The actual development expenditure of the province has often remained less than the budgeted expenditures in Sindh due to multiple reasons, provincial government indicated in its official document. Development expenditure comprises provincial Annual Development Plan (ADP), Federal Public Sector Development Program (PSDP), and foreign project assistance (project loans and grants).
The actual development expenditure has often remained less than budgeted expenditure - partly because of the shortfall in federal transfers and provincial own revenues, and partly due to issues in implementation capacity of executive agencies, especially regarding foreign-funded projects, the budget analysis document of the provincial government indicated.
Documents showed that the government spending on development sector plays a very important role in the economic growth of a country as it generates employment opportunities, rotates capital in the economy and creates development activities etc.
Policymakers always attach priority to the development sector. However, this depends on the availability of funds after the allocation of operational expenditures of a government such as payment of salaries and utilities etc.
In this regard, the most important initiative of a government is the establishment of basic infrastructures of the country that acts as a catalyst for domestic and foreign investments.
Thus, the development side of the budget is the government spending intended to create future benefits such as infrastructure investments in transports, education, health and other social sectors to improve quality of life of the people.
The total development budget outlay during CFY 2019-20 was Rs.284.0 billion. Out of this Rs.208.0 billion was estimated for Provincial ADP and Rs. 20.0 billion for District ADP schemes, Rs.51.1 billion from Foreign Projects Assistance (FPA) and Rs.4.9 billion by Federal Government through PSDP schemes under execution of Sindh Government.
The Provincial ADP 2019-20 included Rs.161.0 billion for 1853 ongoing schemes and Rs. 4633 billion for 852 schemes was estimated for new schemes. The budgetary allocation of Federal PSDP has been estimated at Rs.4.9 billion, as against Rs.15.0 billion in the LFY, which is lower by 67 percent.
In the current financial year (CFY), the development budget of Rs.284.0 billion formed about 23.3 percent of total budget outlay of Rs.1,217.9 billion, which was 17.4 percent less than the LFY, as Rs.284 billion were estimated for development budget out of total budget outlay of Rs.1,217.9 billion.
However, after the revised allocation of Rs.172.9 billion, the development budget forms about 18 percent of the total revised outlay in last financial (LFY) 2018-19.
The unpleasant decision of making a cut of Rs.152 billion in development budget has been done due to the shortfall faced in federal transfers during LFY 2018-19. The actual transfers from Federation to Government of Sindh always fall short of the estimates provided during a fiscal year.
With the unpredictability of these fiscal transfers from the federal to provincial Government, budget preparation becomes cumbersome as the projections of non-development expenditure and development portfolio are largely based on these estimates. Resultantly, Provincial development expenditure has to be adjusted to offset the effect.