Rs2.659 trillion national development outlay for next budget

Picture source - PIDE
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In a strange development, the Annual Plan Coordination Committee (APCC) has proposed a national development outlay of Rs2.659 trillion for the upcoming budget 2023-24. This includes a federal Public Sector Development Programme (PSDP) of Rs1.1 trillion and a provincial allocation of Rs1.559 trillion.

The APCC has also suggested allocating Rs90 billion for the Sustainable Development Goals Achievement Programme (SAP) for Parliamentarians in the next budget, which is lower than the revised allocation of Rs111 billion for the current financial year. The APCC has approved and recommended a National Development Outlay of Rs2.659 trillion to the National Economic Council (NEC) for FY 2023-24. This includes Rs624 billion as Foreign Aid and Rs1,559 billion for provincial development programs. The federal PSDP for 2023-24 is proposed at Rs700 billion, with an additional Rs56 billion in foreign aid and Rs200 billion in PPP financing.

Furthermore, the APCC has introduced a new mechanism for provincial nature development projects and established guidelines for federal sponsoring agencies and provincial departments to adopt the Assan Assignment Account (AAA) Procedure. Under this procedure, sponsoring/executing agencies should adhere to the NEC-approved policy of 2021 for provincial nature schemes and bear at least 50 percent of the project cost. The Finance Division may release funds flexibly, providing 25 percent for each quarter to ensure sufficient and timely availability of funds. It may also cover the foreign exchange component (FEC) and exempt development spending from austerity measures such as procurement bans. The Finance Division should not deduct/charge the CDL recovery from the released funds under PSDP and should refrain from diverting development funds to non-development areas during the fiscal year. It may consider waiving the ban on machinery and equipment procurement for development projects and provide a budget to ERRA for salaries/operational expenses if required.

The reduction in the size of the PSDP and the increase in provincial nature projects have negatively affected national infrastructure projects. To ensure adequate funding for timely completion and avoid cost overruns, it is crucial to limit the share of provincial nature projects to a minimum level.

Minister for Planning Ahsan Iqbal stated that Prime Minister Shehbaz Sharif has instructed the Ministry of Finance to increase the PSDP size from Rs700 billion to Rs950 billion for the upcoming budget. Additionally, Rs150 billion in funds for Public Private Partnership (PPP) projects have been proposed, making the total PSDP size up to Rs1,100 billion. Ahsan Iqbal accused the PTI-led regime of reducing the development budget from Rs1 trillion in 2017-18 to Rs0.550 trillion in their last year of rule in 2021-22.

He mentioned that the throw-forward amount reached Rs9 trillion, but the government has decided to allocate more funds to projects that are 70 percent completed. The APCC has also approved the macroeconomic framework, which includes a GDP growth target of 3.5 percent and an average inflation rate of 21 percent for the upcoming budget. The increased public sector investment is expected to contribute to the economic turnaround. Additionally, the government has approved the 5Es vision, which focuses on promoting exports, E-Pakistan, environment, energy, and equity.

Ahsan Iqbal highlighted that a significant portion of development funds would be allocated to projects that have already achieved 70 percent completion. Regarding the SAP program and duplication of flood-related projects, he mentioned that ministries had diverted resources to the SDGs program instead of surrendering funds. He promised to take action if any duplication of flood-related projects is discovered. The Ministry of Planning is planning to implement an IT-based registry for monitoring purposes.