The government was compelled to slash releases for the Public Sector Development Programme (PSDP) during first half (July-December) of ongoing financial year 2010-11 due to severe financial constraints exacerbated by withdrawal of the oil prices and failure to begin implementation of the 'reformed general sales tax' (RGST), sources told Business Recorder.
The fate of hundreds of important projects has been compromised as the Finance Ministry struggles to contain the burgeoning deficit. For the first six months of the year, the government could not release more than Rs 58 billion for development projects, under 25 percent of the Rs 280 billion earmarked for the entire year against commitment to release 40 percent.
The government reneged on its commitment to release maximum quarterly ceiling of 20 percent each for first and second quarters, 25 percent for third quarter and 35 percent for fourth quarter; and a maximum of 7 percent per month during the 1st and 2nd quarters, 8 percent per month during the 3rd quarter and 12 percent per month during the last quarter.
Sources said that funds were being released for strategically important projects and also projects within special development packages. "The government has stopped funds for many projects over which all ministries and divisions have registered strong protest," sources said, adding that funds are being released on case to case basis.
According to the Deputy Chairman of the Planning Commission, the government has slashed PSDP 2010-11 by 50 percent to Rs 140 billion from Rs 280 billion earmarked in budget 2010-11 due to financial constraints. The government has also dropped ongoing projects worth Rs 500 billion from the PSDP and has decided to rationalise the development portfolio to create financing space for 33 projects costing over Rs 600 billion which Executive Committee of National Economic Council (Ecnec) had approved on December 9, 2010.
Prime Minister's Inspection Commission (PMIC) has questioned Planning Commission why new projects worth over Rs 600 billion had been approved at a time when ongoing projects were already delayed due to scarcity of funds. According to PMIC authorities, projects of strategic importance were been delayed due to non-availability of funds and the government had approved new schemes. The cost of many important projects have escalated manifold due to delay.
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