Now that the godfather of development is in charge, how will the federal government’s flagship Public Sector Development Program (PSDP) take form? Will it be more of the PML-N’s same-old infrastructure-heavy mega-projects constructing transportation links and public buildings? Or will there be a change of priorities in favor of social sector development? Will the public sector continue to lead? Or will the private sector be meaningfully brought in via public-private-partnership projects that actually get some traction?
Macroeconomic realties considered; development spending requires a boost. Recall, PTI government had approved an Rs900 billion PSDP budget for FY22 (which turned out to be its last fiscal year in power). This budget was slashed by Rs200 billion mid-ways through the fiscal in order to make some room for financing the mini-budget. Then couple of months back the government reportedly sliced the budget further in order to create fiscal room to cover for some of the losses emanating from petrol price freeze.
As per the latest Planning Commission data, Rs604 billion worth of PSDP funds had been authorized for disbursement in the Jul-Mar period of FY22. Out of that sum, Rs423 billion had been shown as PSDP expenditures in the nine-month period (which is almost half of original Rs900 billion budgets for the fiscal). The actual spending figures for 9MFY22 will become clear once the Ministry of Finance releases its quarterly fiscal report in a few weeks. It is likely that PSDP is further reduced to keep deficit in check.
As a result, whatever PSDP budget is eventually left for FY22, in real terms, it will be significantly lower than the time when the PML-N government had left office in FY18 after completing a major portion of Rs1 trillion PSDP portfolio that fiscal, Pakistan’s highest ever. There are question marks over whether the public sector even has the capabilities to even plan (leave alone execute) trillion-rupee development portfolio with tools that were developed decades ago. Quality of spending matters as much as scale.
That brings the question: what can Shehbaz really do for development at federal level, considering his government is already a short-lived one compared to other first-time PMs who had wider timeframe ahead of them? Given the fiscal squeeze and the need to bring the IMF back on track, most likely he may go along with more cuts in PSDP budget for the remainder of this fiscal. It makes sense if he saved his plans for the next budget, which is to take shape in a month’s time, so he can put his imprint on development.
Now that the federal cabinet is in sight a week after the new PM took oath, it will be another big challenge for Shehbaz, who is leading a coalition government amidst approaching elections, to refuse politically-motivated development schemes requested by the allied parties. Considering former PM Khan’s full-on delegitimizing drive against this nascent government, expect government allies to bargain out-of-proportion, as the failure of continuing this political setup may be judged as PML-N’s alone.