ISLAMABAD: The caretaker government has spent Rs191 billion on development projects in the first seven months of this fiscal year – an amount that is more than Rs300 billion or 61% below the target and underlines the consequences of tough economic conditions.
The Ministry of Planning announced on Tuesday that development expenditure reached just under 191 billion rupees in the July-January period of the current fiscal year. His one-page summary sheet showed that the expenditure was only 38% of the amount approved by the Ministry of Planning for expenditure for the period.
According to the Development Fund Release Strategy, the government was to spend Rs 494 billion or 52% of the total annual budget in the first seven months of the fiscal year. However, actual expenditure was Rs 300 billion short of the target.
The interim 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 during the first quarter, the government did not meet the target. The IMF gave a waiver to make Pakistan eligible for a tranche of $706 million.
The significant gap between authorization and actual expenditure highlights problems in the release process, slow progress in systems and the ability to spend allocated funds. The deliberate slowdown in development spending aims to offset higher current spending.
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During the first talks on the review, Pakistan assured the IMF that it would accelerate spending after admitting a delay in Public Sector Development Program (PSDP) spending. Pakistan has also committed to expedite the process of prioritization and rationalization of PSDP in line with the recommendations to achieve savings of at least PR 61 billion.
Last month, the National Economic Council asked the provinces to take up 68 projects worth Rs 121 billion. The NEC also banned further spending on parliamentary programs and prime ministerial initiatives. These three steps will save the Center Rs 202 billion in costs, including Rs 112 billion during the current fiscal year.
However, the chief ministers of Sindh and Khyber-Pakhtunkhwa (K-P) have raised questions about 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 called Pakistan’s PSDP “unaffordable” due to limited fiscal space, noting a total cost of Rs12 trillion to complete the approved projects, requiring more than 14 years.
A report by the Ministry of Planning showed that 19% of the total expenditure in the seven months, or Rs 35.6 billion, was on MPs’ programmes. The last PDM government had approved an expenditure of Rs 61.3 billion on these programmes, but the interim government has slowed down the process. The annual budget is Rs 90 billion.
For the current fiscal year, the government has estimated a foreign loan release of Rs 75 billion. Disbursements reached Rs 43 billion in seven months.
Development budget allocations for provinces, special areas, Azad Jammu and Kashmir and Gilgit-Baltistan were affected during the first four months. Against the annual allocation of Rs 170 billion, only Rs 40 billion was spent, with the largest head of expenditure still following MP schemes.
National Transmission and Dispatch Company (NTDC) and Pakistan Electric Power Company (PEPCO) have spent Rs 7 billion on their projects, with an annual allocation of nearly Rs 55 billion.
The National Highways Authority (NHA) has an annual budget of Rs 157 billion. The Ministry of Planning approved an expenditure of Rs 94 billion, but the actual expenditure remained only at Rs 21 billion. Rs 30 billion was spent on water sector projects against an annual budget of Rs 90 billion.
Only Rs 261 crore was spent on the Rs 70 billion Special Program for Prime Minister’s Initiatives. The interim government stopped these releases, which former prime minister Shehbaz Sharif earmarked for projects of his own taste.
Where the federal government spent little on development, the provinces stepped up spending under this head. Provincial spending exceeded projections in the first quarter, partly due to the payment of Rs 115 billion by the Punjab government to settle debt from commodity operations and faster implementation of the PSDP.
