KARACHI : On September 7, 2018, Pakistan Tehreek-e-Insaf (PTI) government issued orders to stop releasing funds for Public Sector Development Programme (PSDP), as per the conditions outlined by the previous government. On Wednesday it was learnt that approximately 400 unapproved projects have been put on hold, reducing the total allocations for PSDP by Rs380 billion.
Analysts and stock market players have hailed this move by the sitting government. “This is a wise decision by the government because the current fiscal deficit of the country not only makes hefty PDSP impractical but it would also mean even more depletion of foreign exchange reserves as well as inflation,” said Insight Securities Director Research Zeeshan Afzal.
The previous government of Pakistan Muslim League – Nawaz (PML-N) had announced a rather hefty PSDP programme, with approximately Rs1.6 trillion allocated to the public sector development. In April, the announced budget proposed Rs800 billion for the federal government, Rs850 billion for provinces, out of which 17.4 per cent was to be funded by foreign loans amounting to Rs180.3 billion. PSDP allocations also included Rs100bn in block allocations for the next government, which has been overturned by it.
In the PSDP for 2018-19 as per the National Economic Council (NEC) approval during the tenure of the last regime, the Planning Commission inserted around 400 to 450 unapproved schemes as part of the PSDP. Even back then it was debated that projects in the PDSP need to follow a planning and practicality evaluation procedure, before being included as part of the program. However, they were still added in the programme, resulting in differing funds allocations as noted by the Finance Ministry and the Planning Commission.
Industry experts are also of the opinion that the slashed funds from PSDP programme should be used to finance water and other non-developmental issues, instead of focusing on infrastructure, or ‘popular’ projects. PTI officials have also indicated that funds from projects like laptop schemes would be removed from the allocations for PSDP.
Most of the projects being considered for removal are the ones that have not yet been approved by the Planning Commission or have had less than 20 per cent expenditure, sources said. Such projects include Development Communication, Establishment of Pakistan Urban Planning and Policy Center, Reform and Innovation in Government for High Performance, Technical Studies for Planning Commission, and Building of Officers of Economist Group among others.
Shajar Capital Pakistan (Private) Limited CEO Rehan Ateeq said that cutting down on PSDP will not have any long-term negative effect on the stock market either. He said, “Despite the announcements, the stock market has not had any major changes, and the stocks in the banking industry and food companies are still going well.” He also said that the stock market will remain locally driven in the next few weeks.