ISLAMABAD: The federal government of Pakistan has entered into discussions with provincial authorities regarding a proposal to reduce federal funding for provincial development projects and devolved subjects.
This move is in alignment with commitments made to the International Monetary Fund (IMF) amidst rising interest payments.
As per the IMF agreement, Pakistan aims to achieve a primary surplus, which denotes the difference between total revenues and expenditures, excluding interest payments, at 0.4% of GDP, approximately amounting to Rs. 400 billion.
This surplus is to be achieved based on Rs. 600 billion in cash surpluses that provinces are expected to return to the federal government.
International lending institutions, particularly the World Bank, have been urging the federal government to cease its funding of provincial projects and devolved subjects.
According to details, such a measure could result in fiscal savings exceeding Rs700 billion.
Apart from development schemes, the federal government currently finances devolved responsibilities, including vertical health projects.
During a meeting chaired by a provincial chief minister, Federal Finance Minister Dr. Shamshad Akhtar underscored the provinces’ responsibility to fulfill their commitments for cash surpluses.
She also urged them to prioritize development projects, to reduce the burden on federal finances.
Dr. Akhtar stated, “There is a huge potential for rationalizing public expenditure arrangements between the federal and provincial governments for promoting efficiency and effectiveness of public expenditure.”
She also stressed the need for the provinces to expedite and smoothly execute projects under the public sector development program (PSDP).
The minister noted, “Corrective measures will not only result in substantive savings but will also contribute to improving the effectiveness and implementation of the project in the priority sectors of education and health.”
Furthermore, the sources also revealed that the federal government plans to reduce its public sector development program by Rs. 200 billion to 250 billion through the rationalization of ongoing schemes.
This may involve reducing financial allocations to projects in their initial stages or those added to the development plan for political reasons.
While discussing expenditure and revenue targets in the current budget, Dr. Akhtar urged provincial governments to ensure these targets are met, enabling the attainment of primary budget deficit targets.
An official statement from the meeting recommended that provinces prioritize various projects funded by the federal government within the scope of provincial subjects, following the devolution of power.
The meeting aimed to review the spending patterns of the PSDP, control prices of essential commodities, enhance the quality of services in education and health sectors, and strengthen social safety nets to provide relief to the public.