Pakistan’s National Development portfolio for the new fiscal year faces an allocation cut of Rs350 billion or nearly 17% due to shrinking fiscal space and approval of a new armed forces development plan.
The Annual Plan Coordination Committee (APCC) recommended on Monday a Rs1.763-trillion National Development Budget for fiscal year 2018-19 to the National Economic Council, as against Rs2.113 trillion for the outgoing fiscal year.
Despite Pakistan Tehreek-e-Insaf Chairman Imran Khan’s announcement not to give next year’s budget, finance minister of Khyber-Pakhtunkhwa (K-P), where the political party is in power, attended the APCC meeting. The K-P government informed the centre that it would propose a Rs108-billion development budget for next year.
Out of Rs1.763 trillion, Rs291 billion will be arranged from foreign lenders to finance the country’s development needs.
The federal government’s proposed development budget is Rs750 billion and combined development budget of the four provinces is estimated at Rs1.013 trillion. The National Economic Council (NEC), which is headed by the prime minister, has the authority to increase the federal Public Sector Development Programme (PSDP).
The government has also abolished all the special programmes meant for the parliamentarians, as there will be new National Assembly after July.
The provincial Annual Development Plans of Rs1.013 trillion for 2018-19 is Rs99 billion or 8.9% less than the outgoing fiscal year. The proposed federal PSDP of Rs750 billion is also Rs251 billion or 25% less than the outgoing fiscal year, according to the planning ministry’s documents.
“Our fight for significant increase in the proposed Rs750 billion federal PSDP is still going on with the finance ministry,” said Federal Minister for Planning and Development Ahsan Iqbal, while chairing the APCC meeting. “Our needs for defence are high and we have also approved the Armed Forces Development Plan for their modernisation, therefore, the Ministry of Finance is of the view it has other pressing demands,” said Iqbal.
“Whatever the pressing demands, our most pressing demand is development and we should not overlook it,” said Iqbal while once again asking the finance ministry to increase the proposed federal PSDP outlay.
In this background, the APCC has recommended the NEC to enhance the size of the federal PSDP from Rs750 billion to Rs1.3 trillion, which is 73% higher than the proposed federal development budget.
“The indicated amount of Rs750 billion is not sufficient to meet the requirements of funds especially of CPEC projects, some of them awarded on Engineering Procurement Contract mode and at stage of completion,” according to the planning ministry.
The planning ministry has received a total demand of Rs1.9 trillion from line ministries for ongoing and new schemes for PSDP 2018-19. Through consultative meetings with ministries, the total demand was rationalised to Rs1.5 trillion, it added.
Out of Rs1.013 trillion indicated by the provinces, Punjab’s annual development budget for new fiscal year will be Rs500 billion, Sindh’s Rs315 billion, K-P’s Rs108 billion and Balochistan’s Rs90 billion.
The federal minister also emphasised better alignment of the federal and provincial development plans. He said that the federal government does not know about the provincial development priorities.
Impact of low development budget
The federal government’s decision to cut the federal PSDP by 25% would have serious implications almost across the board. Overall, all the federal ministries would get Rs12 billion or 3% less, as the federal ministries budget will be Rs366 billion.
There will be a major dent on the National Highway Authority’s budget, as it will get only Rs233 billion next year – Rs86.8 billion or 27% less than outgoing fiscal year. The power sector’s budget will be cut by Rs28 billion or 47% to Rs33.2 billion.
However, the water sector allocations would be increased by 60% to Rs59 billion in the next fiscal year due to allocations for Diamer-Bhasha dam.
The railways ministry’s development budget has been proposed to cut by 27% or Rs11.5 billion to Rs31.4 billion. The Pakistan Atomic Energy Commission’s development budget has been further reduced to Rs10 billion – a reduction of 33% for the next year.
The Ministry of National Health Services Budget has been cut by 48% or Rs23.7 billion to Rs25 billion. The Higher Education Commission’s budget has been slightly increased to Rs37 billion. The planning minister said that the HEC budget should be further increased to Rs45 billion for 2018-19.
For special areas like AJK, FATA and G-B, an amount of Rs61.5 billion has been proposed in the new budget, which is at outgoing year’s level. The production sector’s development budget has also been cut to Rs5.2 billion.