PSDP spending cut to just Rs48b

Economic crisis forces govt to sharply reduce development spending

ISLAMABAD:

An acute economic crisis has forced the federal government to drastically cut the development expenditure in the first quarter of current fiscal year to just Rs48 billion, which is hardly 7% of the annual allocation and less than two-thirds of the official target for the quarter.

Documents of the Ministry of Finance showed that at least 10 ministries did not spend a penny on development works during the July-September period of current fiscal year due to no budget sanctioning.

Another group of 12 ministries received less than 5% of their annual allocation, a reduction made in view of the severity of the economic crisis.

According to the documents, the overall spending under the Public Sector Development Programme (PSDP) was slightly over Rs48 billion during the July-September period. The expenditures were hardly 6.6% of the annual allocation.

Details showed that the Ministry of Planning had authorised Rs120.6 billion for expenditure, but the Ministry of Finance did not release the funds due to fiscal constraints. However, during the same period, the select few bureaucrats did not forget about self-sanctioning 150% executive allowance.

Meanwhile, for the current fiscal year, the National Assembly has approved Rs727 billion for over 1,100 PSDP projects.

According to an office memorandum of the Ministry of Finance issued in July this year, the Ministry of Planning will release 20% of funds for the development budget in the first quarter.

With this allocation, the government should have spent Rs146 billion, but the actual spending was Rs98 billion less than the target. Subsequently, the Ministry of Finance instructed that the spending should be curtailed to 10% of the annual allocation.

Pakistan has been passing through a serious economic crisis. Only in June this year, the government entered a tight monetary condition with the International Monetary Fund (IMF) and committed that it would create a primary budget surplus of Rs153 billion – the net revenue after paying the debt servicing cost.

The target is unrealistic, which has now forced the government to curtail all expenditures except on debt servicing, defence and paying salaries to the employees.

Furthermore, the World Bank in its recent report titled “Pakistan Economic Update” stated that the country would have a primary budget deficit of 3% of GDP, largely because of the devastating floods.

It is, therefore, believed that the slow release of budget will adversely impact the construction work on the ongoing schemes, which will further escalate their cost.

Despite these challenging times, the coalition government has also added four dozen new projects to the PSDP, after the publication of budget books. It diverted Rs23 billion from the ongoing schemes to fund the new projects in the current fiscal year.

Total development expenditures during the first quarter were 41% less than the same period of last fiscal year, when the previous government spent Rs82.5 billion under the PSDP.

During the current government tenure, out of Rs48 billion, an amount of nearly Rs40 billion was given to just five ministries. The maximum spending of Rs13.6 billion was booked by the Ministry of Water Resources, followed by Rs10 billion under the head of special areas and projects – a term used to finance the schemes located in provinces, but were being executed under political expediency.

Summing up sector-wise spending, the power sector spent Rs8.4 billion, or 20% of the annual allocation. The Pakistan Atomic Energy Commission’s spending was Rs4.3 billion, or 17% of the annual budget. The information technology ministry spent Rs3.2 billion, or 51% of the annual budget.

There were 10 ministries that could not spend money despite receiving authorisation from the Ministry of Planning. One of them is the Ministry of Climate Change that, despite securing Rs1.9 billion authority from the Planning Ministry, could not get final approval from the Ministry of Finance.

Besides, the ministries like the Cabinet Division, commerce, finance, housing and works, information, maritime affairs, narcotics control, petroleum, Pakistan Railways and religious affairs did not spend any funds in the first quarter.

Likewise, there were 12 departments that could spend only 1% to 5% of the annual allocation in the first quarter. The Higher Education Commission could spend Rs1.3 billion, or 3% of the annual allocation.

In addition to this, the spending by the Ministry of Health stood at Rs112 million, or 1% of the annual budget. The Aviation Division spent Rs15 million, or 2% of the annual development budget while the National Highway Authority spent Rs1.6 billion, or 1% of the annual budget.

 

Published in The Express Tribune, October 13^th, 2022.

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