The Pakistan Democratic Movement government has recently made a significant decision to boost the federal development budget for the upcoming fiscal year. In a move aimed at gaining public support ahead of the next general elections, Prime Minister Shehbaz Sharif increased the budget by an impressive 31% to reach Rs950 billion. This decision, which was made moments before the scheduled meeting of the Annual Plan Coordination Committee (APCC), has sparked both confusion and anticipation among stakeholders. In this article, we will delve into the details of this budget increase and its implications for the country’s development.
A Higher Allocation for Public Sector Development
The Ministry of Planning initially proposed a Public Sector Development Programme (PSDP) of Rs700 billion. However, Prime Minister Shehbaz Sharif, in a surprising move, increased the allocation to Rs950 billion. This revised budget excludes Rs150 billion, which will be spent by the private sector. The decision to raise the PSDP size to Rs950 billion has caused some confusion among stakeholders, as the APCC working paper was based on the earlier proposed Rs700 billion budget.
Implications and Recommendations
The APCC, in response to the increased federal development budget, has recommended a cumulative national development outlay of Rs2.5 trillion for both the federal government and the four provinces. This allocation represents a 4% increase compared to the current fiscal year. The committee also approved a 3.5% GDP growth target, with sectoral growth targets set at 3.5% for agriculture, 3.4% for industries, and 3.6% for services in the fiscal year 2023-24. The inflation target for the next fiscal year has been set at 21%.
The increased budget of Rs950 billion for the federal development budget marks a 31% rise over the original allocation for this year. The finance ministry had initially approved a ceiling of Rs700 billion, which was contested by the planning ministry. Planning Minister Ahsan Iqbal emphasized the opportunity presented by the PSDP to leverage public resources for priority sectors. He stated that projects related to exports, equity, empowerment, environment, energy, and the CPEC (China-Pakistan Economic Corridor) will be prioritized in the allocation of resources.
Allocation Demands and Project Completion
Various ministries have requested over Rs2.6 trillion for 2,035 projects under the PSDP 2023-24, with a throw-forward of Rs8 trillion. The completion of these approved projects is estimated to require an additional Rs12 trillion. The APCC has also endorsed development outlays of Rs1.56 trillion for the four provinces. Notably, Punjab and Khyber-Pakhtunkhwa interim governments have proposed smaller development allocations until October 2023.
Next Steps and Provincial Allocations
The proposed budgets will be presented to the National Economic Council (NEC) for endorsement. The NEC, headed by Prime Minister Shehbaz Sharif, is the constitutional economic decision-making body. In addition to the federal development budget, the four provinces will contribute Rs1.559 trillion from their own resources. Punjab has proposed a development budget of Rs426 billion for a four-month period, significantly lower than the revised estimates of Rs712 billion for the current fiscal year. Sindh has allocated Rs617 billion, showing a substantial increase of 40% compared to this year’s budget of Rs442 billion. Khyber-Pakhtunkhwa has allocated Rs268 billion, while the Balochistan government has proposed a development budget of Rs248 billion, representing a remarkable increase of 65% over the current fiscal year.
Challenges and Adjustments in Development Budget
The federal development portfolio faces several challenges, including resource scarcity, poor planning, management, and execution. The coalition government has made adjustments within the current year’s development budget to align with changing priorities. Ministries re-appropriated Rs64 billion from one project to another, and supplementary grants of Rs75 billion were secured. Additionally, Rs12 billion was diverted from this year’s PSDP to conduct the 7th Population and Housing Census. The Ministry of Maritime Affairs also allocated Rs8 billion for the provision of 2000 engines to poor fishermen in Gwadar. The planning ministry expects around 164 projects costing Rs294 billion to be completed by the end of this fiscal year.
Addressing Issues and Guidelines
To address ongoing challenges, the APCC has endorsed guidelines for funding provincial schemes. It recommends that only those provincial schemes should be funded where the provincial government shares half of the cost. The committee also proposes that the total PSDP should be provided to the Planning Ministry in four equal quarterly tranches, instead of the current practice of 10% during the first quarter. Furthermore, the APCC suggests providing foreign exchange cover as needed and exempting development spending from austerity measures such as procurement bans. It also recommends that the Ministry of Finance should not deduct interest on cash development loans given to the Pakistan Atomic Energy Commission, Power Division, and the National Highway Authority. Lastly, the APCC emphasizes the importance of not diverting development funds for current expenditures.
The decision by the Pakistan Democratic Movement government to increase the federal development budget by 31% demonstrates its commitment to prioritize national development ahead of the upcoming general elections. The revised allocation of Rs950 billion for the Public Sector Development Programme will provide opportunities for growth in various sectors, including exports, equity, empowerment, environment, energy, and the CPEC. While challenges remain in terms of resource scarcity and effective implementation, the government’s focus on development is expected to drive economic growth and improve the country’s infrastructure.