Development programme: Spending shrinks with aim to restrict budget deficit

Power, infrastructure and social uplift schemes get less-than-required funds.

ISLAMABAD:

The federal government has made a hefty cut in development spending, slicing it by Rs61 billion in the first half of the current fiscal year, slowing down disbursements to power, infrastructure and social uplift schemes.

The step has been taken in an effort to remain within the budget deficit ceiling of 4.9% of gross domestic product, agreed with the International Monetary Fund (IMF), after tax revenues fell short of the target.



From July to December, the government spent Rs148.8 billion on development programmes, restricting expenses to 28.3% of the annual development budget of Rs525 billion, show official documents.

According to the financial management programme set by the Ministry of Finance, the government can spend 40% of the annual budget in the first half of the fiscal year while the remaining will be consumed in the second half.

However, the development spending in the first six months was Rs61.2 billion or 11.7% less than the prescribed limit.

The IMF has already projected that this year’s development budget will be slashed by about 10% in an attempt to avoid the adverse impact of a sharp fall in tax revenues on the budget deficit.

Compared to the Public Sector Development Programme (PSDP) of Rs525 billion approved by the National Assembly, the IMF’s latest report shows that spending will not be more than Rs477 billion, a drop of Rs48 billion or 9.2%.

However, first-half expenses suggest that the PSDP will be even thinner than the IMF’s projection made last month.

This will be the second consecutive year when the PML-N government will fail to fully consume the PSDP despite repeated assurances of Finance Minister Ishaq Dar. Last year, actual development spending stood at Rs435 billion, missing the National Assembly-approved expenditures by one-fifth or Rs105 billion.

Details of spending in the first half of the current fiscal year show the power sector received only 16% or Rs10.2 billion of its annual budget of Rs63.6 billion, though electricity shortages necessitated the release of funds on a fast track.



Expenditures on water schemes recorded some improvement as the sector got Rs14.8 billion or 34% of its annual allocation.

Road projects were another area where spending stood below one-fifth of annual allocation. The government released Rs21.7 billion to the National Highway Authority against the annual target of Rs111.6 billion.

The Pakistan Millennium Development Goals and Community Development Programme got nothing compared to full-year allocation of Rs12.5 billion.

Similarly, the Rs36 billion earmarked for the Special Federal Development Programme for provinces and special areas remained unutilised. However, in coming days, Rs2 billion could be released out of this pool to Sindh for the Green Line Karachi Metro Bus Project.

Talking to The Express Tribune, a senior official of the Ministry of Planning and Development argued that the government had not formally cut the development budget, approved by the National Assembly.

The release of funds, he said, slowed down as the projects, which had not yet been approved by the authority concerned, could not be provided required financing. The other reason was no disbursement to block allocations like the millennium development goals, which would pick up in coming months.

However, there were instances where releases were higher than half-year ceilings. The Pakistan Atomic Energy Commission got Rs23.8 billion or 46% of its annual budget while the Ministry of Housing and Works received 84% of the annual target in the first half.

The Ministry of National Health Services, Regulations and Coordination were provided three-fourth or Rs20.4 billion of its full-year budget.

Published in The Express Tribune, January 6^th,  2015.

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