ISLAMABAD, May 9: The coalition government has stopped releasing funds to ministries and departments, citing the precarious position of the national exchequer.

Sources said that under a recently decision, only critical funds requirements would be met during the remaining two and half months of the current financial year.

They said the current Public Sector Development Programme (PSDP) had been cut by another Rs30 billion. Earlier, the PML-Q and caretaker governments had cut the PSDP by Rs70 billion in a bid to contain the growing fiscal deficit.

The sources said the Rs425 billion PSDP had been reduced by Rs100 billion and the move was aimed at achieving a 6.5 per cent fiscal deficit against a target of 4 per cent set for 2007-08.

“If the PSDP had not been cut, the fiscal deficit would have climbed to more than 9 per cent of GDP,” a finance ministry official said. He said that a meeting held on Friday decided to meet only the ‘real time actual funding requirements’ till the new budget. The meeting was attended by senior finance ministry officials and financial advisers of various ministries.

A ‘prudent strategy’, he said, had been adopted for the last quarter of the current fiscal year. “In most cases ministries and departments did not spend funds which they had received in the first three quarters of the current fiscal year. That is why it was decided not to provide them more funds.”

The government, the sources said, was facing a ‘very tough’ financial situation, forcing it to take ‘necessary austerity measures’ for the remaining period of the current fiscal year.

The government, they said, was facing a revenue shortfall of more than Rs35 billion, especially because of a slowdown in the economic activity during the first six months of 2007- 08 when the revenue increased by only 1.8 per cent compared to the same period last year.