PSDP a tale of unfinished endeavours

The ongoing fiscal year has entered its final few weeks, and it is now abundantly clear that the Public Sector Development Programme (PSDP) will remain underfunded this year, too.
The Planning Commissions data shows that the Planning & Development division had disbursed Rs190.9 billion till May 31 against its funds release limit of Rs234 billion. Exact amount of spending in 11MFY13 is not known yet. But the Finance Ministrys latest fiscal operations report put total federal PSDP funding at Rs203.7 billion in 9MFY13, which suggests that FY13 budgetary allocations will not be met fully.
Though the statistics on PSDPs foreign aid component are not publicly available, the Rs27 billion allocations on Special Programmes have reportedly been exhausted by the previous elected government. Based on that, and the Finance Ministrys report, one can safely put total PSDP spending in 11MFY13 at above Rs255 billion. Any shortfall in foreign aid component may widen the PSDP funding gap this year.
To fund all its PSDP allocations, the P&D division has to disburse a large sum of Rs43 billion in the ongoing month of June. That seems unlikely given the fact that an already-strained federal treasury is reportedly having trouble providing for the urgent and voluminous liquidity requirements of the energy sector.
Data shows that various divisions and ministries had received significant PSDP funding till May 31. These include Wapda (Rs41.5 billion), Communications division (Rs23.5 billion), Kashmir & Gilgit-Baltistan affairs (Rs17.8 billion), P&D (Rs16.5 billion), HEC (Rs15 billion), Railways (Rs12.9 billion), FATA (Rs12.5 billion), the PAEC (Rs11.7 billion), Housing & Works (Rs6.9 billion), and Finance ministry (Rs 6.5 billion).
Even then, most of these entities remain underfunded relative to their budgetary allocations. Wapdas power sector projects received only 13 percent of the budgeted funds; PAEC 30 percent; Communications division 45 percent; Finance ministry 48 percent; and Railways 57 percent. The HEC and the Housing division, however, received 95 percent of their earmarked funds so far.
Its usual for the government to slow down PSDP spending in order to fund non-developmental expenditures. Interestingly, Finance ministrys documents show that FY12 was a different year in that the PSDP funds were fully utilised. However, it is disputed by the Planning Commissions data from June end last year which shows that P&D division closed the financial year with Rs58 billion yet to be disbursed from its PSDP release quota.
PSDP funds have been slashed after the floods in 2010 and 2011, and were also cut in years before and after so as to contain rising fiscal deficit due to ballooning subsidies. And FY13 may also end on the same note. What the new government must do is to first rationalise and prioritise the PSDP projects based on socioeconomic value and then follow through them with sustainable state funding and private sector participation.
However, wholesale approval of a reportedly large PSDP portfolio (Rs 450 billion) for next fiscal year - designed by the bureaucracy and waiting to be stamped by the incoming government during budget approval process - will mean business as usual.

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Federal PSDP FY13 - Rs (bn)

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Sector           Ongoing    Throw           FY13 budgetary                  FY13

                Projects   Forward          allocations                Releases*

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                   (No.)    (Cost)  (Govt. Funds)  (Foreign Aid)  (Jul 1-May 31)

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Infrastructure    346     2,314.4         126             86                98.0

Social            716       554.7         127              8                85.4

Others             77        41.8          3               0                 2.4

ERRA                -           -          5               5                 5.0

                                          261             99

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Total           1,139     2,910.9                  360                     190.9

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