KARACHI: Federal development spending in 2020-21 nominally exceeded its target of Rs650 billion, marking the highest development fund utilisation since 2011-12.

Minister for Planning and Development Asad Umar tweeted on Tuesday that spending under the Public Sector Development Programme (PSDP) in the last financial year remained Rs659bn or 101.4 per cent of the annual target.

“In a year of Covid restrictions, this exceptionally high development spending reflects (the) resolve of PMIK to accelerate growth,” he wrote on the social media website.

Funds reserved for development projects often lapse as governments lack the absorption capacity at both federal and provincial levels. They find it difficult to execute multiple development projects at the same time, which often results in unspent funds in their coffers by the end of the fiscal year.

The government had spent only Rs373.8bn in the first 10 months of 2020-21, which is 57.5pc of the target. This shows PSDP spending gathered pace only in the last two months of the fiscal year.

According to the Ministry of Planning and Development, the federal government had authorised Rs540.7bn out of the budgeted PSDP of Rs553bn in 2019-20.

Going forward, development spending may take a hit with the resumption of the loan programme under the International Monetary Fund. The international lender demands that its borrowers practise austerity while forgoing economic growth to improve its balance of payments. This leads to development spending cuts by the federal and provincial governments.

The provinces are forced to spend less and post budgetary surpluses to reduce the fiscal imbalance at the federal level.

Total federal PSDP for 2021-22 is Rs900bn, up 38.4pc from a year ago. The federal government already authorised/disbursed as much as Rs133.6bn in the first 16 days of 2021-22, which is 14.85pc of the annual target.

Published in Dawn, July 28th , 2021