ISLAMABAD: The federal development spending fell drastically by 43.68 per cent to Rs151.42 billion in the first half year (July-December) of the current fiscal year from Rs268.87bn over the corresponding period last year to create a space for unbridled current expenditures.

In absolute terms, the expenditures so far account for 20.82pc of the total revised allocation of Rs727bn, drastically short of the development spending target, according to data released by the Ministry of Planning and Development on Monday.

Economists believe that the massive drop in development spending in the current fiscal year would not only slow down the economy but would take a toll on revenue collection as well.

Under the disbursement mechanism announced by the Planning Division, the development funds allocated in the federal budget are released at the rate of 20pc in the first quarter (July-September), followed by 30pc each in the second (October-December) and third quarter (January-March) and remaining 20pc in last quarter (April-June) of a fiscal year.

It is believed that the development expenditure is being curtailed to contain the rising fiscal deficit owing to the increase in current expenditures. The PMLN-led coalition government has appointed over 74 special assistants, who are drawing huge salaries besides perks and privileges at a time when the country’s forex reserves have dwindled drastically and industries are cutting their production.

The government now estimates its overall expenditures to surge past budget target by about Rs1 trillion due to about Rs900bn higher interest payments and expected Rs422bn revenue shortfalls that may need to be bridged through additional tax measures in the second half of the current fiscal year.

The main driver of development expenditure which reached Rs151.42bn is because of 41.15pc share in total spending by state-run corporations — power sector entities and National Highway Authority (NHA) — to Rs62.32bn in 1HFY23.

The breakdown showed that the utilisation of development funds by state-run corporations stood on the higher side chiefly because of a more than 32pc surge in power sector projects which increased to Rs36.45bn from Rs27.6bn in 1HFY22.

NHA’s expenditure on the other hand dropped to Rs25.87bn in 1HFY23 against Rs35.72bn in the corresponding period last year.

Published in Dawn, January 17th, 2023