With Pakistan’s Covid-19 peak and plateau having been pushed further into the future by inept crisis management, the times they are going to get tough heading into FY21. A deep economic downturn is here, but it isn’t clear whether you can spend your way out of it, for the pandemic is non-economic in DNA but it’s leaving profound economic repercussions. What kind of “development” can answer the calling?
At a time when national priorities needed to be revised and the means to deliver economic outcomes reassessed, the latest budget has shown that it will be business as usual for development projects in Pakistan. The flagship public sector development program (PSDP) will continue to roll as it does, with limited accountability for the countless billions spent amid costly overruns in project completion times.
On to “business as usual”! At Rs1.32 trillion, “national development” for FY21 is budgeted at 2.9 percent of GDP, the lowest aspiration in at least a decade. The outlay hits right at 15 percent of budgeted total expenditures, same as budgeted in FY20 and actually spent in FY19. In Jul-Mar, actual development spending at Rs781 billion came in even lower, at 12 percent of total expenditures. This shows that just 46 percent of Rs1.7-trillion development budget was utilized. Last quarter will be a dud, due to lockdowns.
When it comes to federal PSDP, details of which are available, the FY20 budget of Rs701 billion has been revised down to Rs564 billion – a drawdown of 20 percent on an already historically lean figure! Now the fresh budget allocates Rs650 billion to top-up that revised figure by 15 percent. Even if this figure is spent completely, it would be much lower than actual PSDP spending seen in earlier years.
But utilization levels have remained low under this government. The former PML-N government had utilized, on average, 87 percent of original PSDP budget in its first two years in office and 81 percent of PSDP over the five years in office. The PTI government, in its first two years, has utilized 71 percent of its PSDP budgets, on average, despite lower allocations. Utilization must improve to make some impact.
Be that it may, the government is running a tight fiscal ship amidst myriad uncertainties. But this shouldn’t stop efforts to improve quality of spending, in order to get the most out of limited resources. This gives rise to a dilemma: should only the existing projects be funded to start reaping socioeconomic returns soon, or should new projects with relevance to these times be funded more? The federal government has decided to allocate three-fourth of the new PSDP budget to existing schemes.
Among the few notable changes in the PSDP composition for the next fiscal is that more money is to be routed through the cabinet division instead of the finance division. The NHA’s development budget, which is heavy on CPEC transportation projects, has been cut by a quarter; Railways’ allocation is increased by a half, in part due to funding for ML-1. ‘Security Enhancement’ is to be funded outside PSDP.
An unspecified amount of Rs70 billion has been introduced for Covid and other natural calamities. The government has yet to come up with a concrete damage needs and assessment report related to the pandemic. Hence, the inclusion of a block allocation! But this may not satisfy international donors and development partners who want details on how Covid-related funding will be incorporated into PSDP.