Islamabad: The government has limited development spending to just 20 percent of the annual budget for the first half of the fiscal year due to a severe economic crisis, as multilateral lenders remain reluctant to provide any major relief to Pakistan after recent floods.
However, the spending cap condition will not apply to parliamentarians’ schemes – a surprising development.
According to Ministry of Planning and Development sources, they will receive 100 percent of the annual budget within a six-month period (July to December) due to the upcoming general elections.
The Ministry of Planning has issued fresh instructions to all federal government ministries and departments, informing them that their second quarter limit (October-December period) has been reset to “10% of the Rs. has gone
Effectively, overall spending will be less than 20 percent during the first six months, as the government had already capped development spending at 10 percent for the first quarter as well.
Caps have been placed on components worth Rs 667 billion.
In July this year, the finance ministry issued an office memorandum and set the first half development budget ceiling at 45 percent.
According to details, the government has effectively cut the development budget by 25 percent or more than Rs 180 billion after the fresh directives.
For the current fiscal year, the government has allocated 728 billion rupees for the Public Sector Development Program, but so far only 54 billion rupees or 7 percent of the annual budget has been spent.
This step has been taken to align with the fiscal targets agreed between Pakistan and the International Monetary Fund (IMF) under the revised $6.5 billion bailout package.
Pakistan had hoped to get some concessions from the IMF and the World Bank after devastating floods ravaged the country.
But during recent talks by Pakistani officials with the IMF and WB, key creditors have advised Pakistan to stick with it, according to sources familiar with the talks.
The sources added that Jihad Azur, director of the IMF’s Middle East and Central Asia Department, has given a clear message to Pakistan that the country has to stick to the programme’s goals.
Following these meetings, Pakistan has initiated the process to complete the unfinished work scheduled under the programme.
Finance Minister Ishaq Dar said on Wednesday that Pakistan will not seek any relief from the IMF.
He added that the country will complete this program by June next year.
Diplomatic sources said the international lending community sympathized with Pakistan over the floods, but that sympathy might not translate into dollars due to the international political environment.
Before leaving for Washington, Dar said that the IMF’s staff-level review mission will visit Pakistan on October 26 for the 9th review of the bailout program.
According to sources, the mission is not arriving next week and the new dates are yet to be finalised.
Both sides have mutually agreed to delay the mission by at least three weeks due to the delay in finalizing the post-flood damage and needs assessment report.
A WB-led team is finalizing the report and its preliminary estimates suggest a cost of more than $32 billion for damages and losses from the floods.
However, despite the trying economic times, the government has decided to provide the full budget for MPs’ schemes during the first six months of the financial year.
The National Assembly had approved 70 billion rupees for parliamentarians’ schemes in June, which the federal cabinet decided to increase to 87 billion rupees this week.
In its office memorandum to the Cabinet Division, which deals with budgeting for parliamentarians’ schemes, the government has also revealed a budget ceiling of 10 per cent for the second quarter.
However, sources said that it has been decided internally that all the money will be handed over to the Cabinet Division.
After leaving out the amount of MPs’ schemes, the effective expenditure of all ministries and departments comes down to 15%, if these limits are fully implemented.
The development portfolio includes 1,178 schemes for which an additional Rs 7 trillion is required for completion.
At the current pace and available budget, it will take more than a decade to complete the ongoing schemes alone.
According to planning ministry office notes released last week, the aviation division will get Rs 405 million to spend in the first half, the Board of Investment Rs 161 million and the climate change division Rs 1.9 billion – all 20 come in the range of percentages. .
The Water Resources Ministry’s first-half expenditure cap has been set at Rs 17.8 billion, or 18 percent of the annual allocation.
The six-month limit for the power sector is Rs 12.6 billion or 30 percent of the annual allocation due to the high share of foreign debt.
The expenditure of Pakistan Atomic Energy Commission is fixed at 5.2 billion rupees or 20 percent of the annual budget.
The Ministry of Information Technology is exempted because its projects are funded by China.
The Federal Ministry of Education has been limited to Rs 1.2 billion or 20 percent.
Higher Education Commission expenditure has been limited to Rs 7.7 billion or 18 percent of the total budget.
