PSDP: frozen, for now

The federal government’s Public Sector Development Program (PSDP) is caught in its tracks, due to the fiscal situation that coronavirus has thrown up for Pakistan. As per latest data from Planning Commission, the federal government had authorized a total of Rs467 billion for PSDP by the end of March. Just Rs2 billion were authorized in March, compared to Rs36 billion in February and Rs130 billion in January.

A development spending of two billion bucks in a whole month is peanuts, one that has no precedent in pre-corona era. This means that development spending is effectively frozen. At the end of 9MFY20, the Rs467 billion spending equates to two-thirds of the Rs701 billion PSDP budget. That’s not too bad, but it is suspected that “actual” amount of spending, which is released by finance ministry, will be rather lower.

Will the spending increase anymore as the clock runs down the fiscal? Recall that before the virus started jamming up the wheels, the finance ministry was already looking to slash the PSDP budget by Rs100 billion. If that intent is to be followed in earnest, the PSDP will still need to be funded by an additional Rs134 billion in the remaining 13 weeks this fiscal.

However, dealing with COVID-19 requires Pakistan to prioritize its financial, human and technical resources towards controlling the spread of the virus, instead of undertaking infrastructure development that may provoke local transmission of cases. Lockdowns are not cast in stone and they need to be calibrated based on emerging scenarios to see if some degree of easing is warranted in some regions. (For more on a risk-based approach to easing lockdowns, read “Exit strategy,” published April 8, 2020).

By April 14, it will become clear as to which side of this unappealing trade-off, between controlling the virus and choking the economy, the government eventually lands. (For more on that trade-off, read “Priming the pump for Corona?” published March 24, 2020). However, data show that the PSDP freeze was already in action even before lockdowns had started happening across the country.

Sources suggest that the PSDP spending has been ceased because the federal government didn’t have clarity on how much external financing it would get, and so it needed to have an internal fiscal cushion to fight coronavirus on its own. Therefore, t

The federal government’s Public Sector Development Program (PSDP) is caught in its tracks, due to the fiscal situation that coronavirus has thrown up for Pakistan. As per latest data from Planning Commission, the federal government had authorized a total of Rs467 billion for PSDP by the end of March. Just Rs2 billion were authorized in March, compared to Rs36 billion in February and Rs130 billion in January.

A development spending of two billion bucks in a whole month is peanuts, one that has no precedent in pre-corona era. This means that development spending is effectively frozen. At the end of 9MFY20, the Rs467 billion spending equates to two-thirds of the Rs701 billion PSDP budget. That’s not too bad, but it is suspected that “actual” amount of spending, which is released by finance ministry, will be rather lower.

Will the spending increase anymore as the clock runs down the fiscal? Recall that before the virus started jamming up the wheels, the finance ministry was already looking to slash the PSDP budget by Rs100 billion. If that intent is to be followed in earnest, the PSDP will still need to be funded by an additional Rs134 billion in the remaining 13 weeks this fiscal.

However, dealing with COVID-19 requires Pakistan to prioritize its financial, human and technical resources towards controlling the spread of the virus, instead of undertaking infrastructure development that may provoke local transmission of cases. Lockdowns are not cast in stone and they need to be calibrated based on emerging scenarios to see if some degree of easing is warranted in some regions. (For more on a risk-based approach to easing lockdowns, read “Exit strategy,” published April 8, 2020).

By April 14, it will become clear as to which side of this unappealing trade-off, between controlling the virus and choking the economy, the government eventually lands. (For more on that trade-off, read “Priming the pump for Corona?” published March 24, 2020). However, data show that the PSDP freeze was already in action even before lockdowns had started happening across the country.

Sources suggest that the PSDP spending has been ceased because the federal government didn’t have clarity on how much external financing it would get, and so it needed to have an internal fiscal cushion to fight coronavirus on its own. Therefore, the remaining PSDP funds may end up being utilized for federal government’s Emergency Relief Fund (ERF), which is to provide finances to a number of bodies including National Disaster Management Authority, Ministry of Health and related entities, and Corona Tiger Force.

As both Pakistanis at home and abroad are affected, the government shouldn’t expect philanthropic contributions to meaningfully cater the rising demands on the relief fund in coming weeks, sources maintain. Meanwhile, there is an ongoing effort to reduce duplication in federal and provincial projects on corona-related healthcare spending. Additionally, as clarity emerges later this month on scale of funding from World Bank and ADB, PSDP spending on critical healthcare projects is likely to be enhanced.he remaining PSDP funds may end up being utilized for federal government’s Emergency Relief Fund (ERF), which is to provide finances to a number of bodies including National Disaster Management Authority, Ministry of Health and related entities, and Corona Tiger Force.

As both Pakistanis at home and abroad are affected, the government shouldn’t expect philanthropic contributions to meaningfully cater the rising demands on the relief fund in coming weeks, sources maintain. Meanwhile, there is an ongoing effort to reduce duplication in federal and provincial projects on corona-related healthcare spending. Additionally, as clarity emerges later this month on scale of funding from World Bank and ADB, PSDP spending on critical healthcare projects is likely to be enhanced.