Critical Federal Projects to Suffer As Govt Cuts Rs. 250 Billion Development Budget

An alarming project-cost factor coupled with a significant fund deficit has crippled the federal government’s agenda to meet its Rs. 600 billion annual development targets, according to Planning Division sources.

Project funding underwent a major slash in the first six months on the annual fund plans set for the development budget 2021-22. Fifty percent cut on foreign aid for critical projects has also crippled the government’s target-meeting agenda, Planning Division officials told ProPakistani.

Officials concerned revealed that this situation of inflation and inflow-crunch has never been seen before in meeting the most essential targets within the first half of a financial year. The federal government no longer has the capacity to fund even the critical major protects requiring releases of at least Rs. 300 billion even after the cuts on the original plan imposed last month.

The Public Sector Development Plan (PSDP) was “enhanced by 38 percent from Rs. 650 billion in FY 2020-21 to Rs. 900 billion,” as per the budget documents. However, now the government has lost the capacity to release the budgeted amount for PSDP projects, as per fresh estimates finalized over the first week of January 2022.

The total cut incurred on the planned development budget is feared to swell further from Rs. 300 billion, as Planning Division officials, divulged. They said that the skyrocketing inflation shot through the fund-release capacity of the federation by over 17 percent, and the officially calculated project-cost escalation for the current PSDP funding might be over the mandated 15 percent. And this tragic trend is bound to impact the projects urgently needing heavy imports of machinery, accessories, and materials in circumstances of perpetual loss to the rupee value against the US dollar.

In the discouraging environment of an unprecedented 50 percent cut on the pledged Rs. 100 billion foreign aid for the PSDP projects, the Planning Division would now be heavily dependent on the provincial governments for an emergency injection of Rs. 50 billion. Federation needs this cash to pay up the outstanding contract bills withheld over the past three months on logistics-related dues.

A 12-year old arrangement with the provinces for an annual rescue fund worth Rs. 250-350 billion cash surplus allows the federation to make a demand for such injection. However, this fiscal year, the government has been forced by a swelling fiscal crunch to seek Rs. 350 billion from the provincial coffers as major PSDP projects face erosion requiring urgent assistance from the central government.

If Sindh doesn’t agree to help the federal government in this matter, the projects mandated to complete this financial year would have to suffer irreparable loss, say relevant officials.

Some of the projects on the critical list include those sponsored by the Finance Division (Rs. 123 billion); Corporations (Rs. 113 billion); Water Resources Division (Rs. 103.5 billion); National Highway Authority (Rs. 70 billion); Cabinet Division (Rs. 46 billion); Higher Education Division (Rs. 42 billion); Railway Division (Rs. 36.6 billion); Atomic Energy Commission (Rs. 27.5 billion); Interior Division (Rs. 21.6 billion); National Health Services (Rs. 21.7 billion); Climate Change Division (Rs. 14 billion); Kashmir Affairs & Gilgit Baltistan Division (Rs. 7 billion).