ISLAMABAD, May 16: The priority committee of the ministry of finance has proposed a Rs400 billion federal Public Sector Development Programme for 2008-09, about 8 per cent slimmer than the original PSDP.

Sources said the Annual Plan Coordination Committee would meet on May 23-24 to firm up the new PSDP which would be approved by the National Economic Council.

The sources said the government would approve only “viable and very essential development projects” in view of the current financial difficulties.

The NEC would probably meet two days before the announcement of the national budget on June 7.

The PML-Q and the caretaker governments had cut the PSDP by Rs70 billion and Rs30 billion, respectively.

The sources said that officials of the Planning Commission and the finance ministry had proposed a lower ceiling for the PSDP to bring the fiscal deficit down to 5.5 per cent of GDP in the next financial year.

Official planners preparing the budget believe that if development budget is reduced and the government expenditure is minimised, the 5.5 per cent fiscal deficit target would be achieved.

For the current financial year, the sources said, efforts were being made to bring down the fiscal deficit from 9.5 per cent to 6.5 per cent by June 30. The original size of the PSDP was about Rs724 billion which included Rs435 billion federal PSDP, Rs85 billion for provinces and Rs204 billion for public sector corporations.

Sources said that 40 development projects worth Rs50 billion proposed by the Planning Commission had been withdrawn. A group of planners recommended to keep the new federal PSDP at Rs280-300 billion.

It was tentatively agreed to have the new federal PSDP at Rs400 billion as proposed by former Finance Minister Ishaq Dar, the sources said.

Mr Dar confirmed that the prime minister and other PPP ministers had agreed to his proposals about the size of the PSDP.

He said there would be an across-the-board cut in the development budget and government expenditures.

He said he would continue giving his advice on various economic issues as desired by PPP co-chairman Asif Ali Zardari during his recent meetings and telephonic conversation with PML-N leaders Nawaz Sharif and Shahbaz Sharif.

The sources said several ongoing projects under the public-private partnership programme would be completed, including the Lahore-Sheikhupura-Faisal-abad expressway, Rawalpindi bypass, Karachi-Hyderabad motorway, HEC-DHA Islamabad Medical University in collaboration with the Harvard Medical International and CNG bus service for Karachi and other cities.