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Review of PSDP in budget 2018-19

Adviser to Prime Minister on Finance, Revenue and Economic Affairs, Dr. Miftah Ismail has stated the next Budget of fiscal year 2018-19 would not have an increased Public-Sector Development Program (PSDP) budget. Mr. Ismail has said the next year’s development budget would be allotted for ongoing current schemes. The Planning Ministry opposes this policy of allotting the budget for current schemes underway. It believes the outgoing government must provide fiscal space in macroeconomic framework for the next government to work with and launch new schemes.

The Finance Ministry has proposed Rs 17.045 billion Public Sector Development Program (PSDP) for 10 projects of Finance Division and 26 projects of provincial finance divisions for the next fiscal year.

The proposed PSDP portfolio of the ministry for fiscal year 2018-19 has been finalized for consideration and inclusion in the consolidated development outlay.

Federal Finance Division projects of Rs 6.874 billion with foreign exchange component of Rs 4.557 billion for the next fiscal year included Debt Management Strengthening Program at Ministry of Finance with the cost of Rs 112.420 million.

Other projects of Finance Division are: construction/extension of audit house, Islamabad, costing Rs 179.656 million; financial inclusion and infrastructure project with the cost of Rs 4.463.64 billion; assessing and strengthening the competition regime in Pakistan, Rs 36.273 million; construction of federal audit complex, Islamabad, Rs 556.756 million; modernization and up-gradation of Pakistan Mint, (phase-II), Rs 350 million; automation of Project of Central Directorate of National Savings (CDNS) phase-III, Rs 452.760 million; construction of National Academy of Public Finance & Accountancy (NAPFA), Islamabad, Rs 679.220 million; renovation & repair of Audit Complex, Lahore, (old PT&T building), Rs 89.332 million; and digitalization of Pakistan Economic Survey, Rs 10 million.

The provincial finance wing (PF Wing) is concerned only with release of funds of Rs 10.170 billion for 26 provincial projects which included one project of Rs 60 million for Punjab, seven projects of Rs 3.234 billion for Sindh, three projects of Rs 900 million of Khyber Pakhtunkhwa and 15 projects of Rs 5.976 billion for Finance Division of Balochistan.

Finance Division is proposing an allocation of Rs 10.170 billion for provincial projects in the PSDP 2018-19 against Rs 17.724 billion allocation for outgoing fiscal year.

The reduction in proposed allocation was made because in the PSDP for the current year an allocation of Rs 9.555 billion has been made for the Greater Karachi Water Supply Scheme (K-IV) project.

Development budget to be slashed by 20 percent

The Ministry of Finance has recommended Rs800 billion development budget for upcoming financial year 2018-19, decreasing it by 20 percent of what it is currently.

This cut could impede the physical progress of around 1,100 schemes,

The Ministry of Planning, Development and Reform was officially informed by the finance ministry regarding its proposal to set the development budget at Rs800 billion for fiscal year 2018-19.

The Rs800 billion proposed development budget set for next financial year was not sufficient. It also includes Rs140 billion quotas for non-core development projects.

The proposed gross development budget of Rs800 billion would reduce the speed of present projects underway which include water sector, national highways and power projects.

The Finance Ministry has proposed Rs800 billion development budget for the next fiscal year, which is one-fifth less than the Public Sector Development Programme (PSDP) for this year and would affect physical progress on almost 1,100 schemes.

The amount is Rs201 billion or 20 percent less than the budget for the current fiscal year 2017-18 that is ending on June 30.

The government would not announce a fattened PSDP on April 27, as the next year’s development budget would be allocated only for ongoing schemes.

The outgoing government has to leave some fiscal space in the macroeconomic framework for the upcoming government to announce new initiatives.

In this fiscal year’s budget, the government had set aside Rs272 billion or 27 percent of the federal development budget for special programs.

Till December 2017, there were 1,022 schemes including 573 ongoing ones. The government requires Rs5.6 trillion to complete work on these schemes.

It has sent a communiqué to the finance ministry, demanding Rs1.1 trillion instead, according to sources in the ministry.

The Finance Ministry was of the view that the outgoing government should not allocate funds for new development schemes and this should be left to the next government.

The planning ministry wanted that at least Rs200 billion should be reserved in the new budget so that the next government may finance projects of its choice.

The Finance Ministry’s insistence to allocate only Rs 800 billion that includes budget for defence-related activities would create problems for those ministries that do not have a say at the highest level in the power corridors.

Most of the Rs 800-billion indicative development budget would go to the National Highway Authority (NHA), Water and Power Development Authority (Wapda) and other priority areas of the government.

The indicative development budget ceiling is 20 percent less than outgoing fiscal year’s Rs 1.001 trillion worth of development budget. The authority has sought Rs 326 billion for 14 China-Pakistan Economic Corridor (CPEC)-related road projects.

Priorities Committee does not discuss the defence budget that is decided at the level of GHQ and the finance minister.

The sources said that for the next fiscal year the defence budget will be roughly Rs one trillion. However, the Ministry of Defence is seeking additional finances for replacing various types of equipment for the armed forces, the sources added.

