By Staff Reporter
ISLAMABAD: Pakistan’s newly elected coalition government has reached a consensus that spending cuts in development projects in the next fiscal year are the best way to stabilise the country’s fragile finances hit by expensive energy imports.
Prime Minister Shehbaz Sharif has pitched Rs700 billion funds for public development projects in FY23 budget and a push to scrap lawmakers’ discretionary funds worth Rs70 billion
The former government had allotted Rs70 billion for the SDGs schemes in the outgoing fiscal year, which was supposed to be utilised by respective Deputy Commissioners on the recommendations of Parliamentarians belonging to the area/constituency.
However, there is no way to track how these funds were utilised for the execution of small development schemes. Initially, these schemes were based on 50/50 cost-sharing between the center and provinces, but the latter did not match the former’s share.
Pakistan is currently locked in talks with the IMF on the outstanding 7th review which, if it manages to pass, will bring the stalled $6 billion funding programme back on.
According to the fiscal framework shared with the IMF during the parleys, the government has agreed to cut Public Sector Development Programme (PSDP) allocation down to Rs700 billion from previous Rs900 billion.
The Annual Plan Coordination Committee (APCC) is scheduled to meet on June 1, 2022, for recommending an annual development outlay and macroeconomic framework to the National Economic Council (NEC).
The NEC is the highest economic decision-making forum in the country, and it is expected to meet under the chairmanship of PM Sharif ahead of the unveiling of the next budget. The tentative date for the NEC meeting is June 7, 2022.
On the developmental front, the escalating throw-forward is a major concern. The total cost of around 1168 development projects in the list of PSDP for 2021-22 escalated to Rs 6.1 trillion and with the inclusion of development schemes executed by corporations through self-financing, the total cost soared to Rs8-trillion-mark.
“With the allocation of Rs700 billion in the budget, there will be insufficient resources available for meeting the requirements of even ongoing development projects. There are projects in the list of PSDP that will not be completed within the next 15 to 20 years, keeping in view their allocations on an annual basis,” one top official said.
A classic example is the case of the Higher Education Commission (HEC). Hundreds of commission’s schemes are part of the PSDP list. Curiously, the government is going to allocate a development budget of Rs46-48 billion for it, while recurring expenditures of ongoing projects stand at Rs146 billion.
Ironically Sharif-led government will, with all its might, shove around 200 new development schemes into the programme. It’s evident from Central Development Working Party’s (CDWP) continuous meetings to approve new projects. This practice will go on till the budget on June 10, 2022. All this just to make those projects part of PSDP for next budget 2022-23 with PMLN stamp on them.
Initially, the government had indicated a resource envelope of Rs500 billion for the PSDP in the next budget but then Ahsan Iqbal, Minister for Planning, requested Miftah Ismail, Minister for Finance, to jack up the allocated amount. Initially the figure was Rs800 billion, but it was reduced during the finalisation of the fiscal framework for the IMF talks in Doha.
“We have proposed Rs700 billion for PSDP for the coming budget and the Ministry of Economic Affairs will inform us about the foreign funding available for execution of foreign-funded development projects,” another top official said.
The Ministry of Planning has prepared a National Development Framework (NDF) but it requires input and approval of the new regime. This development framework recommends abolishing the execution of packages in the provinces through PSDP funding. It all depends on how much political pressure this government can take to ensure fiscal prudence in the budget-making process.
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