The Finance Ministry has proposed federal outlay of Rs 255 billion for next financial year's (2009-10) Public Sector Development Programme (PSDP), which is Rs 116 billion less than that of current financial year. The Annual Plan Co-ordination Committee (APCC) in the Planning Commission, scheduled to meet on May 21-22, will consider the said federal component of PSDP and, in turn, recommend it to the National Economic Council (NEC) for approval.
Total demand from all ministries amounted to Rs 876 billion. Planning Commission had recommended Rs 400 billion allocation as federal component of PSDP for next financial year. However, the Finance Ministry's priorities committee is reported to have approved the federal component in PSDP ranging between Rs 245 and Rs 255 billion due to financial constraints and in an effort to meet the fiscal deficit target of 3.4 percent of GDP committed to IMF for the next fiscal year.
The government had allocated Rs 371 billion in federal PSDP and Rs 170 billion for the provincial PSDP during the current financial year (2008-09). It deducted Rs 34 billion, allocated for Benazir Income Support Programme in federal PSDP and put it into recurring budget. After deducting the amount of Rs 34 billion for BISP, government allocation of Rs 337 billion in federal PSDP has been reduced to Rs 219 billion comprising cut of Rs 118 billion due to financial constraints.
The Rs 118 billion cut in PSDP is Rs 18 billion higher than the announced cut of Rs 100 billion during the Prime Minister's visit to the Planning Commission on February 13. Sources said that the financial constraints further compelled the government to cut the PSDP for current financial year. The government had released Rs 71 billion in first half (July-December) of the current financial year.
The second half of the current fiscal year envisages release of Rs 148 billion. However, few expect this amount to be actually disbursed. Due to financial constraints, Finance Ministry may further delay the release of these funds in next year. Due to financial constraints, Planning Commission has also proposed that provinces should generate funds from their own resources to complete the development projects, as the federal government is faced with severe financial constraints.
Pakistan requires additional budgetary resources both from multilateral and bilateral donors in order to support social safety nets and development spending, keeping in view the tight fiscal position for the current year and the expected tight position in the next financial year (2009-10).
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