About 35 percent of the defence budget would go for employees-related expenses, about one-fourth for operating purposes, about 26 percent for creating physical assets and roughly 14 percent of the proposed defence budget would go for civil works, said the sources in the finance ministry.

The President’s Secretariat would get roughly Rs1 billion while the Prime Minister’s Office budget will also be close to Rs1 billion in the next fiscal year.

In the wake of financial constraints faced by the country, the Finance Ministry has slashed down proposed development budget from Rs1, 000 billion in the outgoing fiscal to Rs745 billion, including Rs108 billion for internally displaced persons (IDPs) for the upcoming budget 2018-19.

The government had slashed down the PSDP to the tune of Rs800 billion for the current fiscal year in a bid to restrict the budget deficit in the range of 5.3 percent of GDP.

 

Projects proposed for PSDP 2018-19

Ministry of Industries and Production has proposed 55 new projects for funding under Public Sector Development Programme (PSDP) 2018-19 in order to develop and promote the national industrial sector of the country. It has proposed an allocation of Rs 8329.637 million for the development of these projects in next PSDP as against the Rs 2,737.27 million of the same period last year, said an official of Industries and Production ministry.

The new projects would help in reducing unemployment and poverty by creating new jobs as well as help in skill development. These projects would also help in the provision of training facilities and common machinery pools along with the transfer of technology.

By December 31, the government had released Rs 293.230 million for 13 ongoing projects of the ministry under the PSDP 2017-18, out of which an amount of Rs 234.75 million had been utilized so far.

In PSDP 2018-19, the ministry has proposed 3 projects of Industries and Commerce Department Government of Balochistan, 3 projects of technology up gradation and skill Development Company and one project of Lesbela Industrial Development Authority.

Moreover, five projects relating to Small and Medium Enterprises Development Authority and one project of export processing zone was proposed for financing under the next year’s development programme.

During the fiscal year 2017-18, the Ministry of Planning Development and Reforms has allocated full remaining funds to 4 ongoing projects, which would be completed by June 2018.

The government has decided to slash down proposed allocation for new development projects to just 5 to 7 percent in the upcoming budget 2018-19 against 30 percent projects inserted into the Public Sector Development Programme (PSDP) for outgoing fiscal year 2017-18, it is learnt.

After indication of 25 percent reduction in proposed size of the PSDP to the tune of Rs 750 billion for upcoming budget 2018-19 against Rs 1,001 billion for outgoing fiscal year 2017-18, there has been significant decline in receiving directives from the top man of the country ahead of the coming budget. Everyone knows about fiscal constraints so the ministries have been directed to come up with viable ongoing projects and only a couple hundred new projects could be made part of the PSDP if the ministries/divisions could justify them at relevant forums.

In the wake of electioneering year, it will be impossible for the incumbent regime to do away with inclusion of no new projects into the PSDP. “We will have to include new projects but efforts will be made to restrict number of new projects within the desired limit of 5 percent only,” the sources said.

However, the ministries/divisions have sent out massive demands of funding to the Ministry of Planning at initial stage as the National Highway Authority (NHA) alone has sought allocation of Rs600 billion for the upcoming PSDP for 2018-19 against allocated amount of Rs330 billion for outgoing financial year 2017-18.

The NHA has ignored this fact that the Ministry of Finance has just communicated PSDP size of Rs750 billion, including Rs105 billion for temporarily displaced persons (TDPs) and other programmes, and Rs645 billion for ministries/divisions. “How the NHA demand of Rs600 billion seems feasible, the sources questioned?

“The Ministry of Railways has sought funds for kick-starting Mainline-1 (ML-1) project that is now part of the China Pakistan Economic Corridor (CPEC),” official sources told The News, but added that it was not yet known that how the government would find out cushion to finance the Rs900 billion project as it would escalate throw forward of the PSDP manifold.

The overall proposed allocation of PSDP was cut down by 25 percent bringing it down from Rs1,001 billion in fiscal 2017-18 to Rs750 billion in 2018-19 despite the fact that the Planning Commission had sought over Rs1.1 trillion development budget but so far it was not officially conveyed to the Ministry of Finance.

“The Planning Commission is holding consultations with ministries/divisions and attached departments to exactly ascertain their genuine demands after which a decision will be taken to adjust their projects keeping in view available resource envelop indicated by Ministry of Finance,” said the sources.

The sources said the PML-N-led government inserted 4 to 7 percent new projects into the PSDP in first couple of years after coming into power in fiscal year 2013. Then the government jacked up share of new development projects up to 30 percent in last budget 2017-18, but now the proposed allocation for fresh projects would be reduced significantly in the coming budget keeping in view the resource constraints.

Earlier, there was a viewpoint in Ministry of Finance that no new projects would be made part of the PSDP for next fiscal year, but the planning managers took stance that it was not feasible to insert zero new projects into the PSDP. “It is impossible to stop inclusion of new projects at all,” said the sources, but conceded that only 5 percent new projects could be made part of the next PSDP.

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