Prime Minister Imran Khan has approved 12 June for announcing the budget for the 2020-21 fiscal year. PHOTO: FILE
The federal government has decided to stop unapproved projects from the Public Sector Development Program (PSDP) in the next budget, which will now be announced on June 12.
The $ 9.2 billion China-Pakistan Economic Corridor Mainline-I (ML-1) Project or Rs 1.5 trillion is also among the projects that were not approved. But the government still has two weeks to approve the ML-1 scheme or else it will be delayed for another year.
The decision to cancel an unapproved scheme from the following fiscal year aims to comply with Parliamentary Law and ensure better utilization of fiscal resources. It will also help clean up federal development portfolios that have overstepped boundaries for political reasons.
“No project that is not approved will be included in PSDP 2020-21,” Federal Minister for Planning and Development Asad Umar said The Express Tribune on Monday.
The minister said the ministries still had time to get their projects approved before finalizing the budget. Umar said the government would also ensure effective monitoring and evaluation of ongoing projects, because there is currently no such mechanism.
Prime Minister Imran Khan has approved 12 June for announcing the budget for the 2020-21 fiscal year. The development project approval process for the following fiscal year has been completed before June 8, which is the new date for the National Economic Council (NEC) meeting, chaired by the PM.
The Annual Plan Coordinating Committee (APCC), which was previously scheduled to meet on May 20, will now meet on June 4. The Ministry of Finance has proposed 5 or 12 June as the date of the budget announcement and the prime minister approved 12 June to present his government the third budget in the National Assembly.
There are currently around 180 projects that have not been approved – including ML-1 – that must be approved before the APCC meeting or cannot be included in the PSDP. In April, the Central Development Work Party delayed the approval of the ML-1 project due to a number of technical and financial problems.
In June last year, the parliament approved the 2019 Public Financial Management Act to ensure fiscal discipline in the public sector.
Sections 17 and 18 of the Law establish parameters for project approval and monitoring. No development project will be considered for inclusion in requests for grants that have not yet been given technical approval, according to the Act.
In addition, no development projects are considered to be included in the grant request unless the project is equipped with a budget allocation for the coming year, which fully reflects the proposed project costs for each year.
Immediately after coming to power, the Pakistani government of Tehreek-e-Insaf (PTI) dropped 350 projects that were not approved by the federal PSDP 2018-19, saying that these projects were politically motivated.
However, in the fiscal year 2019-20 PSDP, the government re-entered the project which was not approved.
Following the inclusion of the new scheme, the total size of the PSDP swelled to Rs9.8 trillion with 1,063 projects.
Various ministerial and inter-ministerial forums still have time to approve or recommend this scheme before the APCC and NEC formally approve PSDP next year.
The Ministry of Planning is considering proposing approved and recommended projects for inclusion in the PSDP booklet.
The Ministry of Finance has indicated an allocation of Rs600 billion for PSDP for the next budget, which is equivalent to only 1.3% of the size of GDP projected in the next fiscal year and is one of the lowest development spending. The Ministry of Planning has demanded that the prime minister increase the allocation to Rs700 billion, which is intended to meet the ongoing project financing needs. But the prime minister has not yet made a decision.
The issue was again raised on Monday with the prime minister during a meeting held to review the budget of the Punjab and Khyber-Pakhtunkhwa governments. But no final decision was made by the prime minister.
The development budget shown at Rs600 billion is largely in line with projections made by the International Monetary Fund (IMF) in its latest report on Pakistan. The IMF has projected a Rs588-billion federal PSDP for the 2020-21 fiscal year.
For this year, PSDP’s core budget is Rs551 billion while another Rs150 billion is allocated for projects and initiatives carried out by the finance ministry.
Now, towards Rs551 billion, a total of Rs600 billion has been proposed for this fiscal year which will include some additional fiscal responsibilities previously funded by the Ministry of Finance. The expenditure of Rs70 billion for security and temporary refugees that were previously part of PSDP by the PML-N government will now be issued from the following fiscal year. This expenditure will be displayed as other development expenses.
Unlike this year when the Ministry of Finance reserved Rs71 billion for districts belonging to Khyber-Pakhtunkhwa, it was proposed that the package for all provinces including FATA must first be part of the core PSDP.
In the following fiscal year, significant allocations will be made again to finance the MPs scheme under the Sustainable Development Goals. For this fiscal year, Rs30.5 billion has been allocated to the MPs scheme. The SDGs funding administration ministry is the Cabinet Division.
The federal cabinet recently declined a summary to hand over SDGs to the Ministry of Parliamentary Affairs.
Published in The Express Tribune, May 19th, 2020.
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