Despite the Ministry of Planning’s earlier announcement of Rs700 billion Public Sector Development Programme (PSDP) for next financial year, the Finance Division has indicated only Rs500 billion for federal PSDP as compared to Rs900 billion allocated by the previous government of PTI for the current PSDP.
According to officials at the Ministry of Finance, the ministry is going to fix the federal PSDP at Rs500 billion for financial year 2022-23 for financial constraints. The ministry has also reduced the PSDP of the fiscal year 2021-22 to Rs500 billion from Rs900 billion with the reduction of Rs400 billion.
The Ministry of Planning, Development and Special Initiatives (MoPD&SI) had earlier decided to slash PSDP to Rs500 billion in 2021-22 as per agreement with International Monetary Fund (IMF) and asked Ministries/Divisions to send their recommendations though the amount budgeted under this head was Rs900 billion.
Keeping financial constraints in view the planning ministry had sought to cut the number of ongoing schemes by over 90% due to the fast-shrinking fiscal space.
According to sources, the MoPD&SI may however try to show the total outlay of federal PSDP to Rs800 billion by including at least Rs100 billion as foreign financing for the schemes and an estimate of Rs200 billion under the public-private partnership model.
Earlier both the ministry of finance and planning had agreed to allocate Rs800 billion for the PSDP in the next fiscal year. However, it seems the decision of fixing PSDP at Rs500 billion has been made after holding talks with the International Monetary Fund (IMF).
The finance division had also indicated the same reduced PSDP (Rs500 billion) early last month which is equal to the reduced size of the PSDP for the current fiscal year ended on June 1, 2022.
The current PSDP comprises 1,164 projects that require Rs6.3 trillion for completion, leaving no room for financing any new small or big project.
Initially, the previous Pakistan Tehreek-e-Insaf (PTI) government secured Rs900 billion for the PSDP for 2022-23, which it later reduced to Rs600 billion. Last month the finance ministry had further cut the ongoing fiscal year’s PSDP to just Rs500 billion keeping the precarious economic condition. So far, Rs383 billion has been spent out of the Rs500 billion budget while the finance division, as per sources, stopped releases of the fourth quarter of the fiscal year.
According to officials at the finance ministry, following the budget indication related to PSDP, the ministry of planning would ask all ministries, organizations concerned to propose projects for PSDP accordingly.
The Ministries/ Divisions that will face maximum cuts in their PSDP are Finance Division, Water Resources Division, National Highways Authority, Power Division, Planning Division and Housing Division.
According to sources, unlike the limited budget and financial constraints, various ministries and organizations, through their budget proposals, have proposed over 1,000 projects for financing and sought around Rs2 trillion from the government.
Insiders informed that for fiscal constraints the center may not be able to fund the ongoing/approved projects under federal PSDP in provinces which are more than 325 in numbers. Furthermore, the center may also not be in position to continue giving shares to the earlier announced development plans/programs initiated in including erstwhile Fata, Gilgit-Baltistan and AJK.
It may be recalled here that Planning Minister Ahsan Iqbal last month had claimed that a proposal to allocate Rs700 billion for the federal PSDP for the next financial year was being considered.
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According to officials at the Ministry of Finance, the ministry is going to fix the federal PSDP at Rs500 billion for financial year 2022-23 for financial constraints. The ministry has also reduced the PSDP of the fiscal year 2021-22 to Rs500 billion from Rs900 billion with the reduction of Rs400 billion.