In the first four months (July-October) of the current fiscal year, Pakistan’s development spending decreased by over 45% to less than Rs 99 billion despite growing interest payments and interruptions brought on by severe floods.
The Ministry of Planning and Development’s statistics show that overall spending in the first four months of FY23 was Rs 98.78 billion, down from Rs 178 billion the previous year. Thus, the entire expenditure is far below the goal mechanism for development spending at just 12.37 percent of the total PSDP allocation of Rs 800 billion.
According to the Planning Division’s announced disbursement mechanism, the federal budget’s development funds are released at a rate of 20% in the first quarter (July-September), 30% in the second (October-December) and third quarters (January-March), and 20% in the fourth and final quarter (April-June) of a fiscal year.
Given delays in interest payments and a slowdown in revenue, the government has decided to limit development spending in the first half of the fiscal year (July-December) to less than 20 percent rather than 50 percent as a temporary measure to maintain engagement with the International Monetary Fund (IMF).
Due to increased interest payments of roughly Rs 900 billion and revenue shortfalls of less than Rs 100 billion, the government now projects its overall spending to exceed the budget objective by about Rs 1 trillion next month. To close the gap, more tax measures may need to be implemented.
Tragically, even development expenditures increased to Rs 98.78 billion from Rs 31 billion in the same time the previous year, mostly due to a more than 45 percent rise in spending by state-run businesses, including the National Highway Authority (NHA) and institutions in the electricity sector.
The utilisation of development funds by state-run businesses also performed better than expected, mostly due to a more than 245 percent rise in electricity sector projects, which went from costing Rs 7 billion in the first four months of last year to costing Rs 24.4 billion this year.
On the other hand, NHA’s expenses somewhat decreased to Rs 20 billion this year from Rs 24 billion previous year.