ISLAMABAD: The public sector spending on federal development projects meant for improvement of the standard of living of the people lagged significantly behind targets in the first 10 months of the current fiscal year amid the government’s priority to keep the fiscal deficit within limits imposed by the International Monetary Fund (IMF).

By April 18, the government had released only 40 per cent of the funds allocated for the federal ministries for the year, according to the Planning Commission. Under the disbursement mechanism approved by the government, the ministries should have spent about 75pc of the allocations by now.

Of the allocated Rs362 billion, Rs145bn had been released, while about Rs270bn should have been disbursed during the 10 months.

The total Public Sector Development Programme (PSDP) releases, which also included uplift schemes of some major corporations and special areas like Azad Jammu and Kashmir, Gilgit-Baltistan and the Federally Administered Tribal Areas, amounted to Rs271bn in nine-and-a-half months against allocation for the year of Rs540bn, with a disbursement rate of 50pc.

“The government should have disbursed about Rs405bn by now had it followed its own disbursement mechanism,” an official said.

He said a continuous shortfall in revenue collection was the major reason behind a squeeze on funding for the development programme because the government’s top priority at the moment was to achieve fiscal deficit targets to remain in the good books of the IMF for continuation of its economic bailout package.

But in doing so, some ministries got as low as 0.2pc of allocated funds. This may have a lasting impact on the standard of living and cause cost overruns and project delays in the short term, the official said.

The planning and development division, which is responsible for monitoring the PSDP, itself received Rs226 million, less than 0.2pc of an allocation of Rs125.5bn.

The defence ministry was given Rs168.6m — 4.7pc of the Rs3.54bn PSDP allocation.

The defence production division was given Rs499m (21.7pc) in the 10 months against an allocation for the year of Rs2.3bn, ministry of education and training Rs342m (6.4pc) of Rs5.34bn and ministry of housing and works Rs790m (21pc) of Rs3.8bn.

The ministry of water and power, which has been one of the top priorities of the government, received Rs27.8bn, only 40pc of its Rs57.8bn allocated share.

The Pakistan Atomic Energy Commission was among the luckiest federal institutions as it received about 85pc of the allocated funds during the 10 months. It was given Rs44.5bn against the budgetary allocation of Rs52.3bn.

The power sector followed with 78pc disbursements, receiving Rs39.8bn of the Rs51.5bn allocated.

The government had allocated Rs1.15 trillion for the consolidated development programme —Rs540bn for the federal PSDP and Rs615bn for provincial Annual Development Plans (ADPs).

Under the disbursement mechanism announced by the government, it is required to release 40pc of the total allocation in the first half of a fiscal year — 20pc each in the July-September and October-December quarters — followed by 30pc in January-March and the same percentage by June 30.

An official said that in the face of slower than estimated revenue collections and restrictions imposed by the IMF on the country’s fiscal deficit, the development programme could be the easiest route to controlling expenditures.

A finance ministry official said the government had given an undertaking to the IMF to slash the overall development programme to about Rs834bn — 28pc lower than the budgeted Rs1.15tr — to contain fiscal deficit, with a provision for taking additional fiscal measures in case of revenue shortfalls.

As part of that understanding, the target for the PSDP for 2013-14 is believed to have been reduced to Rs420bn from the Rs540bn announced in the budget, down more than 22pc. The ADPs of the provinces are to be cut by about 33pc to Rs414bn from Rs615bn.