The government has been claiming credit for initiating big development projects. This is visibly so but with consequential steep rise in expenditure on this account. Perhaps it could also be one reason for some impact on budget deficit and high imports affecting the balance of payments situation.
Development spending in the next financial year would be slashed. Adviser on Finance said recently that its size is proposed to be kept at 750 billion in the upcoming budget as compared to Rs1000 billion during the outgoing financial year. This means a net reduction of Rs250 billion and to that extent lessening of the burden on total expenditure. This might be a one-time solution but the need would remain finding a balance between the economy’s resource position and development needs.
The annual public sector development programmes have been and continue to be dependent on both domestic and external borrowings. The obvious result is rising debt-servicing liability which for the current year it was estimated at Rs1360 billion. In the current expenditure of the federal government, debt-servicing is the biggest item. Not long ago, legislative limit had also been put on borrowing but that does not imply that borrowing should remain on higher side.
Quite often borrowing for development programmes is justified that once new projects start coming on stream, they will create job opportunities, add to national income and create in the economy the capacity to repay the borrowed money. While the first two objectives appear to have been achieved in considerable measure, the last one demands closer attention and improvement. If the economy has been acquiring the capacity to adequately meet debt-servicing obligations, the much talked about budget deficit would also start coming down.
At the same time it is also necessary to keep current expenditure under control and increase government’s income. The objective could be to reach a stage where the given resources could throw some surplus for development spending. It might be termed as quite a difficult task but it is certainly not impossible. A visible movement in that direction would be encouraging.
While a new government will come to power after the forthcoming elections, it should pay particular attention as to what should be the size of annual development programme. Obviously, funds have to be allocated for the ongoing projects on priority. The vital decision would be to determine the areas and number of new ones.
Usually it is said that good economics make good politics. The message in the saying is clear meaning that while a government has to cater to the competing claims on the economy it ought to initiate projects for the ultimate welfare of the people. Pakistan’s economy has reached a point where such a goal would not be out of reach.