A cut of Rs113bn in the country’s current year development spending and a contained Rs655bn investment for the next fiscal year do not augur well for the focus shift from stability to growth.

The 5.5pc growth target for the current year was missed by a wide margin with actual growth now estimated at 4.7pc. Finance Minister Ishaq Dar attributes 0.5pc drag to cotton’s 28pc dip over last year’s 13.96m bales.

Quite understandably, this agriculture collapse overshadowed a 58pc fall in output of wood products, 18pc decline in engineering products, 10pc decrease in electronics, 7.5pc in steel products and 3pc in paper and paper board.

A 4.61pc growth in large-scale manufacturing in the outgoing fiscal year against a target of 6pc also pointed towards that end.

It was no surprise, therefore, when the GDP growth target of 6.5pc for the next year set under the medium-term macroeconomic framework approved last year was pulled down to 5.7pc.

During 2015-16, the fixed investment as percentage of GDP declined from 13.9pc in 2014-15 to 13.6pc in 2015-16, missing the target of 16.1pc. The public investment grew from 3.7pc to 3.8pc whereas the private investment declined from 10.2pc to 9.8pc – a really worrisome aspect.

National savings also registered at 14.6pc of GDP, falling short of the target of 16.8pc but increased from revised estimate of 14.5pc in 2014-15. The IMF programme under which the government has been following a policy of austerity and stabilisation was thus seen taking a toll on real sectors.

In line with this ground situation, Minister for Planning and Development Ahsan Iqbal was worried that resource allocation was too short of the appetite in the economy for growth. “It was a nightmarish challenge to adjust Rs1800bn worth of demands within Rs655bn fiscal envelop given by the Ministry of Finance under the IMF framework,” he said.

Strangely there, the government has continued for the second year with transferring Rs100bn to military authorities for special development programme for temporary displaced persons (TDPs) and security enhancement and park this in the development programme.

The federal PSDP 2016-17 has been set at Rs655bn, including foreign aid component of Rs143bn (excluding Rs100bn for TDPs and security enhancement, Rs20bn for Prime Minister’s Youth and Hunarmand programmes and Rs25bn for Gas infrastructure Development Fund). This amount is 13pc higher over the PSDP allocation made in the outgoing fiscal year.

Because of the resource constraints, an attempt was made to promote projects that could contribute to achieving goals set under Vision 2025 and 11th Five-Year Plan. In doing so, it was decided that the projects, initiated before 2010 having throw-forward of up to Rs15m should not be provided funds in the PSDP 2016-17, except for those completing this year or for clearing any financial liability.

In an attempt to control growth throw forward, 97pc of the allocation was kept for ongoing projects, and only 3pc for new projects. Following this strategy, only necessary funds have been earmarked for all projects including those for CPEC while protecting counterpart funding for foreign funded projects. The strategy is to move towards strict compliance of output base budgeting from the next financial year.

Top priority was accorded in budget preparation to power sector where a total investment worth Rs410bn is planned. Of this, around Rs157bn has been proposed from the budget. In addition, Rs253bn will be invested by power sector companies – NTDC, Gencos, Wapda – from self-generated resources through consumer tariff for on power generation and distribution and transmission projects.

Second priority has been accorded to transport and communications sector with an allocation of Rs260bn to realise the potential of regional integration. This includes Rs188bn for national highways and Rs41bn for Railways and Rs31bn for other projects including aviation projects.

Being touted as a ‘game changer’, CPEC was considered as an opportunity for generating employment, regional integration, boosting trade and growth opportunities and support the socioeconomic developments.

As the CPEC projects would enter into their second year of implementation during 2016-17, the government has tried to ensure that these get enough funds required for their takeoff none of CPEC project gets delayed due to resource constraints.

As such, 13 projects for development of Gwadar were made part of the PSDP 2016-17 with a total estimated cost of Rs68bn, with an allocation of Rs9.5bn for next year. Due to special security requirements of CPEC projects, 1pc of the cost of these projects has been earmarked for security arrangements on top of increase in defence budget from Rs781bn during current year to Rs860bn next year despite a separate Rs100bn to be spent by armed forces for security enhancement in the tribal region.

Six projects of Pakistan Railways having estimated cost of Rs3.1bn are included to support CPEC, with an allocation of Rs1.8bn during 2016-17. Five projects on Western route of CPEC having total estimated cost of Rs172bn were included in the PSDP 2016-17. Up to June 2016, Rs73bn has been spent on these while similar amount is earmarked for these projects for next year.

Three projects on Northern alignment of CPEC with total estimated cost of Rs174bn are included in the PSDP with an allocation of Rs21bn. The projects include Burhan-Havailian Expressway and Thakot-Havailian road link.

Three sections of Peshawar-Karachi motorway (Lahore-Abdul Hakeem, Multan-Sukkur and Sukkur-Hyderabad) with total estimated cost of Rs612bn are included in the PSDP with an allocation of Rs62bn.

Published in Dawn, Business & Finance weekly, June 6th, 2016