The government is set to cut Rs 20 billion from the allocated amount of Rs 125 billion for development projects in food and agriculture sector in an effort to meet its 4.2 percent fiscal deficit commitment with International Monetary Fund (IMF).
Sources told Business Recorder that the Food and Agriculture Ministry was working on 65 development projects, worth Rs 125 billion, while the Planning Commission has asked it to identify projects worth Rs 20 billion that could be either dropped, or delayed, to reduce expenditure.
The fiscal deficit is targeted to decline to 4.2 percent of Gross Domestic Products (GDP) in the current financial year, from 7.4 percent of last year, 2007-08. The government has committed to IMF to reduce domestically financed development spending by about 1 percent of GDP through better project prioritisation.
The government had allocated Rs 20 billion amount, under the Public Sector Development Programme 2008-09, for development projects in agriculture sector. However, Finance Ministry has released a smaller amount during the first half of the current financial year. The consequence of this reduction in funding is that projects would not be completed on time.
Finance Ministry released only around Rs 2 billion for 65 development projects out of total allocated amount of Rs 20 billion during the first half of the current financial year due to financial crunch that the country is faced. It released Rs 1.8 billion in the first quarter, and Rs 0.9 billion for the second quarter.
Sources noted that the Planning Commission has divided the projects into four categories for cutying funding: (i) government will not slash the funds for projects that are on the verge of completion; (ii) reduction in funds for the most important projects would not be made that could result in increase in productivity of crops with a positive impact on the grower''s income; (iii) funding for the less important projects will slow down; and (iv) funding for the projects in this category would be deferred for one or two years and such projects on which the work has not been initiated so far could be dropped.
Food and Agriculture Ministry is identifying projects that would be submitted before the Planning Commission. However, the ministry is of the view that all projects are important and even the projects that are in the pipeline should not be dropped from the projects list. However, they should be deferred for some period, and work on them could be initiated as soon as the economy recovers, sources added.