PSDP: still pumping

After a promising start in January, development spending slowed down in February. The federal government had released, from its own pocket, about Rs75 billion for the Public Sector Development Programme (PSDP), latest Planning Commission data show. Though the figure is lower than Rs108 billion released in January, it is quite normal that one great month for PSDP is followed by a lean month.

But the ruling party won’t mind that. Bulk of new spending is making its way to political projects. During February, significant amount of spending was authorized for projects that go by labels like ‘Special Federal Development Program’, ‘Energy for All’, and ‘Clean Drinking Water’. In earlier months, heavy disbursement went to a scheme with the name ‘Prime Minister’s Global SDGs’ Achievement Programme’
Those funds are likely making their way into battleground political constituencies in Punjab, which is the political power base of the ruling PML-N. Also in February, significant block disbursements were also made to special areas (Gilgit-Baltistan and the Azad Jammu & Kashmir). Post-war FATA rehabilitation spending also picked up during the month.

Question is: how much of the trillion-rupee development budget will be funded by year end? Data show that as of March 2, total PSDP releases – federal government plus foreign-aid component (FAC) – had reached Rs550 billion (55% of the overall budget). Federal government has thus far fulfilled 53 percent of its Rs839 billion PSDP promise; whereas, FAC has met 64 percent of its Rs162 billion commitment.

While disbursements are a key signal, actual spending is what matters in the end. But clarity on money actually spent is absent right now. Those details will be released much later by the finance ministry. Generally, there is disparity between figures released by the Planning Commission and the finance ministry.

For instance, for the Jul-Dec 2018 period this fiscal, the Planning Commission had showed PSDP disbursements at Rs330 billion (which included a federal spending component of Rs263 billion). Compared to that, federal PSDP spending was shown at Rs248 billion for 1HFY18.

Be that as it may, the PML-N has only three good months – March, April and May – to pump all that PSDP money into the system, for the government tenure officially ends in early June. Adjusting for the recent spending pace, the federal government might be able to fund up to 88 percent of the trillion-rupee budget.

That funding ratio would be in line with the recent trend under the PML-N. But can the government defy political uncertainty and fiscal math’s to spend their way to elections?