PSDP disbursement remains steady

Federal government resisted the urge to slash the PSDP allocations last fiscal year; yet there was still a major shortfall in actual disbursements. By the close of FY12, the Planning & Development Division had yet to release Rs58 billion against its mandated PSDP funding limit of Rs228.4 billion. This fits well into the prior development trend, but will things be different in FY13 - it being a year of political transition? The latest data released by the Planning Commission shows a steady disbursement trend, as the P&D division released Rs19 billion between July 1 and August 17, 2012. The size of the federal PSDP budget is a mammoth Rs360 billion in FY13 - 73 percent of which will be sourced from the treasury and the rest will be mobilised through foreign assistance. It must be noted that the P&D division is authorised to release PSDP funds up to Rs233 billion in FY13. The cabinet and finance divisions will directly release Rs27 billion under Special Programmes, while Rs100 billion in foreign aid disbursement will be received in the Economic Affairs Division. As per the existing release mechanism, the P&D division has to disburse 20 percent of its mandated PSDP funds by September. Disbursements may pick up in coming weeks, with 40 percent of the quarterly quota already finished. Thus far, major releases include over Rs3.5 billion for Kashmir Affairs and Gilgit Baltistan division; over Rs3.3 billion for Railways division projects; and Rs2.86 billion for the Fata region. Other projects receiving major funding include Rs2.19 billion for National Programme for Family Planning and Primary Health Care; Rs900 million for a 100MW power plant in Tharparkar; and Rs800 million for the Erra Block. The existing approach to public sector development has been criticised by independent economists (and even those within the system) for its various maladies. Wanting administrative capacity and waning efficiency to deliver are just one side of the coin. The other worrying aspect is that the approval of projects seems to be inspired by everything but creation of socioeconomic value and public benefit. Herein lies the irony. On one hand, policymakers are yet to crack the code that can fix the mighty throw forward (cost) of existing projects that has reached Rs3 trillion due to massive time & cost overruns. On the other, they are approving new projects; essentially squeezing the fiscal space for projects already in limbo. Just last week, Ecnec approved 45 new projects with a present value of Rs681.8 billion! It is quite apparent that the lack of interest in rationalising the PSDP portfolio to address the pressing development needs of the country may perpetuate unabatedly.

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Federal PSDP FY13 (Rs bn.)
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                 Ongoing     Throw        FY13 budgetary                   FY13
Sector          Projects    Forward        allocations                Releases*
                   (No.)     (Cost)   (Govt.)   (Foreign Aid)  (Jul.1 - Aug.17)
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Infrastructure       342    2,340.4     115.3        85.6                   7.9
Social               665      543.7     137.7         8.4                   9.9
Others                68       40.6         3           0                   0.4
ERRA                   -          -         4           6                   0.8
                                        260.0       100.0
Total              1,075    2,924.8     360.0                              19.0
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Data source: Planning Commission * Against Rs233.0 bn