Finance division indicates reduction in PSDP for 2022-23

Despite the Ministry of Planning’s earlier announcement of a Rs 700 billion Public Sector Development Program (PSDP) for the next fiscal year, the Finance Division has only indicated Rs 500 billion for the federal PSDP, against 900 billion rupees allocated by the previous PTI government for the current PSDP.

According to Ministry of Finance officials, the Ministry will set the federal PSDP at Rs 500 billion for the financial year 2022-23 for financial constraints. The ministry also reduced the PSDP of the financial year 2021-22 to 500 billion rupees from 900 billion rupees with a reduction of 400 billion rupees.

The Ministry of Planning, Development and Special Initiatives (MoPD&SI) had earlier decided to reduce the PSDP to Rs 500 billion in 2021-22 in line with the agreement with the International Monetary Fund (IMF) and asked the ministries/divisions to send their recommendations via the amount budgeted in this framework. head was 900 billion rupees.

Given financial constraints, the Ministry of Planning had sought to reduce the number of ongoing programs by more than 90% due to rapidly shrinking fiscal space.

According to sources, the MoPD&SI could however try to show the total federal PSDP expenditure at 800 billion rupees by including at least 100 billion rupees as foreign funding for the programs and an estimate of 200 billion rupees under the model of private public partnership.

Previously, the Ministry of Finance and Ministry of Planning agreed to allocate Rs 800 billion to PSDP in the next fiscal year. However, it appears that the decision to set the PSDP at Rs 500 billion was taken after talks with the International Monetary Fund (IMF).

The finance division had also indicated the same reduced PSDP (500 billion rupees) at the beginning of last month, which is equal to the reduced size of the PSDP for the current financial year ended June 1, 2022.

The current PSDP comprises 1,164 projects which require Rs 6.3 trillion to complete, leaving no room for funding new small or large projects.

Initially, the previous Pakistani Tehreek-e-Insaf (PTI) government secured 900 billion rupees for the PSDP for 2022-2023, which it later reduced to 600 billion rupees. Last month, the Ministry of Finance had further reduced the PSDP for the current financial year to just 500 billion rupees, preserving the precarious economic situation. So far, Rs 383 billion has been spent on the Rs 500 billion budget while the finance division, the sources said, has halted fiscal fourth quarter releases.

According to the officials of the Ministry of Finance, following the budgetary indication relating to the PSDP, the Ministry of Planning would ask all the ministries, organizations concerned to propose projects for the PSDP accordingly.

The ministries/divisions that will suffer maximum cuts in their PSDP are Finance Division, Water Resources Division, National Roads Authority, Electricity Division, Planning Division and Housing Division.

According to sources, contrary to the limited budget and financial constraints, various ministries and organizations through their budget proposals have proposed more than 1,000 projects for funding and sought around 2 trillion rupees from the government.

Insiders advised that due to budget constraints, the center may not be able to fund ongoing/approved projects under the federal PSDP in provinces that have more than 325 people. In addition, the center may also not be able to continue giving shares to previously announced and launched development plans/programs, including former Fata, Gilgit-Baltistan and AJK.

It may be recalled here that Planning Minister Ahsan Iqbal said last month that a proposal to allocate 700 billion rupees to the federal PSDP for the next financial year was under consideration.

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