In the midst of financial crunch, the government has managed to keep development spending on track for the first time in three years as it released Rs148 billion or almost half of the annual budget in the first half of the current fiscal year.
From July through December, the government released Rs148.2 billion for the federal Public Sector Development Programme. The amount is around 10 per cent higher than releases usually made in the first half of a financial year.
The Planning Commission’s spending plan shows that 40 per cent of the annual budget is spent in the first half while the remaining 60 per cent is utilised in the second half of the year. Analysts attribute the unusual but healthy trend to the general elections, due in early 2013, as the government wants to complete maximum number of projects ahead of the vote.
“From July to December, over Rs148 billion was released for development spending,” said Rana Assad Amin, Special Secretary of the Ministry of Finance. He said actual spending might be a few billion rupees less than the releases as payments are made against the completed work.
It is for the first time in three years that development spending has crossed the first-half target. Less development expenditure during previous years not only pulled back economic growth but also affected revenue collection.
In the previous three years, the development budget was cut to meet non-development expenditures like interest payments, defence and electricity subsidies. In 2010-11, the government spent Rs216 billion on development schemes against actual allocation of Rs300 billion.
More than anticipated foreign loans also played a crucial role in increasing development expenditure. Against foreign aid component of Rs39 billon for the whole year, the country got Rs37 billion in the first half, said Rana Assad Amin.
After suspension of foreign budgetary support due to delay in reforms, the government moved to remove hurdles in the way of project assistance. The Economic Affairs Division, a unit that deals with foreign lenders, has been holding project review meetings with the World Bank and the Asian Development Bank to ensure timely release of project funds.
For the current year, the government has earmarked Rs300 billion for federal development programmes including Rs10 billion for the Earthquake Reconstruction and Rehabilitation Authority.
Of the total amount, the Planning Commission’s share is Rs220.5 billion. The commission said it released Rs88.8 billion in the first half, which was Rs40.2 per cent of the annual budget. However, the releases have not been equally distributed among all sectors. The communications ministry got a lion’s share of Rs15.4 billion while the Higher Education Commission received Rs8.9 billion.
For schemes of Pakistan Railways, Rs5 billion was released. Chashma-3 and Chashma-4 nuclear power plants got Rs4.6 billion while Rs7.2 billion was given for land acquisition for Diamer-Bhasha Dam.
For special programmes of parliamentarians, the government has earmarked Rs33 billion for the entire fiscal year. In the first half, over Rs22.5 billion was released which may divert money from other projects as the government will try to keep overall spending within the ceiling of Rs300 billion.
This year, the government has estimated budget deficit at Rs990 billion or 4.7 per cent of national output. However, the State Bank of Pakistan, in its annual report, said the gap between expenses and income may widen up to 6.5 per cent or Rs1,368 billion.
Published in The Express Tribune, January 1st, 2012.
COMMENTS (1)
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ
Obviously the pick-up in releases and spending is related to the up-coming elections. But it will have an impact on the year-end budget deficit and spark a new round of inflation and reserve loss.