PSDP blues

PSDP blues As expected, “development” is the major fiscal casualty in the “austerity” budget. Reportedly, the federal government has decided to significantly curtail the development budget for the next fiscal year. The size of the federal government’s flagship Public Sector Development Program (PSDP) is expected at Rs575 billion. The figure is smaller than not only the original FY19 budget of Rs800 billion but also the twice-chopped, revised budget of Rs675 billion that is currently in play. Amid declining economic indicators, the Rs100 billion budget cut will inevitably be made worse by lower actual spending in FY20. The contrast between budgeted and actual development spending has often been stark. Already, spending has lagged this fiscal. The federal government’s nine-month fiscal report card shows that more than half of federal PSDP funds were yet to be spent, with just a quarter to go.

As per the Ministry of Finance, actual PSDP spending stood at Rs331 billion in 9MFY19, which is lower 21 percent year-on-year. This spending equates to 41 percent of the original PSDP budget of Rs800 billion – not far from the level seen in recent years. However, in terms of spending share, PSDP had a 9 percent share in overall spending, down drastically from 13 percent in the same period previous year.

Meanwhile, there is considerable difference between the figures of Finance and Planning ministries. The FinMin data are more relevant because they show actual spending; the Planning Commission data show “release” of funds – a final clearance before funds are authorized for spending by Q Block. In 9MFY19, the difference between “released” funds and “actual” spending on PSDP was about Rs100 billion.

Heading into final weeks of the fiscal, the PlanCom data is presenting a rosy picture. As of May 25, the Commission had “released” Rs582 billion out of the Rs675 billion budget. That’s an impressive utilization ratio of 86 percent, with a month still to go. But a lot depends in the end on how much of that the Finance ministry approves for spending in the end.

As the PTI presents its first full-year budget on June 11, it should introspect on two critical aspects of development. First, quantitatively, the PTI’s PSDP will also be long on infrastructure and short on social sector. That will be in contrast to the party’s social sector development mantra. And qualitatively, no meaningful reforms have been undertaken to overhaul the PSDP regime, which suffers from cost and time overruns due to several reasons. It looks more like business as usual, but with a smaller budget.