PSDP: still going strong?

Fresh off an economic shock, the new fiscal year requires a development spending push perhaps like no other year in recent memory. And it did start off like that, but now it appears there is a bit of a pause.

By early August, the emerging signs of economic recovery were buttressed by the fact that the development spending had come in at a multi-year high so early at the start of the fiscal. By August 7, Rs102 billion out of the Rs650 billion Public Sector Development Program (PSDP) budget for FY21 had been authorized for release by the Planning Commission.

But since then, the needle has barley moved. As per latest data from the Planning Commission, up till September 25, about Rs118 billion in total had been sanctioned for release under PSDP spending. In other words, in about one and a half months, mere Rs16 billion more were sanctioned for release.

For much of August and now September, it appears there was little activity on this front. On one level, this shouldn't be concerning. The Planning folks can only release 20 percent of the PSDP funds in first quarter. And the funding until September end equates to 18 percent of the Rs650 billion budget. Besides, the funds authorized must be released and then spent on projects on the ground. It’s the whole cycle.

The credit to the government still holds that its PSDP funding has been the highest in recent years as of first quarter end of the fiscal. In a similar timeframe, PSDP funds had been authorized for release at a level of about 17 percent of the Rs1 trillion budget in FY18, at about 6 percent of the Rs675 billion budget in FY19 and almost 15 percent of the Rs701 billion budget in FY20.

Also, so far as yearly growth is concerned, PSDP authorization as of September-end this fiscal is 15 percent higher than last year. However, this growth will subside as the PSDP allocations for FY21 are about 7 percent less than the original budgetary estimates for FY20. While neither the government nor the Fund would like to slash PSDP down the fiscal road, fiscal strains might force otherwise.

Meanwhile, it will be good for analysis if the Planning Commission could resume sharing specific, project-wise details of PSDP funding under different government ministries, divisions and corporations. Sharing such data with the public has been a long-running practice, but in recent months the information flow has stopped. In the interest of transparency, too, such data sharing should be resumed.