ISLAMABAD, Aug 12: The government has reduced the pace of release of funds for the Public Sector Development Programme for 2009 by almost 40 per cent to bridge the gap between expenditure and revenue and to contain the rising fiscal deficit.

Sources told Dawn on Tuesday that federal ministries, divisions and departments had been asked after the approval of the federal budget to submit work and cash plans that should not exceed 15 per cent of their annual development programme allocations.

“With this pace of releases, the government may be able to slash development expenditure by more than Rs200 billion by the end of the year,” an official said.

This year’s allocations for development projects had been increased to Rs550 billion from last year’s Rs520 billion.

The sources said that even Rs350 billion spent on development programmes would be a big thing. They said the second and third quarter utilisation of PSDP funds usually slowed down because of harsh winter conditions in northern parts of the country.

Historically, the planning commission used to allow release of 25 per cent of the total allocation during the first quarter without cash and work plans to ensure speedy start-ups. The releases in the second quarter used to be made on the basis of first quarter’s actual fund utilisation and cash and work plans for the remaining part of the fiscal year.

The sources, however, said there was no major initiative in sight to control the current expenditure that has been rising for decades. The governments usually sought supplementary grants every year after they consumed budgetary allocations, but the axe normally fell on development programmes in the event of financial constraints.

Planning Commission’s spokesman Asif Sheikh said that the first quarter releases had been reduced from 25 to 15 per cent but he did not agree that development expenditure had been cut.