PSDP spending

Published October 28, 2024

THE government’s decision to ‘rationalise’ its Public Sector Development Programme must help it ensure efficient utilisation of scarce resources, avoid cost and time overruns due to delays in the execution of projects, stop growth in the huge backlog of incomplete schemes, and bring transparency to spending. A committee formed to suggest development spending reform has been tasked with developing standards for the selection of schemes “including an annual limit on the total size of new ones entering the PSDP portfolio” based on sound financial logic to prioritise economically viable projects. It will also give recommendations for the execution of schemes within specified timelines, and with clear ownership.

The government has undertaken this exercise to meet one of the structural benchmarks of the new $7bn IMF programme. However, economic experts have long been pleading for PSDP reform to boost infrastructure for higher growth, create much-needed social goods, and act as an enabler of private investment. A PIDE study suggests that public investment has not succeeded in driving up economic growth. With a drastic decline in development investment from 7.5pc of GDP in 1992 to just above 1pc today, the PSDP’s impact on growth is further affected, leading to a rapid increase in the throw-forward of incomplete projects. With new schemes added to the PSDP every year, because of political reasons, the decreasing allocations to a large number of projects are resulting in cost and time overruns, turning many of them economically unviable. A recent IMF report has concluded that Pakistan requires Rs10.7tr to complete schemes left unfinished for decades. On top of that, there is no mechanism to hold accountable those responsible for the massive losses to taxpayers. With greater responsibility being shifted to the federating units in line with the 18th Amendment, it should also be made mandatory for the provinces to undertake a similar exercise for optimal use of their own development investments.

Published in Dawn, October 28th, 2024

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