Friends of Democratic Pakistan: finance urged not to include pledges in budget

The Economic Affairs Division (EAD) had strongly urged the Finance Ministry not to include the 5.7 billion dollars pledges/commitments as revenue in the 2009-10 budget, but the Finance Ministry reportedly refused to exclude the amount. This was stated by highly influential sources to exclusively Business Recorder.
The inclusion of the pledges from ''Friends of Democratic Pakistan'' (FODP) in the budget allowed the government to present an over-ambitious Public Sector Development Programme (PSDP) worth Rs 646 billion, reflecting a 54 percent increase, from last year, in the current financial year''s budget for 2009-10.
At present, the only pledges that have been disbursed are those made under International Monetary Fund''s (IMF) 7.6 billion dollars Stand By Facility and an Augmented IMF package of 3.2 billion dollars. These amounts will be followed by a considerably lower amount from ADB, amounting to 1.7 billion dollars, followed by World Bank''s 846.888 million dollars in the current financial year.
Sources in Finance Ministry said that the bulk of the 5.7 billion dollars pledged bilateral assistance in the Tokyo FoDP meeting is unlikely to be earmarked for direct budgetary support. In addition, "FODP is unwilling to provide financing for new development projects, and the government would have to massively slash allocation under Public Sector Development Programme (PSDP) 2009-10", sources said.
However, as money is fungible, direct project support from FoDP may be used for budgetary support, sources added. But project support would also require the Government of Pakistan to indicate its share of the financing. The Finance Ministry would prefer to receive assistance for budgetary support from FODP. However, with the exception of Saudi Arabia and United Kingdom no other country is willing to provide budgetary support, sources said.
The 1.5 billion dollars under the Kerry-Lugar bill was earmarked for budgetary support. However, the controversy surrounding the bill may delay its disbursement. This may well necessitate the government going back to the IMF to seek further augmentation of the standby facility, analysts argued.
The IMF is strictly monitoring Pakistan''s performance indicators under its standby loan arrangement, and FODP are carefully evaluating these indicators prior to making any decisions with respect to disbursing their pledges. As there has been no inflow of disbursement to date, the obvious conclusion is that Pakistan has not yet come out of the woods as far as its economic performance is concerned. Sources told Business Recorder that donors had sought detailed list of projects for financing after donor conference held in Tokyo in April but Planning Commission had failed so far to furnish the list. "It is necessary to present projects that are ready for implementation but for the last six months no project has been placed before the FoDP," sources added.