With huge revenue slippages and substantial additional expenditures arising out of security operations and the resettlement of displaced persons, the government seems to have put a tight funding squeeze on development programmes — both at the federal and provincial levels.
This is indicated by the federal development spending. According to the Planning Commission (PC), the government has released just 47.6pc (about Rs250bn) of public sector development programme (PSDP) allocations in the first three quarters (July-March) of this fiscal.
The approved disbursement mechanism required the government to disburse 70pc in the first nine months (9MFY15), or Rs368bn. “This means these disbursements are over Rs118bn or 23pc lower than the government’s own schedule, and explains the government’s mood to control the fiscal deficit at the cost of development,” said a senior PC official.
The government provided only Rs21bn to the power sector in the first nine months of the fiscal, against an allocation of Rs64bn
The official disbursement mechanism required 20pc releases in the first two quarters each, followed by 30pc each in the third and fourth quarters. In the first nine months of the last fiscal year, the government had spent about 57pc (Rs243bn) of the total allocation on the PSDP.
The government has already given an understanding to the IMF that it will slash the consolidated development programme by about 22pc this year to contain the fiscal deficit within the limit of 4.9pc of GDP.
A bit of improvement in spending was brought about after the government disbursed about Rs12.5bn in a lump sum to parliamentarians last month; these were originally earmarked for achieving the Millennium Development Goals. The funds were diverted to politically oriented development schemes under the revised head of ‘community development programmes’.
In doing so, the consolidated development programme has been brought down to Rs917bn from the Rs1.175trn allocated in the budget 2014-15. This spending would be even lower than last year’s actual development expenditure of Rs1.012trn.
The federal PSDP spending for the current year has been revised to Rs477bn against the budgetary allocation of Rs525bn — down about 9pc. But the major reduction in development spending has been estimated to come from provincial governments, mainly because of their commitment with the federation to offer Rs289bn in cash surpluses and capacity limitations to the undertaking of development projects.
Consequently, provincial development spending has been worked out at Rs440bn against the allocation of Rs615bn made in the budget 2014-15 — a cut of Rs175bn.
The government had told the IMF that the envisaged fiscal adjustment in the current year was underpinned by tax revenue measures and further realisation of energy subsidies. However, the delay in implementing the electricity tariff adjustment and court orders against the gas infrastructure development cess had created risks for the fiscal outlook.
Finance Minister Ishaq Dar had recently confirmed that the country will have to face additional expenses to the tune of Rs110bn this year for the Zarb-e-Azb operation, and to raise the strength of the civil armed forces and the rapid action force and to settle displaced persons. These expenditures were not envisaged at the time of the budget last year.
Lower development spending has a direct bearing on the living standards of the people, as slow releases — owing to funding constraints — results in repeated cost overruns and delayed accrual of benefits of such expenses to the people.
The Planning Commission revealed that federal ministries were given only Rs146.8bn in 9MFY15, against their annual allocation of Rs259bn.
Perhaps the major affectees of the tight disbursement policy were the special programmes designed for the provinces and special areas like Azad Kashmir, Gilgit-Baltistan and the Federally Administered Tribal Areas. The government had allocated Rs32.54bn for them but released nothing in 9MFY15.
Interestingly, the tight control over development schemes is also quite evident in some priority areas like water and power and the road sector. For example, it had allocated Rs111.6bn for national highways, but released only Rs34.5bn.
More intriguingly, the government provided only Rs21bn (less than 33pc) to the power sector against an allocation of Rs64bn, even though the sector is on top of its priority list to end load-shedding. This was perhaps mainly because of a shift from coal-based power generation and improvements in the transmission system at a later stage to LNG-based power generation.
Likewise, water sector projects were promised Rs44bn in the federal budget but were provided only Rs25bn in 9MFY15. This is despite the fact that the ministers for water and power and planning have repeatedly raised alarms over looming water scarcity.
And the Indus River System Authority recently demanded a freeze on the entire development programme for at least five years to divert all funds for building dams and irrigation infrastructure.
The ministry of national health services, regulations and coordination has been perhaps the luckiest, as it has consumed almost its entire allocation of Rs27bn in the first three quarters, followed by the Pakistan Atomic Energy Commission, which received Rs34bn against its annual share of Rs51.4bn. The railways division was also able to get Rs27bn against its allocation of Rs39.56bn.
