January boost for PSDP

Amid protracted signs of economic slowdown, there have been growing calls of letting open the development purse a bit more. Well, wait no more! Under a new, politically-savvy boss at the planning ministry, the development spending at the federal now seems to have a spring in its step.

As per the latest data released by the Planning Commission, the federal government had authorized Rs429 billion under the flagship Public Sector Development Program (PSDP), as of January 31, 2020. The figure, which is almost 50 percent higher than the fund authorization level in 7MFY19, equates to 61 percent of “potential” utilization of funds against a full-year budget of Rs701 billion.

The word “potential” is being used here as a qualification, for the funds “authorized” by the planning ministry do not have the same meaning as funds “released”. The funds are mostly released by the finance ministry in the end. Usually, funds are released with a lag. What this simply implies is that the funds authorized in 7MFY20 thus far will be higher than the funds actually spent.

Meanwhile, January was the breakout month for PSDP spending. About Rs130 billion – or roughly a fifth of the yearly budget – was authorized by the P-block during last month alone. Out of that, the government dished Rs108 billion from its own kitty, whereas Rs20 billion+ came from the foreign aid component.

While the finance ministry’s fiscal data for 1HFY20 is awaited to see how much development spending has “actually” made its way into the economy at large, the planning folks seem intent on approving as many development funds they can. The ceiling for funds’ authorization until March-end is 70 percent of the budget. With two months to go until the quarter’s close, the 61 percent utilization rate looks healthy.

Some 80 percent of the authorized funds thus far of Rs 429 billion have come from the government’s own account, and the rest has materialized from foreign economic assistance. The government has so far met 60 percent of its PSDP budgetary commitment of Rs573 billion, whereas the foreign aid component has realised at least two-thirds of its commitment of Rs128 billion in the ongoing fiscal.

With the IMF team in town for the second quarterly review of the $6 billion EFF program, there is speculation that the scrutiny over revenue shortfall may push the government to present a mini-budget in coming month. It is unclear whether development spending will be put on the chopping block as well. However, federal PSDP budget is already a lean figurine, drastically smaller in real terms from budgets past.