistan projects”. He criticised the planning ministry for ignoring his province in allocation for the development budget.
Projects have remained incomplete for years due to minuscule allocations. For instance, the PSDP 2020-21 document showed that for the Kachhi canal project, Rs2.5 billion had been proposed against the remaining requirement of Rs5.5 billion.
For the Gwadar International Airport, only Rs519 million has been proposed, suggesting no major uptick in work in the next fiscal year too.
Similarly, the Gwadar safe city project was given just Rs50 million against the remaining need for Rs687 million. The project is being implemented since 2016.
Owing to the tight fiscal space coupled with the adverse impact of partial economic lockdown, the federal and provincial governments could not spend their development budgets in the outgoing fiscal year, ending June 30.
Against the original annual allocation of Rs1.61 trillion, the actual development spending is expected to remain at Rs1.2 trillion in the current fiscal year, according to the APCC’s working paper.
As against the original Rs701-billion federal PSDP, the APCC working paper showed expenditure of Rs623 billion in the outgoing fiscal year, 11% less than the budget. Similarly, the provincial development spending has been shown at only Rs540 billion for the current fiscal year, down 41% over the original budget.
Overall, all the federal ministries will get Rs370.7 billion in the next fiscal year, which is Rs50 billion less than the outgoing fiscal year’s spending estimate of Rs420 billion.
The Ministry of National Health Services’ budget has been slightly increased to Rs14 billion against Rs13.7 billion in the outgoing fiscal year. The Higher Education Commission will be allocated Rs29 billion against Rs29.2 billion this year. The education ministry has been allocated Rs4.5 billion, slightly less than the outgoing fiscal year.
For special areas like Azad Jammu and Kashmir and Gilgit-Baltistan, Rs44.8 billion has been proposed in the new budget - equal to this year’s level. An amount of Rs5 billion has been proposed for the climate change ministry, down from Rs7.6 billion, whereas Rs12 billion has been allocated to the Ministry of Food and Agriculture and Rs800 million to the Ministry of Industries.
For financing the schemes recommended by members of the National Assembly and Senate, a budget of Rs24 billion has been allocated.
The Ministry of Finance has been given Rs50.5 billion, including Rs40 billion for the districts merged into Khyber-Pakhtunkhwa and erstwhile Federally Administered Tribal Areas. The Ministry of Railways’ budget has been increased to Rs24 billion. The Water Resources Division has been given Rs75.8 billion, down from Rs85.7 billion or 11.5%. The government has allocated Rs16 billion for the Diamer-Bhasha dam project for the next fiscal year.
The National Highway Authority budget has been cut to Rs110 billion as against Rs155 billion in the current fiscal year. Pakistan Electric Power Company (Pepco) will get Rs35 billion.
Published in The Express Tribune, June 5th, 2020.
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