June 22, 2008	Sunday	Jamadi-us-Sani 17, 1429

ISLAMABAD, June 21: The ministry of finance stopped releasing development funds to the ministries and divisions in the last quarter of the current financial year ending on June 30 due to the weak kitty position.

Sources told Dawn on Saturday that now there will be a total of Rs87 billion cut in the current Public Sector Development Programme of Rs435 billion aimed at bringing down fiscal deficit from 7 per cent to 5.6 per cent of the GDP.

The financial advisers (FAs) and deputy financial advisers (DFAs) of the ministries and divisions have been directed to first “exhaust” their funds relating to third quarter to qualify for the releases of money for last quarter of 2007-08.

When contacted a senior official of the ministry of finance said that so far about 80 per cent development funds had been released.

He said that since considerable amount of development funds of the third quarter remained “unutilised”, there was no justification to release funds of the fourth quarter. “This is a major reason for slow-down in the release of funds,” he added.

The official said that FAs and DFAs were asked to “scrutinise” the funds of the ministries and divisions and give a report to the ministry of finance about it. They were also advised to inquire about the funds being kept in the banks and were not being utilised.

However, an official of the Planning Commission when approached said that for all practical purposes, 20 per cent development funds of the ministries and divisions have “lapsed” and, therefore, could not be disbursed, especially when the financial year 2007-08 was about to end in next nine days.

He said that the rising fiscal deficit has become a serious issue due to which the PPP-led coalition government felt helpless and was forced to significantly cut the development budget and that the exercise will even continue during the next financial year.

The official said that an “announced cap” has already been introduced in the size of the PSDP for 2008-09, which is Rs550 billion, including the shares of the provinces. “From the very beginning a minimum of Rs100 billion, out of Rs550 billion, will not be available during the next financial year,” he said, adding that the financial difficulties of the government were compounding leaving a little room for undertaking large development activities across the country as was earlier promised.

He said that the fiscal situation deteriorated during 2007-08, is creating new funding problems for the government.

Also, the enhanced budgetary expenditure on account of rising subsidies on oil and food exerted further pressure on the treasury.

The official said that there had been a stunning build-up in subsidies in the current budget totalling Rs407 billion, including Rs175 billion on petroleum, Rs133 billion on electricity, Rs40 billion on wheat and Rs48 billion on textiles and fertilisers.