• Outlay includes Rs950bn PSDP and Rs1.56tr provincial development plans
• Ahsan says plan may change as caretaker govts can’t make allocations beyond 120 days
• After turbulent year, govt aims to lift GDP growth rate to 3.5pc
• Federal allocations seem difficult to meet given fiscal constraints

ISLAMABAD: The Annual Plan Coordination Committee (APCC) on Friday recommended a tentative national development plan of about Rs2.66 trillion, including the federal Public Sector Development Programme of Rs950bn to lift the country’s economic growth rate to 3.5 per cent in the next fiscal year from one of the lowest rates of 0.3pc this year.

The plan is subject to change because of caretaker governments in Punjab and Khyber Pakhtunkhwa, who could not make allocations for more than 120 days, according to Planning Minister Ahsan Iqbal.

The macroeconomic framework and the development plan would now be formally approved by the National Economic Council (NEC), the country’s highest forum on the macroeconomic and development agenda and is headed by the prime

minister. The plan was earlier postponed until June 6 because of Prime Minister Shehbaz Sharif’s visit to Turkiye.

The federal PSDP would be supported by Rs150bn funding from the private sector, mostly for motorways, for which the Centre has set aside Rs100bn for matching viability gap financing (VGF).

The total Rs2.66tr development outlay involves Rs1.1tr of the federal programme, including Rs150bn private financing and about Rs1.56tr of provincial annual development plans (ADPs).

The caretaker governments in Punjab and KP shared provincial ADP estimates for the first quarter (July-October) only at Rs426bn and Rs268bn, respectively.

Sindh and Balochistan plan to spend Rs617bn and Rs248bn for their respective ADPs. The full-year provincial ADPs would reach Rs2tr, the APCC noted.

A key hallmark of the PSDP included another Rs90bn allocation for parliamentarian’s scheme, described as the Sustainable Development Goals Achievement Programme (SDGs-AP), against the current year’s budget allocation of Rs70bn, which was gradually increased to Rs111bn.

Officials said another Rs50bn block allocation had been kept in the PSDP that would also be later utilised for SDGs ahead of elections to win over voters’ support.

The GDP growth rate of 3.5pc is premised on 3.6pc growth in the service sector, 3.5pc in agriculture and 3.4pc in industry.

The target for exports has been set at $30bn and inflation has been projected to come down from an average of 29.2pc this year to about 21pc next year.

Ahead of the APCC meeting, Prime Minister Sharif presided over a meeting of the development plan and asked the planning division to increase PSDP financing to Rs950bn.

Planning Minister Iqbal told journalists that the PSDP used to be Rs1tr five years ago, which dropped to just Rs500bn under the previous government, which he said threw the China-Pakistan Economic Corridor (CPEC) in cold storage and failed to prioritise the country’s development.

The finance ministry had given an indicative budget ceiling of Rs700bn for the PSDP, which he thought was insufficient given the country’s infrastructure needs.

He said he took up the matter with the prime minister, who agreed to increase the development budget and directed the finance ministry to allocate Rs950bn for PSDP.

In addition, another Rs150bn financing for the development projects, particularly motorways, would be arranged by the private sector.

With the increase in size, the allocation for SDGs, highways and water sector projects would be enhanced proportionately. He said the allocation for SDGs was being raised because surplus funds were available with some ministries.

Responding to a question, the minister said the caretaker governments in the two provinces could present a budget for 120 days and the new governments, after elections, would come up with their priority spending for the remaining nine months.

He alleged that the previous government showed artificial economic growth through $80bn imports and the development programme was not among its priorities.

In contrast, he said, the current government’s priority was to complete those projects soon that had already achieved 70pc progress.

To another query, the minister vehemently denied that the government used pressure tactics to show higher a economic growth rate and said that the delay in the meeting of the National Accounts Committee was because flood expenditures had to be included.

Allocations for most sectors have generally been kept unchanged or nominally increased when compared to the current year, except for minor cuts for special areas like Azad Jammu and Kashmir and Gilgit-Baltistan. The two areas would together get Rs54.4bn next year compared to Rs55.4bn this year.

Total infrastructure allocations for the next fiscal year as of now stand at Rs360bn compared to Rs358bn during the outgoing year.

The biggest chunk of about Rs160bn (22pc) has been allocated for transport and communications, followed by Rs90bn (13pc) for SDGs and water sector each and Rs80bn (11pc) for energy sector and 7pc for higher education (Rs51bn).

The social sector would get Rs179bn next year against Rs194bn this year, while allocations for production sectors — agriculture and industry — have been put at Rs12.6bn next year against Rs16.4bn this year.

The ministries and divisions had initially demanded Rs2.6tr in the coming budget for 2,035 development projects having a throw-forward of Rs8tr, but they were persuaded to bring it down to Rs1.2tr, which too was unacceptable to the finance ministry because of fiscal constraints.

The ministry was not ready to allow more than Rs700bn PSDP because of the IMF programme. Although it reluctantly agreed to increase development allocations to Rs950bn on the prime minister’s directives for political reasons, tight fiscal control is unlikely to allow releases to match allocations.

Because of the tight fiscal situation, the priority was given to “core national projects” — those that have achieved 70-80pc fiscal progress and those having maximum foreign funding available.

The APCC also decided to recommend the NEC contain the share of provincial nature projects to a minimum level so that adequate funding for timely completing vital national projects could be ensured and cost overrun be avoided, given the shrinking size of PSDP amid the growing share of provincial nature projects seriously undermining national infrastructure projects.

The Planning Commission complained that the share of provincial nature schemes in the federal PSDP had arisen from 13pc in 2016-17 to 31pc in 2022-23, as the growing share of provincial projects was seriously undermining national infrastructure projects.

The APCC also recommended that funds for development projects should be disbursed in equal quarterly instalments instead of the current practice of 20pc each in the first and last quarters and 30pc each in the second and third quarters.

Published in Dawn, June 3rd, 2023

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