Development costs

Published March 27, 2024

A HEFTY escalation of 30pc in the cost of ongoing federal development schemes is one of the many decisions where the caretaker government overstepped its authority. It is unclear as to what factors led the administration to make a hasty decision with significant financial implications for the budget on the eve of national elections. It is also not known how the quantum of cost increase was determined, and if it would apply to all schemes or vary from project to project. Indeed, soaring inflation over the past two years has led to a rapid rise in the price of practically everything, and overruns in the capital costs of infrastructural projects were widely anticipated. However, the apparent lack of a clear mechanism or formula to make such assessments separately for individual schemes, as well as the absence of transparency in the process, raises suspicions regarding the intentions of the decision-makers. After all, the government’s development spending has always been a major source of leakage of public funds and corruption. It is, therefore, hoped that the new government will review the decision — at least for the sake of transparency, if nothing else.

The ‘politicisation of development’ has created a massive backlog of incomplete infrastructure schemes both at the federal and provincial level over the past several decades, resulting in time and cost overruns. An IMF report reveals that the federal development portfolio added 244 new projects worth Rs2.26tr in FY23 to a backlog of 909 projects costing Rs10.32tr. This contrasts sharply with the budgeted allocation of just Rs727.5bn for all the schemes. That means, according to the IMF, each project will take more than 14 years to complete, and that too if no new scheme gets underway during this period. The provincial development backlog is estimated to be even bigger. No wonder many economists refer to Pakistan as a ‘graveyard of development projects’. It is incumbent upon the PML-N-led government to reform the annual Public Sector Development Programme. The reform of capital development spending is as crucial as the privatisation of SOEs or improvements in tax collection to bridge the fiscal deficit. Thus, it is advisable that all federal and provincial schemes are audited and those not needed are discarded. In this way, our meagre resources will be allocated for only those projects that have economic value.

Published in Dawn, March 27th, 2024

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