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EDITORIAL: The National Economic Council meeting chaired by Prime Minister Imran Khan was briefed by the Ministry of Planning, Development and Special Initiatives, that the budgeted allocation for Public Sector Development Programme (PSDP) for 2021-22 – federal and provinces combined – is set at 2.1 trillion rupees, against the budgeted 1.324 trillion rupees in the current year (a rise of 58.6 percent). The revised estimates for the current year are projected at 1.527 trillion rupees (15 percent higher than budgeted for the current year): an unusual occurrence for revised PSDP to be higher than what was budgeted, while the budgeted PSDP for next year is 37.5 percent higher than the budgeted estimates for the current year. The NEC was further informed that the federal PSDP would be of 900 billion rupees – nearly 43 percent of total PSDP - while in the current year the budgeted allocation for federal PSDP was higher at 49 percent of total PSDP.

There is no doubt that the higher than the budgeted PSDP allocation for 2020-21 contributed to the growth rate of 3.94 percent given the supporting macroeconomic data released by the Pakistan Bureau of Statistics recently: (i) public sector (autonomous and semi-autonomous) organisations witnessed a growth of 38.3 percent in the current year as opposed to the year before, a claim that is being challenged as the government remains engaged in talks on a management takeover and/or privatisation. In addition, this growth rate contrasts sharply with negative 32 percent in 2019-20 against 2018-19; (ii) transport and communications grew by 229.6 percent in the current year compared to the year before with railways and post offices registering negative growth though “others” (no doubt including ports-related development) registered a growth of 578.3 percent in the current year against a negative 36.3 percent the year before; in contrast private sector registered a negative 15.6 percent growth this year against a 29.7 percent growth last year; (iii) construction rose by 17.5 percent this year against a whopping rise of 328.3 percent last year while in the private sector negative 23.6 percent growth was evident compared to a positive 15.3 percent the year before; and (iv) manufacturing/electricity generation and distribution grew by 274 percent this year against 388.3 percent last year while the comparable figure for private sector manufacturing was 5.9 percent this year with surprisingly the lead taken by small-scale at 21 percent growth and large-scale at 4.7 percent.

In total, private sector growth in the current year was only 6.5 percent against 10.3 percent the year before while public sector/government growth rate was 38.1 percent this year against negative 3.7 percent the year before. These statistics prove that PSDP remains the lead player in fuelling the growth rate and one can support the government’s insistence on raising PSDP as an engine of growth for the next fiscal year. However, Business Recorder would urge the federal and provincial governments to calculate the economic and internal rates of return of each project and prioritize those with higher returns rather than relying almost exclusively on political considerations for allocations. This economically feasible approach would also lay to rest all criticisms/complaints by provinces where the ruling party does not form a government of unfair treatment.

The Sindh government as is evident from press conferences held this week has expressed its concerns for getting a smaller portion of the federal PSDP pie while the federal government has cited a higher allocation for the province compared to what was disbursed during the PML-N administration.

The NEC was also informed that the priority of the allocation is as follows: transport and communication 244 billion rupees, 118 billion rupees energy, 91 billion rupees water resources, 113 billion rupees social sector, 100 billion rupees for regional equalizations, 31 billion rupees for science/technology/IT sector, 68 billion rupees for SDGs and 17 billion rupees for production sector. These allocations may no doubt be challenged by sector experts, specifically in terms of the need to invest a lot more on water resources given that Pakistan is a water-stressed country, or on energy distribution and transmission lines instead of on generation/dam building however had the government prioritized on the basis of economic and internal rates of return of each project these challenges would not surface.

One would therefore earnestly hope that the Khan administration begins to prioritize projects on the basis of their returns rather than on political considerations – a change in policy from previous administrations that would give the right direction to PSDP projects.

Copyright Business Recorder, 2021