ISLAMABAD: Amid complaints of flooding National Highway Authority (NHA) with unviable road projects and over Rs400 billion cash development loans (CDLs) by the government, the Ministry of Finance on Tuesday announced that it would not provide funds for unapproved projects this year.

Testifying before a parliamentary panel, three key federal ministries reported as many major decisions relating to future fiscal policy. Lively discussions followed as various ministries explained their position, sometimes challenging each other.

The meeting of the Senate Standing Committee on Planning, Development and Reform was presided over by Senator Agha Shahzaib Durrani.

At the outset of the meeting, Communica­tions Secretary Jawwad Rafique Malik said his ministry had moved a summary to the Economic Coordination Committee of the Cabinet, telling it NHA was no more interested in cash development loans because of overloading of its portfolio with road and motorway projects launched under political decisions. Unless, the mechanism around CDLs was changed, their size would keep growing beyond NHAs’ financial viability. Hence, the practice of provision of CDLs to NHA should be stopped.

Mr Malik also complained that NHA was also not being provided full funds against projects that were part of the Public Sector Development Programme (PSDP) and that remained the case even in the recent two quarters.

Communications secretary says motorway projects were mostly launched under political decisions, though most of them may not be economically viable

CDLs are typically contracted by the federal government at 2-5 per cent interest and relent to various corporations and public sector entities at 14-15pc mark up.

Then, Planning Secretary Zafar Hasan told the panel that he was moving a summary to the Executive Committee of the National Economic Council for approval so that he could place 20pc of the total allocated funds at the disposal of the line ministries in the first quarter without waiting for their demands.

Mr Hasan was followed by Joint Secretary of Finance Ministry Javed Iqbal Khan who said the Ministry of Finance would not disburse funds for unapproved projects during the current fiscal to avoid waste of public money. He explained that the finance ministry could not have CDLs acquired for development projects on its books because of the IMF programme to keep a check on fiscal deficit.

He said it should also be appreciated that the government was also raising funds from the market in the form of Pakistan Investment Bonds and other instruments to meet various responsibilities and financed partly through return on CDLs.

During a review of PSDP releases of last quarter of fiscal year 2018-19, the planning secretary told the meeting that last year’s PSDP was initially of Rs1 trillion and later rationalised to Rs675 billion, including Rs531bn of local and Rs144bn foreign component. The actual amount released in the previous financial year was Rs678bn i.e. Rs3bn more than the actual PSDP.

The committee also listened to the ministries of communications, power, water and finance on the state of releases in the last quarter. It was surprised to know that NHA was not released any money in the last quarter and expressed concern over it.

The planning secretary said NHA’s allocated budget last year was Rs188bn and it was disbursed Rs251bn -- 134pc of the actual budget.

This was unacceptable to Communications Secretary Jawwad Rafique who said disbursement reached 134pc or Rs251bn against Rs188bn allocation because the government actually received Rs173bn in foreign assistance against its budget estimate of Rs72bn, and reached 240pc of the budget estimated and had nothing to do with PSDP releases. On the other hand, the planning division released only Rs78bn from local component against an allocation of Rs116bn, or just 67pc. As such, the local component was reduced as foreign inflows increased. NHA’s request for disbursements in the last quarter of last fiscal was declined without intimation.

Such a practice, Mr Rafique said, hampered project implementation and resulted in cost overruns. He said about Rs19.6bn funds against “work done” in various projects were not released by the fiscal ending on June 30, 2019.

Mr Rafique bemoaned that road and motorway projects were mostly launched under political decisions and CDLs against such projects were thrust upon NHA though most of them might not be economically viable. For instance, the Karachi-Quetta coastal highway and roads around Gwadar would remain unviable for NHA even for years due to limited traffic.

He said NHA’s portfolio had gone beyond Rs2.5tr and its CDLs alone went past Rs400bn. “NHA cannot finance these liabilities even if it sells all its assets.”

Planning Secretary Hasan said in the first quarter of the current fiscal, the NHA share against allocated funds amounted to Rs13.2bn and about Rs10bn had so far been released. The communication secretary said about Rs3bn interest on CDLs was deducted at source and even the remaining amount had not yet reached the NHA as the sanction was still floating somewhere between the ministry of finance and the Accountant General of Pakistan-Revenue (AGPR) as the first quarter was coming to an end within a couple of days.

Javed Iqbal of the finance ministry said NHA’s funds in the last quarter of previous year were not released due to late demand. The communication secretary’s response was that many letters and reminders were written for urgent disbursements, but though the finance ministry sanctioned the release, it later blocked actual disbursements by writing an urgent letter to the AGPR at the last moment.

The planning secretary told the committee that the total disbursement to the ministry of water stood at 103pc of total allocation. Regarding four selected PSDP- funded projects, the panel was informed that Rs603 million was demanded by the power division and only Rs80m released.

The committee expressed displeasure over non-implementation of its recommendations made in June for PSDP 2019-20 during the budget session.

Published in Dawn, September 25th, 2019