THE room in which to carry out large-scale development activities is undoubtedly shrinking, going by the massive reductions in the development budget that we have seen this fiscal year, and the continuing cuts that have been programmed for the next. Partially as a consequence of this, the growth rate for this year is set to come in far below the target, while for the next year, the government is aiming at 4pc. These are times of macroeconomic adjustment after all, and the old formula of kick-starting growth through low interest rates and large public spending is not an option. Instead, we have the other old formula, of balancing the deficits through large-scale development budget cuts. In the meantime, we wait eagerly to see what will be different in the budget due on June 11.
The spending priorities that one can discern in the details of next year’s Public Sector Development Programme that has just been approved by the government seem more or less the same as they were in previous development programmes. The largest chunk of Rs371bn out of the federal PSDP will be taken up by what they call the ‘infrastructure sector’, which includes power and road projects, as well as some railway and water allocations. There is a Rs21bn allocation for housing, which may relate to the prime minister’s low-cost housing initiative. Apart from this, only Rs200bn is left since the total PSDP has been cut to Rs575bn after the deduction of Rs100bn worth of block grants for the prime minister’s special schemes. Almost two-thirds of these block allocations are to go towards ‘security enhancement’ and the resettlement of displaced people, an allocation that has been reduced from its levels in the past few years. After another Rs22bn for the merger of the tribal districts, around Rs10bn is left which is taken up by the Prime Minister’s Youth Skill Development Programme, something that is also very clearly a carryover from the years past.
In all, one has to strain hard to try and find anything new or different in the PSDP that would imply that things have changed drastically in Islamabad. The new government, despite its claims of being a revolutionary new enterprise, is constrained by its resource envelope. It is constrained by the burden of the past; many projects need funding to be brought to completion. It is constrained by politics, where the competing push and pull of the system demands resources to be balanced out. Meanwhile, the prime minister requires his own resource endowment apparently to keep himself in the spotlight when federal resources are doled out. In general terms, the year taking shape looks like any other year of living frugally.
Published in Dawn, May 25th, 2019