Public Sector Development Programme: Govt releases Rs437b against the approved Rs525b

Cut in spending meant to meet IMF condition of restricting deficit to 4.9% of GDP.

ISLAMABAD:

The government could not live up to its promise of protecting public sector development spending and has released only Rs437 billion till the second last day of the outgoing fiscal year. The move was aimed at meeting a key condition of the International Monetary Fund (IMF).

As against the Parliament-approved Public Sector Development Programme (PSDP) of Rs525 billion, the Ministry of Planning and Development released Rs437 billion till June 29, according to documents seen by The Express Tribune.

The squeeze on releases came to meet the key condition of the $6.6-billion programme, which is to restrict the budget deficit to 4.9% of Gross Domestic Product in fiscal year 2014-15.

Despite tightening PSDP spending, the government is still likely to miss the budget-deficit condition and may have to seek a waiver from the Executive Board of the IMF during the eighth review of the programme, which is expected in August.

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The actual development spending always remains slightly lower than the releases made by the Planning Ministry. The final figure of the spending will be available by the end of next month.

It will be the consecutive second year when the PML-N government could not protect public sector development spending. In the last fiscal year, the federal government had also cut PSDP by Rs105 billion. As against the Parliament’s approved budget of Rs540 billion, the spending in fiscal year 2013-14 had remained at Rs435 billion.

An official of the Planning Ministry said the releases were expected to increase to Rs456 billion by today (Tuesday), as the ministry was expecting Rs13 billion of foreign funding and another Rs6 billion will be released against a few other projects.

In the sixth review report of the bailout programme, the IMF had projected Rs467 billion spending under the PSDP.

Finance Minister Ishaq Dar had promised that the public sector development spending would be protected at Rs525 billion despite a steep shortfall in tax revenues.

The government has drastically slashed the development budget allocated for underdeveloped areas of the country. As against the budgetary allocation of Rs36 billion, the government released only Rs3 billion as of June 29, according to the Planning Ministry documents.

An amount of Rs36 billion had been allocated for under developed areas in Sindh, Balochistan, Khyber-Pakhtunkhwa, Azad Jammu & Kashmir and Gilgit-Baltistan.

In order to inflate development spending, the government has already shifted expenses on Temporary Displaced Persons (TDPs), affected by Operation Zarb-e-Azb, from the current budget to development budget. Planning Ministry officials said that Rs17 billion expenses on TDPs and Prime Minister’s Youth Package will also be included in the outgoing fiscal year’s development spending.

In a meeting of the National Economic Council held on June 1, the federal government had shown the revised size of the outgoing fiscal year’s PSDP at Rs542 billion including Rs17 billion of current expenditures.

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Even after including Rs17 billion current expenses, the PSDP spending will be not more than Rs475 billion, said the officials. It will be 87% of the revised size of the PSDP of Rs542 billion, which was approved by the NEC.

Out of Rs437 billion that the government has released so far, an amount of Rs229 billion was spent through various federal ministries. The federal ministries were given Rs67 billion less than their original allocations of Rs296 billion.

Another amount of Rs143 billion was spent through National Highway Authority and Water and Power Development Authority. The total allocations for these two entities were Rs175 billion.

The military-run Earthquake Reconstruction and Rehabilitation Authority (ERRA) got almost double than its allocation of Rs5 billion. The government has so far released Rs9.7 billion to the ERRA. For the Parliamentarian schemes, which are financed under the garb of Millennium Development Goals, the government released the entire budget of Rs12.5 billion. 

Published in The Express Tribune, June 30^th,  2015.

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