Development budget cut

The unbudgeted rise in current expenditures of the federal government continues to take a toll on development spending

January 22, 2023


The unbudgeted rise in current expenditures of the federal government continues to take a toll on development spending. Just Rs151.42 billion — or 20.82% — of the total revised allocation of Rs727 billion have been spent in the first half (July-December) of the current fiscal year, according to data released by the Ministry of Planning and Development recently. The spending so far is 43.68% less than the amount (Rs268.87 billion) spent during the same period the last year. Under the disbursement mechanism, 20% of the development funds are spent in the first quarter and 30% in the second. This means that 50% of the total allocation — which comes to Rs363 billion — should have been spent on development activities so far this fiscal. So the cut in the first half spending amounts to Rs211.58 billion.

While such a massive cut in development spending is bound to have contributed to economic slowdown and brought down revenue collection, what is even more worrisome is that the government’s overall expenditures are projected to rise further — by about Rs1 trillion more than the target set in the budget due to higher than estimated interest payments and revenue shortfall. This will leave the government with no other option but to resort to additional tax measures in the second half of the ongoing fiscal year. Such is the vicious cycle of the economy.

The government, therefore, needs to look for areas where unnecessary non-development expenditures can be done away with. Reducing the size of the cabinet is one such area. The incumbent coalition government has at its service more than 74 Ministers and Special Assistants to PM who are drawing huge salaries as well as perks and privileges. Other areas include rightsizing the government departments and divisions as well as amalgamating those with similar or overlapping functions. There is no other way out of the vicious cycle resulting from a cut in development spending.

Published in The Express Tribune, January 22nd, 2023.

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