Govt may reduce development budget to Rs530bn in FY21 

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ISLAMABAD: As the COVID-19 pandemic has left limited room for the government to spend on development projects, the Centre has planned to allocate only Rs530 billion to Public Sector Development Programme (PSDP) for the next fiscal year, a reduction of almost Rs171 billion from the current fiscal year.

According to an official privy to this development, Planning Minister Asad Umar, while chairing a review meeting of the indicative budget on Saturday, has informed that development projects being proposed in the next budget would be within the limit of indicative budget ceilings of the Ministry of Finance.

The Finance Division had reportedly asked the planning ministry to limit the federal PSDP to Rs530 billion.

However, according to sources, another Rs70 billion may be allocated for projects being administered by the finance ministry, making the size of total spending on development projects to Rs600 billion.

As the planning ministry usually adds around Rs25 billion in the indicative budget of the Finance Division, the total sum of Rs530 billion could be jacked up to Rs550 billion. But sources at the Ministry of Planning claim that the ministry is not forcing the Finance Division to increase the PSDP.

During the review meeting, which was also attended by Sindh Governor Imran Ismail via video link, Asad Umar proposed maximum releases for Sindh in the current financial year as there would be limited room for the same in the next fiscal year.

According to sources, since there are funds available due to a halt in economic activity during the past two months, the Planning Ministry wanted to at least release sufficient funds for Karachi-based projects.

As of May 8, the planning ministry had authorised Rs541 billion for expenditures. But few ministries have started surrendering excess funds, as no development activities are taking place.

By further squeezing the size of the development budget in its indicative ceiling, the Finance Division has made it difficult for the planning ministry to adjust the number of important projects being proposed by various ministries and lawmakers, besides meeting the financing needs of ongoing projects.

The Rs530 billion development envelope size for the fiscal year 2020-21 is Rs171 billion less than the original budget of this fiscal year, which is Rs701 billion. The actual spending in this fiscal year, however, is likely to remain around Rs525 billion due to lower than expected revenue collection and development activities coming to a grinding halt because of the lockdown in the country.

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