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Print Print 2023-12-11

Unbudgeted projects: Reappropriation of funds banned

  • Ministry of Planning, Development and Special Initiatives asks Ministries/ Divisions to place demand of rupee cover against foreign aid to the extent of expenditure to be incurred during CFY
Published December 11, 2023

ISLAMABAD : Ministry of Planning, Development and Special Initiatives(M/o PD&SI) has imposed a ban on re-appropriation of funds for unbudgeted projects sans its prior approval and asked Ministries/ Divisions to place demand of rupee cover against foreign aid to the extent of expenditure to be incurred during CFY.

These instructions, duly approved by the Deputy Chairman Planning Commission, have been passed on to all the Ministries/ Divisions for strict compliance. On November 9, 2023, M/o PD&SI had already issued an Office Memorandum (OM) in this regard.

In another OM, Chief Public Investment Program (RIP), Section, Irfan Khan stated that Financial Management and Powers of PAOs Regulations, 2021 were issued by Finance Division in March, 2021 wherein, inter-alia, powers for re-appropriation of budgeted funds from one development scheme to another, (duly approved by the competent forum and included in the demand(s) for grant) have been delegated to Secretary/PAO of the Division concerned, while observing all general instructions/ restrictions before re-appropriating the funds.

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According to Ministry of Planning, Development and Special Initiatives, the Regulations clearly indicate that if some urgent need arises, Ministries/ Divisions concerned may only re-appropriate PSDP funds for budgeted approved projects with approval of Secretary/PAO concerned.

The Ministries/ Divisions have been advised to strictly observe the following guidelines, while making re-appropriation of funds among the budgeted projects: (i) PAO may review project wise allocation and expenditure during CFY on monthly basis; (ii) re-appropriation of funds from foreign aid allocation (rupee cover) to local rupee allocation is not permissible; (iii) re-appropriation may be allowed only to the heads of accounts / provisions given in approved PC-Is/ PC-IIs by the respective competent forum; (iv) funds should preferably be re-appropriated for completion of ongoing projects; (v) cost/ time over run may be avoided while allowing re-appropriation of funds from the allocations of on-going projects; (vi) vi) regional and sectoral allocations may be protected to ensure balanced development while allowing re-appropriation of funds; and (vii) re-appropriation for Foreign Aid Allocation (Rupee cover).

According to Chief RIP Section, Ministries/ Divisions are not allowed to re-appropriate funds under PSDP to un-budgeted projects (either left over on-going or new projects).

However, under un-avoidable circumstances, such case(s) may be referred to M/o PD&SI for consideration on case to case basis in the light of direction of National Economic Council (NEC).

Finance Division/ AGPR should also not allow/ open new Cost Center/ Project ID for un-budgeted PSDP projects without prior consent of M/o PD&SI for budgeting through re-appropriation during the fiscal year.

M/o PD&SI further stated that during CFY, an amount of Rs 75 billion is allocated against foreign aid as rupee cover in respect of foreign aided projects.

The Ministry in consultation with Finance Division on October 27, 2023, authorized 35% of respective foreign aid allocation for July-Dec 2023 period, enabling sponsoring Ministries/ Divisions to release / sanction funds.

The Ministries/Divisions have been enabled to undertake expenditure as per requirement of foreign aided projects in line with revised procedure of Revolving Fund Account for foreign aided projects issued by Finance Division in August, 2022.

Chief RIP Section, Irfan Khan further stated that due to fiscal constraints, the demanded rupee cover for foreign aided projects could not be allocated in PSDP 2023-24, adding that reportedly, shortfall of rupee cover against estimated disbursement by donors and expenditure by executing agencies is being faced by some Sponsors during CFY due to AGPR adoption of procedure for allocation of rupee cover.

The issue was discussed in a meeting held on November 17, 2023 in Finance Division and another meeting held on November 21, 2023 in Economic Affairs Division under the chairmanship of caretaker Minister for Finance, Revenue and EAD.

In the light of discussion at the meeting, Chief RIP Section requested sponsoring Ministries / Divisions to review the respective projects with focus on demand of rupee cover against foreign aid to the extent of expenditure to be incurred during CFY.

To meet the additional demand for rupee cover, the following ways may be explored in order of priority: (i) Principal Accounting Officers may review rupee cover requirement / allocation, expected expenditure during the CFY on monthly basis;(ii) re-appropriation of funds (within overall rupee cover) among the foreign aided projects budgeted in same development grant; (iii) re-appropriation of funds from rupee local allocation to foreign aid allocation within the same or among the budgeted projects in same development grant; (iv) arrangement of additional funds through inter-grant adjustment / TSG, by the M/o PD&SI subject to exhausting the first two options; (v) arrangement of additional budgetary provision as rupee cover for foreign aided projects by Finance Division, over and above PSDP size, if any; and (vi) Ministries/Divisions may approach Ministry of Planning, Development and Special Initiatives for additional demand for rupee cover, with full justification, for consideration on case to case basis.

Ministries/ Divisions have also asked to comply with all guidelines/ instructions/ rules contained in the PFM Act, 2019, Financial Management and Powers of PAOs Regulations, 2021, Revolving Fund Account Procedure 2022, GFR, etc., on the matter.

All re-appropriation orders may be endorsed to Planning Ministry for maintaining record/ updating the PSDP data before issuance of financial sanctions, etc.

Copyright Business Recorder, 2023

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