Govt relaxes deadline for PSDP

Move aimed at accommodating projects of ruling coalition in budget

ISLAMABAD:

Prime Minister Shehbaz Sharif has relaxed the deadline for submission of new projects to accommodate schemes of the coalition government in the new budget – a move that will further thin out fiscal resources and put pressure on the public purse amid looming default.

The National Economic Council (NEC) – the constitutional body responsible for approving the economic framework and development plans – had set March 31 as the deadline for the ministries to submit their projects to the Planning Commission for approval and then inclusion in the Public Sector Development Programme.

“The prime minister being the chairman of the National Economic Council has been pleased to grant one-time special dispensation for relaxation in the deadline set by the NEC, ie March 31, 2022 for facilitating the submission of PC-I of new projects to the Planning Commission for inclusion in the PSDP 2022-23,” said an office memorandum.

The orders mark a departure from the prudent fiscal management and are in total disregard to the prevailing economic conditions that warrant a freeze on all expenditures until the default threat is averted.

Sources told The Express Tribune that the Planning Commission was not in favour of relaxing the condition and the move had been initiated by the Prime Minister’s Office to accommodate development schemes of the new coalition government.

The government did not even wait for the meeting of NEC, which is scheduled for June 7. All the provincial chief ministers are members of the NEC.

A day after the relaxation in the deadline, the government also convened a meeting of the Central Development Working Party (CDWP) to consider new projects, approve them and include in the PSDP 2022-23.

In order to make room for the CDWP meeting in the midst of a tight budget approval schedule, the government on Wednesday postponed the Annual Plan Coordination Committee (APCC) meeting.

The APCC meeting has been delayed so that new projects are approved before bringing those to the APCC and then to the NEC.

The CDWP meeting agenda had over a dozen schemes having value of around Rs1.4 trillion, including Rs934 billion power generation component of the Diamer-Bhasha Dam project.

The project is being brought to the table despite the fact that the dam part of the project lacks funding and its cost has escalated to over Rs600 billion.

The decision to relax the condition and make new schemes part of the next PSDP without their proper appraisal and without conducting pre-CDWP meetings is also in contravention of the Public Finance Management Act of 2019.

Section 5 of the law states that all government expenditures, whether from a recurrent or development demand for grant, shall be based on well-defined plans and the strategic priorities approved in budget strategy paper.

The government is also in violation of the PFM Act, as it could not get the Budget Strategy Paper (BSP) approved from the cabinet against the deadline of April 15. It was the responsibility of the finance ministry to get the BSP approved by the cabinet.

The PFM law also states that all development project proposals shall be subject to a technical approval process. Technical approval shall only be granted to projects which are compliant with the standards and procedures set by the Planning Commission.

Also, findings and recommendations of the independent quality assurance reports and cost and benefit analysis and risk assessment, where required as per Sub-section (2) Section 14, shall be taken into account by these forums while considering the development project proposals, according to the Act.

Various government ministries and departments have submitted over 490 projects worth Rs3.5 trillion for their inclusion in the PSDP. But these projects cannot be included in the Intelligent Project Automation System (IPAS), until the March 31 deadline was relaxed.

The current PSDP comprises 1,164 projects that require Rs6.3 trillion for completion, leaving no room for financing any new small or big project.

With the inclusion of new projects, there will be hardly any money to finance these projects.

There is also still confusion about the financing envelope for the PSDP 2022-23.

On May 7, the finance ministry had proposed Rs500 billion for the PSDP while keeping in mind the limitations set by the IMF. But on May 9, the finance ministry informed the planning ministry to increase the ceiling to Rs800 billion.

Lately, the planning minister has hinted that the envelope could be reduced to around Rs600 billion, which would not be sufficient to even complete the ongoing projects.

Initially, the previous Pakistan Tehreek-e-Insaf (PTI) government secured Rs900 billion for the PSDP for the outgoing fiscal year, which has now been cut to Rs480 billion.

Published in The Express Tribune, June 2^nd, 2022.

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