Development dilemma

Disbursements under the Public Sector Development Programme (PSDP) have slowed since the tenure of elected government ended on March 16.
Between March 16 to 29, less than a billion rupees – Rs0.9 billion to be exact - were released by the Planning Commission. In contrast, an average of Rs8 billion per fortnight was released in the preceding months of current fiscal year.
By March 29, total disbursement stood around Rs141 billion against the budgeted amount of Rs233 billion for current fiscal year. Bear in mind that the Planning Commission is authorised to disburse up to 65 percent of its funding limit in first nine months, which roughly translates into Rs151.5 billion. After accounting for the five percent under spending in the first three quarters, the PC’s Planning and Development division is left with about Rs92 billion to be disbursed in the final quarter.
In line with FY12, there have been no official ‘cuts’ in the PSDP outlay this year. Therefore, it will be premature to anticipate a cut during the last quarter. However, the new caretaker government may be forced to consider ‘under-utilisation’ to rein in fiscal deficit – a strategy that was subtly used by government last year.
Meanwhile, throw forward (cost) of PSDP portfolio is touching Rs3 trillion, which will present a dilemma to whosoever forms the next government: either continue funding all the projects in this portfolio, or rationalise it and focus on key priority areas.
In its analytical review of the PSDP portfolio released back in March 2011, the Planning Commission concluded: “PSDP has lost its effectiveness for playing its due role for economic development. A rational policy is needed for financing projects under the PSDP. Currently, PSDP has become over-burdened with number of local nature schemes financed on priority which have rather low impact on economic development, at the cost of strategic national projects.”
Which of the two strategies – increasing budgetary allocation or re-prioritising the PSDP — will the next government chose remains to be seen.

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Federal PSDP FY13 (Rs bn.)

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Sector           Ongoing      Throw         FY13 budgetar        FY13

                Projects    Forward          allocations    Releases*

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                   (No.)     (Cost)  (Govt.)   (Foreign)     (July 01

                                      Funds         Aid   - March 29)

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Infrastructure       345    2,320.3   125.6        85.6          74.9

Social               694      552.9   127.4         8.4          61.5

Others                74       41.6     3.0         0.0           1.9

ERRA                   -          -     4.0         6.0           2.8

                                      260.0       100.0

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Total              1,113    2,914.8   360.0                     141.1

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Data source: Planning Commission                 * Against Rs233.0 bn

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