Govt doubles PSDP spending to Rs705b

Spending surges as IMF programme ends raising questions over fiscal discipline

ISLAMABAD:

Just before the close of the last fiscal year, the coalition government accelerated development spending, doubling it to Rs705 billion within two months—a move that raises questions about claims of fiscal discipline and the quality of spending in the country.

As the International Monetary Fund (IMF) programme ended in April, the government opened the purse strings for spending on parliamentarians’ schemes, highway projects, and provincial nature schemes, according to a comparison of development expenses from the end of April to June.

Details show that from July last year until this week, the government spent Rs705 billion under the Public Sector Development Programme (PSDP) 2023-24, which ended on June 30th.

Planning Ministry sources revealed that when the fiscal year ended on Sunday, the booked expenditure amounted to Rs638 billion. They said the expenses grew to Rs705 billion after the close of the fiscal year, with about Rs70 billion of spending made before June 30th but booked after the fiscal year ended.

There is a possibility that total PSDP spending in the previous fiscal year might end up at Rs720 billion.

The Pakistan Democratic Movement (PDM) government had allocated Rs940 billion for development but kept a tight lid on spending until the end of April. The moment the IMF programme ended, the government accelerated spending.

By the end of April, PSDP spending was Rs353 billion, according to an earlier statement by the planning ministry. However, it doubled within the past two months to Rs705 billion, as shown by the latest statement.

The government recklessly spent during the past two months on provincial projects, parliamentarians’ schemes, and the National Highway Authority. The real concern was booking expenditures after the close of the fiscal year, said the sources.

When contacted, finance ministry spokesman Qamar Abbasi said no funds were spent after June 30th. He added that the difference might be due to some government entities not being linked to the planning ministry’s systems.

The Rs705 billion spending was still Rs235 billion or 25% less than the total budget approved by Parliament for the last fiscal year. For the new fiscal year, the government has set aside Rs1.150 trillion for development spending after initially proposing a Rs1.4 trillion budget.

The IMF has declared Pakistan’s PSDP “unaffordable” due to limited fiscal space, as the country needs a total of Rs12 trillion to complete already approved projects. At the current pace of allocations, it will take more than 12 years to complete just the ongoing schemes.

However, the coalition government has also approved new projects for inclusion in this fiscal year’s PSDP, with 19% of the new development budget set aside for these schemes.

Details showed that spending on some schemes that were earlier halted picked up during the past two months. In January this year, the Special Investment Facilitation Council (SIFC) and the National Economic Council (NEC) had stopped further funding of parliamentarians’ schemes and provincial nature projects.

However, spending on parliamentarians’ schemes rose from Rs43.5 billion by the end of April to almost Rs50 billion. The PDM government had authorised Rs61.3 billion for these schemes, but the interim government slowed down the process.

Spending on provincial projects, special areas, Azad Jammu & Kashmir, and Gilgit-Baltistan also picked up in the past couple of months. Two months ago, total spending on provincial projects was Rs55 billion, which has lately jumped to Rs108 billion.

Similarly, National Highway Authority (NHA) spending increased from Rs57 billion in April to Rs120 billion by the end of the fiscal year.

Development spending on water resources projects rose from Rs52 billion two months ago to Rs165 billion now.

The Ministry of Finance has developed a habit of slowing down releases during the first three quarters of the fiscal year, then suddenly opening the tap.

With a rise in current and development spending, the government’s debt requirements also surged in May. According to the State Bank of Pakistan, there was an increase of Rs1.73 trillion in federal government debt in May alone—an average of Rs56 billion per day. The total federal government debt jumped to Rs67.8 trillion by the end of May.

Spending on Pakistan Atomic Energy Commission projects remained at Rs23 billion in the last fiscal year. The National Transmission and Dispatch Company and Pakistan Electric Power Company (PEPCO) spent Rs55 billion on their projects, up from Rs39 billion two months ago.

An amount of Rs3.5 billion was spent on the prime minister’s initiatives by the end of the fiscal year, up from Rs1.5 billion two months ago.