The spending pace of the trillion-rupee Public Sector Development Programme (PSDP) for fiscal year 2017-18 has visibly slowed down in recent month. The federal government – which promised to fund Rs839 billion, or 84 percent of the PSDP budget – had released Rs130 billion on PSDP in July and August, as per data from the Planning Commission. Fresh disbursements slowed to Rs17 billion in September. Latest data show that just Rs20 billion were released in October.
In total, the federal government has met just 20 percent of its PSDP obligations as of November 3, 2017. As per the official funds’ release mechanism, the administration can spend up to 40 percent of the budgeted funds up till December 31. That doesn’t look like happening, given the pattern that is setting in.
Some help has arrived from foreign shores. In the first four months, about Rs45 billion have been received from foreign countries and multilateral institutions. Just over a half of that funding arrived in October alone. Taken together, the total PSDP funding – government-sponsored plus foreign-sourced – had amounted to Rs212 billion as of November 3. That’s still 21 percent of the Rs1.001 trillion PSDP budget.
About 58 percent of the foreign funding thus far has gone to the National Highways Authority (NHA) projects. China is a major funding origin for foreign investments in NHA projects. Based on figures from latest data released by the Economic Affairs Division (EAD), it is clear that China’s funding in the Jul-Oct period mainly came for the Sukkur-Multan section of Peshawar-Karachi motorway, a CPEC project. The other major source of funds for the NHA projects in this period was the Asian Development Bank (ADB).
Another 36 percent of the foreign funding went to power-sector projects of the Water and Power Development Authority (Wapda). Loans from multilateral financiers like the ADB and the IBRD majorly funded investment in power projects, as per EAD data. Projects included the Tarbela hydropower project extension, power distribution enhancement, coal-fired power plants, and clean energy.
To maintain the growth momentum seen in last couple of years, it is imperative to keep on making effective public-sector development spending at a high level. When Nawaz was at the helm in June 2017, the PML-N government released an ambitious election-year development wish-list for FY18. But now, with him gone, the rising political instability doesn’t help the matters. The bureaucracy that is in-charge for executing key projects may have yet more incentives to perpetuate their inertia.