ISLAMABAD: The government has officially clipped the size of the Public Sector Development Progra­mme (PSDP) by a quarter to just Rs600 billion compared to the Rs800bn allocation, citing fiscal constraints.

This will be the second year in a row that the country’s underfunded infrastructure development will rem­ain constrained by drastic cuts even in funds allocated by the parliament.

In the previous fiscal year (2021-22), the development programme was contained at about Rs550bn against a budget allocation of about Rs900bn — almost a 40pc cut — as no funds were released for spending throughout the last quarter (April-June) amid political transition.

The Ministry of Planning and Development on Sunday confirmed that it had authorised the disbursement of Rs129bn for PSDP projects for the fourth quarter (April-June) des­pite financial constraints and disruptions caused by super floods last year.

For second consecutive year, projects face drastic cuts even in funds allocated by parliament

Under the prescribed disbursement mechanism notified by the Planning Commission, it should have authorised Rs145bn. The mechanism required that 20pc of the budget allocations for development projects must be released in the first quarter of the fiscal year, followed by 30pc each in the second and third quarters and the remaining 20pc in the fourth quarter.

As of March 31, the total releases for the federal development projects stood at Rs471.3bn. This was chiefly supported by about Rs101bn foreign inflows for various development projects — almost 40pc higher than budgeted foreign exchange estimates of Rs60bn for the full fiscal year.

Yet out of the Rs471bn authorisation, less than Rs317bn could actually be spent on development schemes in the first nine months of the fiscal year. With the addition of Rs129bn authorised for disbursement in the last quarter, the total would touch Rs600bn by the end of the fiscal year on June 30.

The Planning Commission said that within the fiscal constraints, water resources and Higher Education Commission had been given top priority while authorising Rs129bn for the fourth quarter.

An amount of Rs27bn has now been released for special areas — Azad Jammu and Kashmir (AJK), Gilgit Baltistan and the erstwhile Fata region that has now been merged with Khyber Pakhtunkhwa — taking their total disbursements to about Rs79bn, including Rs51.8bn released before March 31.

The development projects in these three areas would face serious negative impacts of insufficient funding, as about Rs140bn had been set aside in the budget for these areas, but total authorisations have not gone beyond Rs72bn – almost half of the allocation.

This has apparently happened because these regions — AJK, GB and KP — are ruled by the opposition PTI.

Out of Rs129bn, some Rs30b was released to the water resources division to speed up projects like the Diamer-Bhasha Dam, Mohmand Dam, Kachi Canal, Nai Gaj Dam — taking its total disbursements to almost Rs88bn — just Rs10bn short of Rs98bn budget allocation.

Another Rs22bn was released to the Ministry of Communication to expedite projects like the Khuzdar-Kuchlak Road and the dualisation and improvement of Old Bannu Road.

Yet, the communication sector would remain underfunded during the current and may lead to cost escalations and delays as total disbursements for the second would stand at just Rs76bn against an annual allocation of over Rs111bn.

The major amounts released for the last quarter of the current fiscal year also included Rs8bn for the Higher Education Commission, Rs4bn for the Ministry of Housing and Works, Rs8bn for the Ministry of Railways, and Rs5bn for the power division.

The power sector was a key area that attracted foreign assistance more than estimated in the budget. It received Rs67bn foreign exchange inflows in the first nine months against the annual allocation of Rs41bn.

The official data showed that all the federal ministries were authorised only Rs333bn in the July-March period against their annual allocation of Rs561bn, even though the disbursement mechanism required that they should have received about Rs465bn during this period.

The two corporations of power division and communication received a total of Rs137bn in the first nine months against the annual allocation of Rs152bn.

The planning division said the government had constantly been struggling to cope with the economic challenges and has taken several initiatives for the country’s development, particularly the development of Balochistan, which was badly devastated in last year’s floods.

The ministry said it was committed to allocating funds for development projects despite financial constraints, and the release of Rs129bn for the PSDP would be a significant step towards achieving the country’s development goals.

Published in Dawn, April 17th, 2023