Islamabad:
The government is set to approve a record RS4.1 trillion national development budget for the center and provinces in the midst of a lack of resources that have forced it to ban small -scale projects and not to include federally funded provincial specific new schemes for next year.
Despite the threat of blocking water from India, the government has proposed to reduce the allocation of the water sector by 45% or RS119 billion to only RS140 billion for the financial year 2025-26 against the originally approved budget.
Nevertheless, the proposed Federal Public Sector Development Program (PSDP) reflects the coalition government’s political priorities with intense road infrastructure allocations, while funding for education, health and water has been significantly cut for the financial year 2025-26.
The annual plan Coordination Committee (APCC) will today (Monday) approve the national development budget expenses for the federal government, four provincial governments and the special areas of Pakistan.
Planning Minister Ahsan Iqbal is chairman of the meeting, which will also recommend 4.2% economic growth and 7.5% inflation targets for the next financial year.
The federal PSDP is completed by a committee composed by Prime Minister Shehbaz Sharif, aiming to meet the needs of the coalition partners.
APCC will approve a cumulative RS4.1 trillion outlay for development, which will be RS300 billion or 8% higher than this financial year’s original budgets approved by the national and four provincial assemblies.
There has been a reduction in the federal PSDP, but the four provincial governments will cumulatively use 28% higher than this year’s budget from their own resources. Provinces are rich thanks to the poorly planned National Finance Commission Award from 2010.
APCC will approve the RS1 trillion federal PSDP, down with RS400 billion compared to the original budget of this financial year, which was approved last June. The federal government will borrow RS270 billion from abroad to finance this RS1 trillion expenses.
The four governments plan to use RS2.8 trillion, higher with RS609 billion or 28% during this year’s original budgets. The provincial governments will also borrow RS802 billion from abroad to finance their projects.
Another RS288 billion will be used by the state -owned companies outside the federal budget.
Punjab is on an expenditure tube as it plans to use RS1.19 trillion, which is higher with RS346 billion or 41% compared to this financial year’s budget.
Khyber-Pakhtunkhwa will follow Punjab with RS440 billion expenses, also higher by 63%.
The Sindh government plans to use RS887 billion, higher with RS60 billion or 7%. The Balochistani government is proposing RS280 billion for development, which is higher with RS32 billion over the originally approved budget.
No fiscal space
The federal and provincial governments relieve their purses despite the country facing challenging economic conditions. The federal government, limited by limited fiscal space, once again allocates RS1 trillion, even though it only managed to spend RS600 billion during the first 11 months of the current financial year.
APCC will approve not to include any new provincial nature project in PSDP due to tax restrictions. It will also approve a moratorium by approving up to RS1 billion projects until the IMF program is completed. However, an exception is also proposed from the moratorium in the event of “compelling relationship”.
Despite tax restrictions, projects that relate to wounded topics and provincial nature are financed under the federal PSDP. About 30-40% of PSDP goes to the provincial nature projects that have seriously undermined progress with mega and core projects of national importance, according to the Ministry of Planning.
The projects of national importance are delayed due to thin spread funding, and about 90% ongoing projects have been revised with cost increase and exceeding time, it added.
APCC can also issue instructions that the Development Funds should not be redirected for non-development purposes during the financial year.
APCC will review whether projects with great influence focused on completion within 3-4 years will be funded. The proposed PSDP prioritizes foreign funded and core and projects with great effect.
However, a brief look at the proposed PSDP suggests that, despite hard economic conditions, the government has made an impact on political nature projects by increasing allocations to National Highway Authority and the provincial nature projects.
The allocation to the provincial projects has been proposed to be increased from RS19 billion to RS93.4 billion. Likewise, the NHA budget has been proposed to be increased to a huge RS229 billion, up with RS49 billion or 27%.
In order to make room for higher expenses for political priorities for the coalition partners, the government has proposed to drastically reduce the financing of the water and electric sector projects.
The Power Sector budget is proposed to be reduced by RS72 billion or 41% to RS104 billion. The award of the water sector is proposed to be cut by RS119 billion to only RS140 billion. Diamer Basha Dam Project gets RS35 billion in the next financial year compared to RS40 billion this year, according to the sources.
The Federal Ministry of Education Budget has been proposed to be reduced by 27% to RS20 billion, while the higher education commission’s budget is proposed to be reduced by RS21 billion or 32% to RS45 billion.
Despite challenges, the government has also retained an award of RS50 billion to parliamentarians’ schemes under the umbrella in the Sustainable Development Goal program.
About 1,071 development projects with a cumulative cost of RS13.4 trillion are currently under implementation.
They need another RS10.2 trillion for completion that the Ministry of Planning’s states would take more than 10 years to complete.
Compared to the original RS1.4 trillion, Federal PSDP approved in the budget remained the actual expenses of the end of May of RS596 billion, which is hardly 43% of parliament’s approved budget.
The government admits that Pakistan, the Withan IMF program, is undergoing some restrictions, and that the challenge that is ahead of us is to exploit the limited resources in a way to achieve maximum return from each project to meet goals and goals described in the national economic transformation plan, the 5ES-based five-year and “Uraan Pakistan-Program”.
There are also implementation questions, and during recent reviews, the Ministry of Planning had identified 183 projects, mostly at DDWP level, as problematic and slowly moving. It has been recommended to hood or close all these projects by June 2025.
By limiting or closing such projects, the RS1 trillion could be stored and fiscal space could be created for rapidly moving ongoing projects as well as new priority projects with great influence, according to a proposal for APCC.
