- No indication of ADPs for KP, Balochistan, GB, and AJK in budget.
- Provincials plans for Sindh, Punjab proposed at Rs700bn, Rs763.7bn.
- Number of federally funded projects being executed by provinces.
ISLAMABAD: Conceding severe financial constraints and cutting down on the development funding under the International Monetary Fund (IMF) programme, the Annual Plan Coordination Committee (APCC) has recommended Rs1,221 billion for development programme at the federal level for the financial year 2024-25.
The government has abolished discretionary funding for parliamentarians under Sustainable Development Goals (SDGs) and did not allocate any amount in the next budget. The government has stopped funding for Earthquake Reconstruction & Rehabilitation Authority (ERRA) for the next budget.
Utilisation of the Public Sector Development Programme (PSDP) faced major cut as utilisation of development funds stood at just Rs379 billion against allocation of Rs950 billion for the current fiscal year 2023-24.
The APCC met Deputy Chairman Planning Commission Dr Mohammad Jehanzeb Khan in the chair on Friday in order to approve PSDP at Rs1,221 billion. The APCC envisaged GDP growth rate of 3.6% and inflation at 12%.
The provincial annual development plans of Punjab and Sindh were proposed at Rs700 billion and Rs763.7 billion, respectively. There is no indication of ADPs for Khyber Pakhtunkhwa, Balochistan, Gilgit Baltistan and Azad Jammu & Kashmir for the next budget.
Out of proposed allocation of Rs1,221 billion PSDP, the government allocated Rs877 billion for infrastructure for the next budget against allocated amount of Rs553 billion in the last budget 2023-24; social sector budget was reduced to Rs83 billion in the coming budget against allocated funds of Rs203 billion in the outgoing fiscal year, and funding for special areas such as AJK and GB were allocated at Rs51 billion. The allocation for merged districts was kept at Rs57 billion. The allocation for Science & Information Technology was jacked up to Rs102 billion for coming budget against allocation of Rs42 billion. The allocation for governance, production sectors, food and agriculture and industries were increased.
The APCC was told that Pakistan’s economy has been facing multiple challenges including severe fiscal indiscipline and deficits in the past few years. Owing to increased development needs of the country, PSDP’s throw-forward has increased from Rs3 trillion in 2013-14 to around Rs9.8 trillion, whereas the size of PSDP allocation and expenditure remained stagnant at an average of Rs630 billion during the same period.
The size of PSDP in term of percent of GDP shrunk over time and reduced from 1.7% of GDP in 2013 to 0.9% of GDP in 2023-24. The size of PSDP is also decreasing in real term due to inflation and depreciation of rupee. “Moreover, due to IMF programme, primary deficit has been managed with cut on PSDP which has worsen the development investment in the country,” the working paper of the APCC stated.
In order to achieve primary surplus under the IMF programme, the APCC was informed that the Finance Division issued a back loaded release strategy at the rate of 15%, 20%, 25% and 40% contrary to NEC approved release strategy for quarters Q1, Q2, Q3 and Q4, respectively.
As per release strategy, out of total releases of Rs131 billion in first quarter of FY2023-24, Rs61.26 billion (46.7% of first quarter releases) were earmarked to SDGs schemes, leaving behind only Rs69.74 billion (53.2% of the first quarter releases) for allocation to all remaining PSDP projects. Further, Rs20 billion diverted to non-development side during the year and 20% (Rs184 billion) cut was made in releases of 4th quarter to maintain the primary budget balance, thereby compressing the size of PSDP 2023-24 to Rs746 billion. Further, Rs29 billion were deducted at source by the Finance Division on account of CDL recovery. Thus, the actual/effective size of PSDP was reduced to Rs717 billion.
There are severe challenges faced for formulation of Ministry/Division wise Indicative Budget Ceilings (IBCs) for PSDP 2024-25 including Rs186 billion liability rollover from 2023-24 due to 20% cut in size of PSDP 2023-24; Thin spreading of PSDP allocation and Rising throw-forward; Additional demands of important projects over and above IBCs; Huge demand for rupee cover against FEC/FA component; Increasing number of new schemes particularly of DDWP level; Needs of post-flood 2022 Rehabilitation (4RF) and 5Es initiatives.
A number of federally funded projects under the sponsorship of Finance Division are being executed by the provinces. Funds to such schemes are generally released to Provincial Account No 1. This results into delay in transferring the released funds to project authorities and reporting of financial progress about a specific project.
During the PSDP reviews, it has been observed that funds are not timely released by provincial Finance Departments to project authorities. In this regard, the Finance Division/CGA on recommendations of Planning Commission devised the procedure of Asaan Assignment Account 2020 which inter-alia, stipulates release of funds to federally funded projects being executed by provinces may be made through Assignment Account to ensure uninterrupted flow of funds to project authorities. The procedure should be fully complied with for all the provincially executed projects under the Finance Division.
Originally published in The News
Source link
