ISLAMABAD: The federal government has adopted the climate budget as a governance system to add climate considerations into policy decision-making, Finance Minister Muhammad Aurangzeb said on Wednesday.

During the budget speech, he revealed the federal government had allocated 7.7 per cent of the Running of Civil Government (ROCG) and 15.3pc of Public Sector Development Programme (PSDP) funds for climate-sensitive areas to tackle climate change in the next financial year, 2024-25.

The finance minister explained that in FY25, ROCG and PSDP were substantially bigger. In the medium term, the government plans to ensure that the climate-sensitive budget does not fall below 8pc of the ROCG and 16pc of the PSDP, he said while presenting the federal budget for the year 2024-25 at the National Assembly.

Mr Aurangzeb stated that the federal government is cognisant of the macro-fiscal implications of climate change and is looking forward to bringing economic diversification by introducing climate-resilient infrastructure and new industries to build a greener economy and strengthen fiscal resilience.

15.3pc of PSDP, around 8pc of govt running costs set aside for climate impacts

The daunting challenge of climate change posing socioeconomic risks to Pakistan demands urgent attention, he emphasised.

He added that green budgeting will allow the government to prioritise climate by integrating it into the budgeting process and fixing responsibility for implementation, monitoring, evaluation and reporting across line ministries and departments.

The finance ministry has taken the major initiative of tagging climate-sensitive budgetary and expenditure data based on the National Climate Change Policy. Through a consultative process involving all stakeholders, over 5,000 federal government cost centres under three major classifications (adaptation, mitigation, and other supporting areas) and 40 minor sub-classifications have been tagged successfully, he said.

These interventions will allow the federal government to make targeted allocations to respond to climate change risks, he claimed, explaining how the budget tagging exercise this year focused on three types of data: budgetary estimates (BE) 2023-24, revised estimates (RE) 2023-24, and BE 2024-25.

The BE 2023-24 indicated an allocation of 8.1pc and 15.7pc of the ROCG and PSDP, respectively, for climate-sensitive areas. According to RE 2023-24, the government was only able to spend 7.7 pc of the ROCG but spent substantially more as a percentage of PSDP (19.3 pc), in comparison to the original target, on climate-sensitive areas.

Published in Dawn, June 13th, 2024