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Budget 1999-2000 based on too optimistic estimates

  1. The need for expansion in PSF sector
  2. Budget based on optimistic estimates
  3. The power generation dilemma
  4. Quality Steel on right track
  5. Agricultural constraints and prospects
  6. The LPG terminal of Engro Paktank

Paucity of funds forced the economic managers to cut PSDP funds

From Shamim Ahmed Rizvi, Islamabad
August 16 - 22, 1999

The opinion and analysis of independent economists that the Budget 1999-2000 was based on too presumptuous and optimistic estimates. This has been confirmed with the latest exercise being carried out in the Ministry of Finance to cut the Public Sector Development Programme (PSDP) by about Rs 8 to 10 billion in view of the paucity of funds. A source in the finance ministry confided that the Ministry would soon move a summary proposing the reduction of PSDP from Rs 116.3 billion by at least Rs 8 billion.

This is the first downward revision during the first 5 weeks of the current fiscal. As in the past year, there were many revisions in the remaining 11 months of the year. There were 3 downward revision in the PSDP cutting it by almost 25 per cent then the original allocation in the outgoing financial year. The current year PSDP allocation was almost 26 per cent above the revised estimates of the last year and doubts were expressed by many about the sanctity of this amount.

Minister for Finance and Commerce Ishaq Dar, was non-committal at his post-budget conference on June 13 with regard to giving any assurance that the size of the PSDP for 1999-2000 would not see any cut, as has been witnessed since last several years. "This historic PSDP which got an unprecedented increase of over 26 per cent, will eventually be adopted by the National Assembly. "I therefore do not think there is any need for any special legislation for it," he Maintained.

The government has been thinking over the issue and in some of the meetings, Prime Minister Nawaz Sharif expressed his concern over the application of cuts on the development budget. It was in the backdrop that he had reportedly asked the concerned authorities to go for certain legislation so that no government could think of reducing the PSDP.

But now, even the officials of the Planning Commission do not believe that the new PSDP would not witness cuts. It is said that all the successive governments have been using the PSDP funds for their own development schemes and have avoided to provide adequate funds for social sectors like health, education, rural development and women emancipation. The PSDP also becomes the first casualty as and when any thing unusual happens like the imposition of international sanctions, a calamity or any other unforeseen situation.

The PSDP for 1998-99 had been approved at Rs. 110 billion but eventually it shrank to Rs. 85 billion. Some said that even after that cut, considerable funds from the PSDP allocation were used for the Prime Minister's development schemes like mega projects of motorways. Members of the donor community, specially the World Bank, the IMF and the Asian Development Bank, have been insisting that no cut should be applied on the social sectors but successive governments have not paid any heed to their advice and continued to slash the PSDP according to their requirements.

The Planning Commission has been suggesting large allocations for health and education but experience shows that not more than 2 per cent of GDP has ever been spent on these sectors, with the result that there is no real increase in the literacy rate and no improvement in the primary health facilities specially in the rural areas.

The Prime Minister has been seeking an additional amount of Rs. 80-100 billion for his own special development schemes such as airports, motorways, yellow cabs and the yellow tractor schemes. The officials of the Ministry of Finance and the Planning Commission had been saying that they would have to place some additional funds other than the PSDP at the disposal of the Prime Minister. However, there is no provision made in the budget or in the PSDP for providing additional funds for the Prime Minister's schemes. Now it is feared that when Mr. Sharif would insist to have additional funds, the officials of the finance ministry would be forced to oblige him and the first casualty will again be the PSDP.

Deputy Chairman Planning Commission, Ahsan Iqbal, has been taking pride in saying that he was the one who got more resources for social sectors, specially health, education and information technology. He has reportedly been requesting the Prime Minister to increase the size of the PSDP which was proposed at Rs. 110 billion by the priority committee of the finance division. He even threatened to give up his job if he was not obliged. Insiders say that Ahsan held an exclusive meeting with the Prime Minister some days before the National Economic Council (NEC) meeting on June 3. In this meeting he asked him to increase considerably the size of the PSDP. "Ahsan got the PM convinced and that's why the size of the new PSDP was increased to Rs 116.3 billion as compared to Rs 85 billion of the current financial year." The Finance Minister had also assured that there would be no cut in the PSDP.

The Deputy Chairman Planning Commission is reportedly very unhappy over this move of the Finance Ministry. He is likely to meet the Prime Minister and persuade him not to agree to this cut.