The federal government has decided to drop unapproved projects from the Public Sector Development Programme (PSDP) in the next budget, which will now be unveiled on June 12.
The $9.2-billion or Rs1.5-trillion Mainline-I (ML-1) project of the China-Pakistan Economic Corridor (CPEC) is also among the unapproved projects. But the government still has two weeks to approve the ML-1 scheme or else it will be delayed for yet another year.
The decision to drop unapproved schemes from the next fiscal year is aimed at complying with an Act of parliament and ensuring better utilisation of fiscal resources. It will also help cleanse the federal development portfolio that has been overstretched under political expediency.
“No unapproved project will be included in the PSDP 2020-21,” Federal Minister for Planning and Development Asad Umar told The Express Tribune on Monday.
The minister said ministries still had time to get their projects approved before finalisation of the budget. Umar said the government would also ensure effective monitoring and evaluation of ongoing projects, as currently no such mechanism existed.
Prime Minister Imran Khan has approved June 12 for announcing the fiscal year 2020-21 budget. The development project approval process for next fiscal year has be completed before June 8, which is the new date for the National Economic Council (NEC) meeting, chaired by the PM.
The Annual Plan Coordination Committee (APCC), which was earlier scheduled to meet on May 20, will now meet on June 4. The finance ministry had proposed June 5 or 12 as the budget announcement dates and the premier approved June 12 for presenting his government’s third budget in the National Assembly.
There are currently about 180 unapproved projects – including the ML-1 – which have to be approved before the APCC meeting or cannot be included in the PSDP. In April, the Central Development Working Party deferred approval of the ML-1 project due to a host of technical and financial issues.
In June last year, parliament approved the Public Finance Management Act 2019 to ensure fiscal discipline in the public sector.
The Act’s Sections 17 and 18 lay parameters for approval and monitoring of projects. No development project shall be considered for inclusion in demands for grants that has not been granted technical approval, according to the Act.
Also, no development project shall be considered for inclusion in demands for grants unless it is provided with a budget allocation for the coming year, which fully reflects the proposed project cost for each year.
Soon after coming to power, the Pakistan Tehreek-e-Insaf (PTI) government dropped 350 unapproved projects from the federal PSDP 2018-19, saying that these projects were politically motivated.
However, in fiscal year 2019-20 PSDP, the government again included the unapproved projects.
Following the inclusion of new schemes, the total PSDP size swelled to Rs9.8 trillion with 1,063 projects.
Various ministerial and inter-ministerial forums still have time to either approve or recommend these schemes before the APCC and NEC formally approve next year’s PSDP.
The Ministry of Planning was considering proposing approved and recommended projects for inclusion in the PSDP book.
The finance ministry has indicated an allocation of Rs600 billion for the PSDP for the next budget, which is equal to only 1.3% of the projected size of GDP in the next fiscal year and is one of the lowest development spending. The Ministry of Planning has demanded that the prime minister increase the allocation to Rs700 billion, aimed at meeting financing needs of the ongoing projects. But the prime minister has not yet made a decision.
The issue was again raised on Monday with the premier during a meeting held to review budgets of Punjab and Khyber-Pakhtunkhwa governments. But no final decision was made by the premier.
The indicated development budget of Rs600 billion is largely in line with the projection made by the International Monetary Fund (IMF) in its latest report on Pakistan. The IMF has projected Rs588-billion federal PSDP for fiscal year 2020-21.
For this year, the core PSDP spending budget was Rs551 billion while another Rs150 billion was earmarked for the projects and initiatives undertaken by the finance ministry.
Now, against Rs551 billion, a sum of Rs600 billion has been proposed for this fiscal year that will include some additional fiscal responsibilities that were earlier funded by the finance ministry. The Rs70 billion spending on security and temporarily displaced persons that was earlier made part of the PSDP by the PML-N government will now be excluded from the next fiscal year. This spending will be shown as other development expenditures.
Unlike this year when the finance ministry reserved Rs71 billion for merged districts of the Khyber-Pakhtunkhwa, it is proposed that the package for the entire province including erstwhile FATA should be part of the core PSDP.
In the next fiscal year, significant allocation will again be made for financing the parliamentarians’ schemes under Sustainable Development Goals. For this fiscal year, Rs30.5 billion was allocated for parliamentarians schemes. The administrative ministry of the SDGs funding is the Cabinet Division.
The federal cabinet has recently rejected a summary to handover the SDGs funding to the Ministry of Parliamentary Affairs.
Published in The Express Tribune, May 19th, 2020.