Deliberate slowdown in PSDP spending?

The Federal Governments spending on the FY14 Public Sector Development Programme (PSDP) can hardly be termed as adequate. The Planning Commissions most recent data shows that the PSDP disbursements reached Rs98.215 billion as of November 1, 2013 (see illustration).
The official PSDP funds release mechanism mandated up to 20 percent of funds to be released by September end and 40 percent by December end this fiscal year. However, only 18 percent of the PSDP budget has been funded till November 1. At this pace, the 40 percent spending target by the approaching half-year end will be missed.
Among the Federal Ministries and divisions that have received major funding thus far are the regular ones which tend to have large development allocations. These include the National Highway Authority, WAPDA, Railways, PAEC, HEC, ERRA and special areas. But, only a handful of divisions and ministries have received more than 20 percent of their FY14 allocations so far, with the rest remaining under funded.
It must be noted that foreign aid accounted for about 22 percent of the total disbursements so far. The share of foreign aid in the Rs540 billion PSDP budget is 20 percent.
Slowdown in PSDP spending is clear. Of course, development spending normally picks up in the second half and intensifies in the final months. But, given the context of governments recent revenue slippages, it wouldn be a surprise if the Federal Government is knowingly slowing down the pace of PSDP disbursements. It has to create fiscal space for the more obligating and inelastic current expenditures.
The IMF may revise Pakistans tax collections downwards and advise its government to reduce its expenditures after the ongoing review. In that case, the independent economists are afraid that the axe may fall again on the development spending, which may further slowdown the economic growth.
But, in the absence of any immediate tax measures, keeping the year-end fiscal deficit in the vicinity of 5.8 percent is going to take some doing. As regards PSDP spending, the PML-N government faces a choice: it can carry on releasing the development funds at a decelerated pace: Or it can officially slash the PSDP budget.
In any case, it increasingly appears that the governments flagship New Development Initiatives, the Rs115 billion PSDP allocation that still remains unspecified in the official documents, may not be funded this fiscal year.

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STATUS OF PSDP RELEASES IN FY14

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Rs (bn)                                    Budgeted               Released*

                                       Rupee   Foreign Aid     Rupee   Foreign Aid

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Federal Ministries and Divisions       323.5          38.9      50.5           8.3

Corporations (NHA, Wapda (power)        49.9          64.6      12.7          10.2

Special Areas (Fata, AJK, GB, etc.)     44.8           3.3      12.1           1.9

ERRA                                     7.5           2.5       1.5           1.1

Tameer-e-Pakistan Programme              5.0             0         -             -

Sub-total                              430.7         109.3      76.9          21.4

Total                                  540.0                    98.2

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Data source: Planning Commission                                * as on 01-11-2013

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