ISLAMABAD: Amid strong protest by provinces against federal government’s decision to withdraw funding for provincial health and education projects, the Planning Commission recommended on Tuesday a consolidated development programme of Rs1.41 trillion for the next fiscal year to achieve an economic growth of 5.5 per cent.

“We reject the PSDP (Public Sector Development Programme) in its current form. We have not approved it,” Sindh Finance Minister Syed Murad Ali Shah told journalists at the end of meeting of the Annual Plan Coordination Committee (APCC) presided over by Planning Minister Ahsan Iqbal.

Also read: Govt plans to spend Rs1.4tr on development

All the provinces protested against the delayed holding of the APCC meeting and the distribution of the working papers during the meeting.

The issue will be taken up again on Thursday

They said they could not find time to study the papers and so could not make constructive contributions during the meeting. Their demand to postpone the meeting for a day was not entertained.

“We are not ready to accept the proposed PSDP and reject it. We want matters to be taken forward with consensus,” said Khyber Pakhtunkhwa’s Finance Minister Advocate Muzaffar Said.

The planning minister explained that with the social sectors devolved under the 18th amendment, it was now the responsibility of the provinces to focus their energies on the area.

The representatives of the provinces were informed that under a decision of the Council of Common Interests (CCI) during the tenure of the PPP-led government, the social sector’s vertical projects in the provinces were to be funded by the federal government until June 30 this year, after which they were supposed to be transferred to the provinces.

Meanwhile, the financial constraints faced by the federal government due to restrictions imposed by the International Monetary Fund were quite evident as it scaled down allocations for federal ministries under the PSDP by 15 per cent to Rs250.75 billion for the next year from the current year’s Rs296.32bn, apparently to make room for energy and infrastructure projects to be launched under the China-Pakistan Economic Corridor (CPEC).

The highest amount of Rs200bn was allocated for the National Highway Authority, an increase of a whopping 80 per cent over Rs111.5bn earmarked for the authority this year.

The power sector allocation was increased by 14 per cent, to Rs73bn from Rs63.6bn this year.

Strangely, the government scaled down allocation for the water sector by a significant 31 per cent for next year to Rs30bn from Rs43.4bn this year even though it has been advocating initiation of major hydropower projects and dams like Dassu and Diamer-Bhasha.

The development programme of Rs1.41 trillion included federal PSDP of Rs580bn and provincial annual development plans (ADPs) of Rs838bn, an overall increase of about 21 per cent. “Priority areas for 2015-16 PSDP are energy, CPEC and knowledge initiatives to turn Pakistan into a modern economy which is globally competitive and domestically inclusive,” said Mr Iqbal.

The federal PSDP of Rs580bn for next year is just 10.5 per cent higher than the current year’s allocation of Rs525bn. At Rs838bn, the allocation for provincial ADPs is almost 29 per cent higher than current year’s Rs650bn.

The foreign exchange component in the PSDP has been estimated at Rs182bn against Rs102bn this year while provinces expect Rs100bn from abroad instead of Rs90bn this year.

A block allocation of Rs20bn was made for community development schemes to be initiated on the recommendations of parliamentarians ahead of the local body elections. Interestingly, the heading of allocations for special areas like Azad Jammu and Kashmir, Federally Administered Tribal Areas and Gilgit-Baltistan was renamed as “special federal development programme” to make adjustments subsequently for projects throughout the country including the special areas.

Separately, an amount of Rs6.5bn was allocated for the Earthquake Rehabilitation and Reconstruction Authority.

The APCC approved the annual plan for macroeconomic targets for next year envisaging real GDP growth rate of 5.5 per cent to be supported by 3.9 per cent growth in agriculture, 6.4 per cent in the industrial sector and 5.7 per cent in services. The plan envisaged increasing the investment to GDP ratio to 17.7 per cent next year against 15.1 per cent this year and improving national savings from 14.5 per cent of GDP this year to 16.8 per cent next year.

The target for inflation next year was set at 6 per cent against 4.8 per cent this year. It projected an increase in exports by 5.5 per cent to $25.5bn next year against $24.2bn this year and growth in imports by 6 per cent to $43.3bn, leaving a trade deficit of $17.7bn next year.

The current account deficit was on the other hand projected to increase to $2.8bn or one per cent of GDP next year against $1.6bn or 0.6 per cent of GDP this year.

Sindh Minister Shah pointed out that federal funding for provincial projects was negligible and demanded that substantial funds be allocated for such projects. The provincial governments should be empowered to utilise such allocations.

He said that despite a serious water shortage in Karachi, the federal government had allocated only Rs275 million for the purpose. The allocation should be increased to at least Rs2.5bn.

Mr Shah said the deletion of vertical projects in the health and education sectors had reduced funding for Sindh from Rs5.3bn to zero.

He said that following strong protests by the provinces, the federal government had agreed to meet again on Thursday to discuss the issue.

The finance minister of Khyber Pakhtunkhwa said he too was not satisfied with the federal government’s decision to withdraw funding for social sectors and provincial projects.

Published in Dawn, May 27th, 2015

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