PAKISTAN’S infrastructure development woes are wide and deep. The country must annually spend at least 10pc of its GDP to cover the growing infrastructure gap. The combined federal and provincial development expenditure, a critical component of long-term economic growth planning, has never crossed 2pc of GDP. The reasons are obvious. One, broader infrastructure development, barring vote-earning local schemes, has never been a priority for politicians. Two, it has always been a challenge for successive governments to find sufficient resources for undertaking large infrastructure projects thanks to the colossal failure of the FBR to collect tax revenues in keeping with the size of the economy. While the resource crunch has never compelled the ruling elites to cut down their wasteful spending, it does not stop them from slashing budgeted development allocations.

It, therefore, comes as no surprise that the government has so far utilised just 10.4pc, or Rs114.5bn, of the total federal development programme of Rs1.1tr for the current fiscal year till end November. The fiscal authorities are keeping a tight lid on disbursements to shrink the fiscal deficit under the ongoing IMF programme. Since the FBR is facing a revenue collection shortfall of Rs356bn, the overall federal and provincial development expenditures are likely to remain far below the budget estimates. In its latest monetary policy statement, the State Bank has flagged the FBR’s poor performance as a risk to inflation, saying it would be a challenge for the fiscal authorities to meet the IMF condition of producing a primary surplus of 1pc of GDP and lead them to implement contingency taxation measures to fill the revenue gap. At a time when the government is grappling with the bigger issue of resource crunch, it would be senseless to expect it to increase its spending on development projects. It is unfortunate that the nation’s future growth is heavily dependent upon an inefficient organisation of questionable integrity like the FBR.

Published in Dawn, December 18th, 2024