Facing severe financial constraints, the Annual Plan Coordination Committee (APCC) has recommended a development budget of Rs1,221 billion at the federal level for the fiscal year 2024-25 under the International Monetary Fund (IMF) programme. This budget signifies a sharp reduction in discretionary funding and other development allocations.
The government has decided to abolish discretionary funding for parliamentarians under the Sustainable Development Goals (SDGs) initiative, with no allocation planned in the upcoming budget. Additionally, the Earthquake Reconstruction & Rehabilitation Authority (ERRA) will not receive funding for the next fiscal year.
The Public Sector Development Programme (PSDP) has experienced significant cuts, with only Rs379 billion utilized against an allocation of Rs950 billion for the current fiscal year 2023-24. The APCC, chaired by Deputy Chairman Planning Commission Dr. Mohammad Jehanzeb Khan, approved a PSDP allocation of Rs1,221 billion. The committee projected a GDP growth rate of 3.6% and an inflation rate of 12%.
For the provincial annual development plans, Punjab and Sindh have been proposed allocations of Rs700 billion and Rs763.7 billion, respectively. However, there are no details available regarding the Annual Development Plans (ADPs) for Khyber Pakhtunkhwa, Balochistan, Gilgit Baltistan, and Azad Jammu & Kashmir for the next budget.
Out of the proposed Rs1,221 billion PSDP, Rs877 billion is allocated for infrastructure projects, up from Rs553 billion in the last budget. The social sector budget has been reduced to Rs83 billion from Rs203 billion in the outgoing fiscal year. Funding for special areas, including AJK and GB, is set at Rs51 billion, while the allocation for merged districts is Rs57 billion. Notably, the allocation for Science & Information Technology has increased to Rs102 billion, compared to Rs42 billion previously.
The APCC highlighted Pakistan’s economic challenges, including severe fiscal indiscipline and deficits. The throw-forward of PSDP has escalated from Rs3 trillion in 2013-14 to around Rs9.8 trillion, while the average annual PSDP allocation and expenditure have stagnated at Rs630 billion. The PSDP’s share of GDP has also decreased, from 1.7% in 2013 to 0.9% in 2023-24, exacerbated by inflation and rupee depreciation.
The IMF programme has necessitated a primary deficit management strategy, resulting in reduced PSDP allocations. The Finance Division implemented a backloaded release strategy, distributing funds at 15%, 20%, 25%, and 40% across the fiscal quarters, contrary to the NEC-approved release strategy.
In FY2023-24, Rs131 billion were released in the first quarter, with Rs61.26 billion (46.7%) allocated to SDG schemes, leaving only Rs69.74 billion (53.2%) for other PSDP projects. Additionally, Rs20 billion were diverted to non-development expenditures, and a 20% cut in fourth-quarter releases compressed the PSDP size to Rs746 billion. The Finance Division also deducted Rs29 billion for CDL recovery, reducing the effective PSDP size to Rs717 billion.
The APCC faces challenges in formulating the Ministry/Division-wise Indicative Budget Ceilings (IBCs) for PSDP 2024-25, including a Rs186 billion liability rollover from 2023-24, thin spreading of PSDP allocations, rising throw-forwards, additional demands for key projects, and needs arising from post-flood rehabilitation and other initiatives.
Federally funded projects executed by provinces often face delays in fund transfers and financial reporting. To address this, the Finance Division and Planning Commission have recommended using the Asaan Assignment Account 2020 procedure to ensure the uninterrupted flow of funds to project authorities.
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