Govt may slash PSDP by Rs100 bn

ISLAMABAD: Despite jacking up the budget deficit target from 7.1 to 7.5 percent of GDP, the government is contemplating options for slashing the federal Public Sector Development Programme (PSDP) by Rs100 billion during the current fiscal year.

In an in-camera session meeting of National Assembly Standing Committee on Finance and Revenues that met under chairmanship of Faiz Ullah here at the Parliament House on Wednesday, Secretary Finance Naveed Kamran Baloch informed the committee that the government would remove distortions in salaries of public sector employees working at federal, provincial and in different departments in the upcoming budget for 2020-21.

The Finance Ministry also informed the committee that the government decided to take amount of circular debt parked into Power Holding Company as part of public debt from the next financial year. The Secretary Finance also apprised the committee about Centre’s intentions for transferring more fiscal responsibilities to the provinces in the coming budget because under the existing NFC arrangement the Centre left with no resources after paying debt servicing and transferring resources to the provinces under the NFC arrangement. The devolved subjects in the aftermath of 18th Constitutional amendments needs to be transferred to the provinces in letter and spirit. So the federal government will have to end duplication of work at many avenues.

In case of further revenue shortfall of FBR from revised target of Rs5,238 billion, the government has informed the National Assembly Standing Committee on Finance that one of the options was to release the development funds only up to April 15, 2020 in a bid to reduce the PSDP funding by at least Rs100 billion. The government had envisaged to utilise Rs701 billion on federal PSDP on eve of the budget so it was expected to face cut of Rs100 billion in case of further revenue shortfall faced by the FBR.

The Secretary Finance briefed the parliamentarians on Budget Strategy Paper (BSP) for next budget and stated that the government would allocate funds to fight coronavirus. The FBR’s tax target was expected further cut down from Rs5,238 billion while non-tax revenue target would be jacked up to avoid deterioration of fiscal position.

After the meeting, Chairman of the NA panel Faiz Ullah said that the government was taking a number of steps to reduce inflationary pressures as they released subsidy amount of Rs21 billion to Utility Stores Corporation (USC). He said that the distortions in salary structure of different departments would be done away with during the next budget as salaries would be raised keeping in view the inflationary pressures.

Secretary Finance also told the committee that the government devised short and long-term strategies to reduce the burden of debt in terms of GDP ratio. He said that the government would launch international bonds during the current fiscal year. The privatisation process, he said, would be accelerated to achieve the desired goals. He further told the NA panel that the IMF’s Executive Board would grant approval for release of third tranche worth $450 million under $6 billion Extended Fund Facility (EFF). He said that the government borrowing from the State Bank of Pakistan (SBP) stood at zero in the current fiscal year while the government committed not to issue any further sovereign guarantees.