Tuesday May 21, 2024

If IMF target not met, govt to move mini-budget or cut development budget

By Our Correspondent
August 25, 2019

ISLAMABAD: In the wake of rapidly worsening fiscal position and for fulfilling the IMF condition on primary deficit, the government is left with no other options but to make policy choices either to go for mini budget or slash down development budget.

Top official sources said that the policy choices will have to be made in first half of the current fiscal year as the IMF mission was expected to visit Islamabad by end of October or early November to review the first quarter performance on account of envisaged targets on all fronts of the economy. In case of non-fulfillment, there will be option for evolving agreement with the staff for requesting the Fund’s Executive Board to grant waiver and suggest measures to fulfill all required agreed targets. Even with blessing of Uncle Sam, this time the IMF seems to remain quite tough for Pakistan in upcoming reviews.

The IMF has made part of performance criteria to bring down the primary deficit to 0.6 percent of GDP in the current fiscal year from projected 1.8 percent of GDP for the last fiscal year that ended on June 30, 2019. However, the primary deficit projected for the last fiscal year could not be achieved and economists are estimating that it might escalate to go beyond 3.5 percent of GDP for the fiscal year 2018-19. Lately, the government is now relying upon FBR’s collection in first quarter and under the IMF agreement the FBR will have to collect Rs1072 billion in first three months from July to September 2019. “In case of shortfall on FBR front then the government will have no option but to present mini budget or slash down the development programme in order to bring down the primary deficit” said the official.

Now the PTI-led government has already slowed down the releases of development funds in the current fiscal year through imposition of condition on ways and means. It means that Finance Ministry will issue No Objection Certificate (NOC) for release of funds of over Rs500 million from first day of this ongoing fiscal year.

With imposition of condition in shape of ways and means on funds release of exceeding Rs500 million from Finance Ministry’s Budget Wing has already slowed down the releasing of funds. The dwellers of P-Block (Planning Ministry) are discussing in internal meetings that the condition on ways and means from first quarter (July-Sept) had only resulted into creating multiple lairs on funds releasing mechanism. In such circumstances, they have even deliberated upon that the role of Planning Commission proposed to be abolished and principle accounting officer of each ministry/division should directly submit their demand to Finance Ministry. Against the allocated amount of Rs701 billion for Public Sector Development Programme (PSDP) the government has released only Rs15.4 billion till the latest update on official website however, the sources said that total release had gone up to Rs21 billion. With the proposal of releasing 20 percent funds in first quarter, out of rupee component the development funds of Rs80 billion should be released till September 30, 2019 deadline.

The Office Memorandum of Finance Ministry stated that funds for current and development expenditure shall be released at the level of 20% each for Quarter 1 and Quarter 2, and at the level of 30%-of each for Quarter 3 and Quarter 4, except the funds required for payment of salaries and pension would be released @ 25% of budget for each quarter. The cases relating to international and domestic contractual/obligatory payments that are beyond the above limits shall be considered on case to case basis and relaxation shall require prior approval of the Finance Secretary; Organisations/entities that are provided single-line budget shall be required to provide their annual budget including detailed head-wise expenditure and own receipts for current financial year and last financial year; All payments shall be made through the pre-audit system of the Accountant General Pakistan Revenue (AGPR), or through Assignment Account procedures issued by the Finance Division. Any direct payment through the State Bank of Pakistan shall be made as a special case, with the prior approval of the Finance Secretary; Proposals for supplementary grant/technical supplementary grant shall be routed through the Budget Wing of Finance Division on the enclosed Proforma, before these are approved/endorsed by the Finance Secretary/Finance Minister in charge/Adviser to the Prime Minister on Finance and Revenue for onward submission to the Economic Coordination Committee of the Cabinet.

The strategy for release of funds relating to Public Sector Development Programme (PSDP) will remain the same as above except following” No funds shall be released for un-approved projects; Funds for Quarter 1, not exceeding Rs500 million, shall be recommended/released by the Planning, Development and Reform (PD&R) Division. Amounts exceeding Rs500 million shall be referred to Budget Wing of Finance Division for ways & means clearance; Funds for quarter 2 onwards will be recommended by PD&R after due examination/scrutiny and shall be forwarded to Finance Division for ways and means clearance along with cash work plan and second utilisation report of funds duly reconciled with AGPR/Accounts Office and approval of Principle Accounting Officer of concerned Ministry/Division; Funds would not be released for unapproved projects. Further, if for any project, no funds have been released during the first two quarters, only 40 percent allocation would be released for remaining two quarters and PSDP releases would be made for each quarter and release for two quarters would not be made in one go.

The cases that are approved through ways and means clearance shall be sent back by Finance Division to respective ministries/divisions under intimation to Ministry of Planning, Development & Reforms and sanction letter addressed to AGPR for release of funds would be issued by concerned ministry/division duly endorsed by Finance Division, the OM concluded.