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Development spending 61% below target | The Express Tribune



The caretaker government spent 191 billion rupees on development projects in the first seven months of this financial year – a sum that represents more than 300 billion rupees, or 61% less than the target, and which underlines the implications of difficult economic conditions.

The Planning Ministry reported on Tuesday that development expenditure stood at just under Rs 191 billion during the July-January period of the current fiscal year. Its one-page summary sheet showed that spending was only 38% of the amount the planning ministry had authorized for spending for that period.

As part of the strategy to release development funds, the government was expected to spend Rs494 billion, or 52 per cent of the total annual budget, in the first seven months of the financial year. But actual spending was Rs 300 billion short of the target.

The caretaker government has slowed spending as part of its plan to meet the annual primary budget surplus target set by the International Monetary Fund. Despite the slowdown in spending in the first quarter, the government did not meet its target. The IMF granted a waiver to make Pakistan eligible for the $706 million tranche.

The significant gap between authorization and actual expenditure highlights the difficulties associated with the process of releasing funds, the slow progress of projects and the capacity to spend allocated funds. The deliberate slowdown in development spending aims to offset the increase in current spending.

During the first review negotiations, Pakistan assured the IMF of accelerating its spending after admitting delays in Public Sector Development Program (PSDP) spending. Pakistan also committed to expedite the process of prioritization and streamlining of the PSDP as per the recommendations, with the aim of achieving savings of at least Rs 61 billion.

Last month, the National Economic Council asked provinces to take charge of 68 projects costing 121 billion rupees. The NEC also prohibited any additional spending intended for parliamentarians’ projects and the Prime Minister’s initiatives. These three steps will save the center a cost of Rs202 billion, including Rs112 billion in the current financial year.

However, the chief ministers of Sindh and Khyber-Pakhtunkhwa (KP) have raised questions over the caretaker government’s mandate to take financial decisions with long-term implications. The Sindh chief minister also cited Section 230 of the Election Act which limited the role of the caretaker government.

In its separate review of Pakistan’s public investment framework, the IMF deemed Pakistan’s PSDP “unaffordable” due to limited fiscal space, noting a total cost of Rs12 trillion to complete the approved projects , which requires more than 14 years.

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The report from the Ministry of Planning showed that 19% of total expenditure in seven months, or Rs35.6 billion, was devoted to parliamentarians’ projects. The last PDM government sanctioned expenditure of Rs 61.3 billion for these projects, but the caretaker government slowed down the process. The annual budget is Rs90 billion.

For the current financial year, the government has estimated the release of Rs75 billion in foreign loans. Disbursements reached Rs43 billion in seven months.
Development budget allocations for provinces, special zones, Azad Jammu and Kashmir and Gilgit-Baltistan have been earmarked in the first four months. Of the annual allocation of 170 billion rupees, only 40 billion rupees have been spent, the largest item of expenditure following the parliamentarians’ plans.

The National Transmission and Dispatch Company (NTDC) and Pakistan Electric Power Company (PEPCO) spent Rs7 billion on their projects against an annual allocation of nearly Rs55 billion.

The National Highway Authority (NHA) has an annual budget of Rs157 billion. The Planning Ministry authorized expenditure of 94 billion rupees, but the actual expenditure remained at only 21 billion rupees. An outlay of Rs30 billion was spent on water sector projects, against an annual budget of Rs90 billion.

Only 261 million rupees were spent under the 70 billion rupees special program for the prime minister’s initiatives. The caretaker government stopped these releases, which former Prime Minister Shehbaz Sharif had reserved for projects of his choice.

Where the federal government spent little on development, the provinces accelerated spending in this area. Provincial spending exceeded forecasts in the first quarter, partly thanks to a 115 billion rupees payment by the Punjab government to clear debt related to commodity operations and faster implementation of the PSDP.

Published in The Express Tribune, February 14th2024.

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