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Sunday June 16, 2024

Govt slashes PSDP from Rs727bn to Rs350bn

The government has slashed the Public Sector Development Program (PSDP) from Rs727 billion to Rs350 billion for the current fiscal year under the revised fiscal framework being shared with the IMF

By Mehtab Haider
November 26, 2022
Govt slashes PSDP from Rs727bn to Rs350bn. The News/File
Govt slashes PSDP from Rs727bn to Rs350bn. The News/File

ISLAMABAD: The government has slashed the Public Sector Development Program (PSDP) from Rs727 billion to Rs350 billion for the current fiscal year under the revised fiscal framework being shared with the IMF, The News has learnt.

Top official sources confirmed to The News on Friday that the revised fiscal framework seeks slashing the development outlay by more than 50 percent. It has been cut down from Rs727 billion to Rs350 billion in order to keep the budget deficit and primary surplus within the desired and agreed limits.

Even the IMF seemed reluctant to accept the revised macroeconomic and fiscal framework because these documents were prepared on the basis of a wish list. For instance, the SBP’s decision for hiking the discount rate by 100 basis points, increasing from 15 to 16 percent, would hike the debt servicing requirements by Rs170-180 billion.

Now the Ministry of Planning, Development and Special Initiatives was left with no other option but to contest it in the strongest words by going to plead before Prime Minister Shehbaz Sharif next week that if such an axe had fallen on the development, then it would destroy the public investment initiatives and growth would be compromised in the highly- compressed atmosphere.

According to official data of the PSDP shared by the Ministry of Planning, out of the total allocated amount of PSDP of Rs727 billion, the Ministry of Planning authorised Rs241.2 billion but the spending of all ministries, divisions and corporations stood at Rs98.7 billion in the first four months (July-Oct) period of the current fiscal year.

The Ministry of Planning made a verbal request to the Ministry of Finance for jacking up the PSDP allocations up to Rs500 billion at least for avoiding the axing of important projects but the Ministry of Finance refused to accommodate its demands, arguing that the IMF program did not allow increased spending, keeping in view the stringent fiscal requirements.

Now the Ministry of Planning has decided to write to PM Shehbaz Sharif for apprising him that if the PSDP amount was cut down, it would cause harm to the already contracting economy of the country. When the floods struck Pakistan, the GDP growth might go down to around 2 percent for the current fiscal year against the initially envisaged target of 5 percent.

“We will send a letter to PM Shehbaz Sharif next week apprising him about the negative impact of the reduced public sector investment on overall economic activities,” said one top official and added that the fiscal situation worsened but the bureaucracy preferred that the axe fell on the development front after its failure to increase tax revenues.

Meanwhile, the IMF’s Resident Chief in Pakistan held a meeting with the Ministry of Planning high-ups whereby the government was busy preparing a reconstruction/implementation plan till the first week of next month (December 5 is the deadline).

The question arises when the flood reconstruction would be divided into short, medium- and long-term phases comprising one to two years, 3 to 5 years, and 5 to 10 years respectively, then how the reduced amount of Rs350 billion will be able to launch even the first phase of reconstruction work in the current fiscal year.

The Donors Conference is expected to be held in January 2023 in Paris or New York but its exact schedule was not firmed up.