PSDP spending

There is visible ascent in federal government's development spending in these earlier months of 2HFY15. About 45 percent of the mammoth Rs525 billion federal public sector development programme (PSDP) for this fiscal stands disbursed as of February 27, 2015. Government has spent 42.3 percent against its budgeted component of Rs423 billion, whereas foreign aid released was 56.6 percent of its Rs102 billion budget.
But this underspend is on account of earlier quarters slowdown - thanks mostly to political firestorms and the inherent slow processing in earlier months of a fiscal. However, between January and February 2015, spending picked up. The federal government released Rs66 billion in Jan-Feb, which is 16 percent of government's component.
Similarly, foreign aid also picked up with Rs21 billion coming in these two months, accounting for 21 percent of that components budget. Hence we have Rs236.61 billion of PSDP releases so far - not bad but not exactly impressive either.
Yet that doesn't change the fact that FY15 will be yet another year where PSDP will remain under-utilized. That's because as per official release mechanism, PSDPs quarterly ceiling each for the ongoing and final quarters is 30 percent.
Calculations show that the federal government can spend another Rs60 billion till March 31 and Rs127 billion between Apr-Jun while not breaching those ceilings. A full disbursement of foreign aid by year-end would mean another Rs44 billion on that account. Adding all those figures, you get Rs468 billion PSDP disbursements by FY15 close - that comes up to 89 percent of the budgeted Rs525 billion - not bad!
But thats an ideal scenario. The government won't push for maximum spending in the remaining months on account of fiscal deficit constraints. Similarly, foreign aid, which has shown good disbursement trend in this fiscal so far, may not come in full due to any number of reasons.
We are already looking at marked-down PSDP budget, presumably to meet the Funds targets. Then, the bulk of the increase witnessed in Jan-Feb came about in January, so February was in a relative lull. In that context, one may reasonably expect development spending to pick up on account of project-completion-frenzy near the year's close - but not by much. Proponents of development-cum-growth would likely be disappointed this year, too.