Govt proposes allocating Rs700bn for PSDP in next budget

ISLAMABAD: With recommendations to abolish the allocation of discretionary funding of Rs70 billion through parliamentarians under the Sustainable Development Goals (SDGs), the government has proposed an allocation of Rs700 billion for the Public Sector Development Program (PSDP) for the next budget of 2022-23.

The last PTI-led government provided Rs70 billion for the SDGs program in the outgoing fiscal year which was supposed to be utilised by the respective deputy commissioners on the recommendations of parliamentarians belonging to the area/constituency. There is no evaluation of how this money is utilised for the execution of small development schemes. Initially, this scheme was devised on a 50:50 basis cost-sharing by the Centre and the provinces but the federating units did not provide their share of 50 percent.

According to the fiscal framework shared with the IMF during the ongoing talks held in Doha (Qatar) for finalising the outstanding 7th Review for reviving the stalled $6 billion program, the government has curtailed the allocation of PSDP at Rs700 billion for the next budget 2022-23 against the initially allocated amount of Rs900 billion for federal PSDP in the outgoing fiscal year’s budget of 2021-22.

The Annual Plan Coordination Committee (APCC) is scheduled to meet on June 1, 2022, for recommending an annual development outlay and macroeconomic framework to the National Economic Council (NEC). The NEC is the highest economic decision-making forum in the country and it is expected to meet under the chairmanship of Prime Minister Shehbaz Sharif ahead of the announcement of the next budget. The tentative date for the holding of the NEC meeting is expected on June 7.

On the developmental front, the escalating throw-forward is a major concern. The total cost of around 1,168 development projects in the list of PSDP for 2021-22 escalated to Rs6.1 trillion and with the inclusion of development schemes executed by corporations through self-financing, the total cost soared to Rs8 trillion mark.

“Now with the allocation of Rs700 billion in the budget, there will be insufficient resources available for meeting requirements of even ongoing development projects. There are projects in the list of PSDP that will not be able to be completed in the next 15 to 20 years, keeping in view their allocations on annual basis,” one top official confided to The News here on Thursday.

There is a classic example in the case of the Higher Education Commission (HEC) as hundreds of schemes are part of the PSDP list. Now the government is going to make an allocation of Rs46-48 billion for the development budget in the next fiscal year while recurring expenditures requirement stood at Rs146 billion.

It’s an irony that the new government led by Prime Minister Shehbaz Sharif is going to include around 200 new development schemes and nowadays the convening of Central Development Working Party (CDWP) meetings continued on a frequent basis and would continue till the announcement of the budget on June 10 in order to ensure the listing of projects into the PSDP for the next budget 2022-23.

Initially, the government indicated a resource envelop of Rs500 billion for the PSDP in the next budget but then minister for planning Ahsan Iqbal held a meeting with the Minister for Finance Miftah Ismail and requested to jack up the allocated amount. It was initially agreed that the allocation of Rs800 billion for the federal PSDP would be earmarked but later on the fiscal framework was finalised for holding parleys with the IMF.

“We have proposed Rs700 billion allocations for the PSDP for the next budget 2022-23 and the Ministry of Economic Affairs (EAD) will inform us about the foreign funding available for execution of foreign-funded development projects,” top official sources said.

The Ministry of Planning prepared the National Development Framework (NDF) but it requires input and approval of the new government led by PM Shehbaz Sharif. This development framework recommends abolishing the execution of packages in the provinces through the PSDP funding. It is yet to be seen how much the government decides to absorb political pressures to ensure fiscal prudence in the coming budget.