First four months of FY20: Development spending surges

Ministry of Finance has claimed that development spending during the first four months witnessed a growth of 27 percent as compared to the same period of the last financial year, reflecting an impressive 18 percent increase in one month.

A summary of consolidated federal and provincial budgetary operation for the first quarter July-September 2019-20 released by the Finance Division on November 29, 2019 showed that there was a mere 8.8 percent federal and provincial PSDP disbursement in the first three months of current fiscal year.

The data showed that a disbursement of Rs 142.280 billion for Public Sector Development Program spending (Rs 70 billion federal and Rs 71 billion provincial) during July-September 2019-20 against the budgeted total of Rs 1,613 billion (Rs 701 billion federal and Rs 912 billion provincial).

On Monday, the Finance Ministry maintained that development spending witnessed a growth of 27 percent during the first four months (July-October 2019) while the development spending of the four provinces (combined) during the first four months also stood at Rs 112 billion as compared to Rs 88 billion spent during the same period of the last financial year while total disbursement in the first quarter was Rs 71 million, reflecting a Rs 41 billion additional spending by the provinces in one month.

The ministry stated that this is inaccurate to state that the provincial governments have provided the surpluses at the cost of development, Finance Division said in an official statement in response to media reports in this regard.

In its statement, the Ministry of Finance described the media reports as "misleading" and "incorrect" and maintained that "as per the factual position, neither the provincial surplus is Rs 202 billion nor the surplus amount has been transferred/ returned to the federal government. The actual provincial surplus for the period July-September 2019 is Rs 190 billion."

The Finance Division further stated that according to standard procedure, federal transfers are made to the provincial governments as per the NFC formula and are transferred from federal government account to the respective provincial government account maintained with State Bank of Pakistan. The amount so transferred remains available to the respective provincial governments all the time in their separate accounts with State Bank of Pakistan.

The statement further clarified that the Ministry of Finance compiles and consolidates fiscal operations of State of Pakistan (federal government and all the four provincial governments) on quarterly basis.

The cash balance position of the federal government and provinces is shown in a consolidated manner. The consolidated cash surplus position helps in driving the fiscal policy of the government. The federal government has neither a role in provincial expenditure planning nor its spending. Provincial surplus for the same period of the last financial year was Rs 199 billion.