Govt to cut PSDP by Rs150b for relief as Pakistan continues battle againt deadly floods

• Govt plans to cut Rs150 billion in PSDP.
• Govt has managed to restart stalled IMF programme.
• Govt had released 20 per cent funds.

ISLAMABAD: The government plans to cut Rs150 billion from the Public Sector Development Program (PSDP) and redirect the funds to flood-affected areas for rehabilitation and reconstruction.

At a time when the government has managed to restart the stalled IMF programme, the incumbent regime is struggling to find fiscal space to divert massive funds to flood-affected areas. Initial estimates suggested that Pakistan suffered a massive economic loss in the range of $10 to $12.5 billion as a result of the devastating floods.

On Tuesday, top officials confirmed to The News that the Ministry of Planning had held consultations in the last few days and was preparing recommendations. According to officials, the government will cut the federal PSDP by Rs100 to Rs150 billion in order to reduce allocations from Rs800 billion to Rs650 billion for the current fiscal year.

"These development funds of Rs150 billion will be diverted to flood-affected areas where there is no possibility to execute development projects in the existing circumstances," said the official.

The Ministry of Planning has been engaged to identify projects where the allocation of funds would be cut down and the exercise would be made in consultation with relevant ministries or executing departments.

When contacted, Ministry of Planning Secretary Syed Zafar Ali Shah said they were working on relief and a damage assessment. However, the Ministry of Finance through an office memorandum recently revised its strategy for the release of development funds for the current fiscal year.

It stated that the fund release strategy shall be applied to each demand for grant and appropriation for development budget included in the schedule of authorised expenditure for FY2022-23. It shall not be applicable to an individual project or cost centre or detailed object heads in a demand for grant and appropriation. Funds shall be released and uploaded on AGPR’s server by the Ministry of Planning, Development and Special Initiatives for each demand for grant and appropriations at the maximum level of 10 percent for quarter 1, 20 percent for quarter 2, 30 percent for quarter 3 and 40 percent for quarter 4 of the approved budget.

The release of funds for each approved project in a demand for grant and appropriation shall be made by the PAO in each quarter within the above limits. The PAO shall ensure the availability of sufficient funds for employees' related expenses for each project. Quarterly budget allocation and release will be uploaded on the MoF and AGPR servers by the Finance Division, within the above stated release limits. No payment shall be made over and above the limits by any accounting organisation/office except with the prior written approval of the Finance Division.

Earlier, the government had released 20 per cent funds for the development budget for the first quarter (July-Sept) period of the current fiscal year, but now the ministries/divisions and attached departments are being instructed not to utilise funds more than the revised envisaged limit of 10 percent. Out of Rs800 billion allocation for the PSDP for 2022-23, the government had earmarked Rs433 billion for infrastructure, including Rs84 billion for energy, Rs227 billion for transport and communication, Rs83 billion for water and Rs39 billion for physical planning and housing sector.

The government had envisaged an allocation of Rs144 billion for the social sector, out of which it earmarked Rs23 billion for health and population, Rs45 billion for education, including the Higher Education Commission (HEC), the SDGs achievement programme (Rs70 billion) and others Rs16 billion.

For the provinces and special areas, AJK and GB, the government made an allocation of Rs96 billion and merged districts of KP Rs50 billion. The government allocated Rs16 billion for governance, food and agriculture (Rs13 billion) and industries (Rs5 billion).