Budgetary allocations depend on IMF’s nod

ISLAMABAD: With the decision to jack up development outlay by Rs100 billion from earlier allocation of Rs800 billion to Rs900 billion for the upcoming budget 2021-22, the government has decided to revisit the Budget Strategy Paper (BSP) for creating increased fiscal space for utilising more resources for combating the COVID pandemic.

The government has decided to freeze current expenditures and only salaries increase in the range of 15 to 20 percent will be made part of the budget. However, all this will depend on how the IMF responds to all these budgetary allocations as important round of virtual discussions is expected to take place in the first week of June, 2021 between the two sides.

It is relevant to mention here that the federal cabinet had approved Medium Term BSP for 2021-22 to 2023-24 when former finance minister Dr Abdul Hafeez Shaikh was playing the shots and after his removal, Shaukat Tarin was made the Minister for Finance. He had announced to revise the Budget Strategy Paper (BSP) and this exercise was done as the government decided to increase the allocation of development budget for the next fiscal year 2021-22.

Under the revised BSP, the government wants to jack up the budget deficit target from earlier envisaged target of 6 percent of GDP to 6.5 percent of GDP with the intention to utilise increased resources for development projects in the coming fiscal year. However, the government will have to seek IMF’s permission for increasing the budget deficit target by 0.5 percent of GDP. It indicates that the government will have more fiscal space of Rs262 billion to utilise more resources towards social sector, especially combating the Covid-19 pandemic.

The Ministry of Finance has officially communicated to the Ministry of Planning for jacking up the outlay for the Public Sector Development Programme (PSDP) from earlier indicated amount of Rs800 billion to Rs900 billion for the upcoming budget 2021-22. The upcoming budget is expected to be announced on June 11 or 12, 2021 and the Ministry of Finance is waiting for the approval of Prime Minister Imran Khan for fixing the date.

The Annual Planning Coordination Committee (APCC) is scheduled to meet on May 26, 2021, in order to recommend the annual plan for envisaging macroeconomic targets and federal Public Sector Development Programme (PSDP) to the tune of Rs900 billion in the next budget for 2021-22. The problem arises in recent years that the allocation was made on higher side at both federal and provincial level through national development outlay but its utilisation remained pathetic. At the moment, there are over 1,000 development schemes falling into PSDP list having estimated cost of Rs 7 to 8 trillion for completion of all projects. The phenomena of throw forward has been rising at rapid pace but the dismal pace of utilisation multiplied difficulties. In the outgoing fiscal year, the PSDP utilisation stood at Rs278 billion against released amount of Rs450 billion in the first nine months (July-March) period out of total allocated PSDP funds of Rs650 billion.

The federal government might accelerate utilisation to show maximized figures but effective utilisation of funds would be compromised. The economic experts seemed unanimous that the fear of NAB created difficulties for executing ministries/divisions and departments to utilise allocated funds at desired pace because no principal accounting officer was ready to sign any files for showing utilised funds because he did not want to go through painful process of facing the NAB inquiries on flimsy grounds.