Govt to cut Rs 200 billion from development funds

[Naveed Yaseen]

* Unfulfilled FoDP pledges, additional security expenditures, revenue shortfall forcing cuts
* Finance Ministry says budget cuts not yet final

By Sajid Chaudhry

ISLAMABAD: The federal government is planning a reduction of Rs 200 billion in the Public Sector Development Programme (PSDP) due to shortfalls in expected foreign inflows and additional expenditures, official sources said on Wednesday.

The government was expecting foreign inflows of about Rs 200 billion in the current fiscal year from the Friends of Democratic Pakistan (FODP) forum and the pledges made at the Donor’s Conference in Tokyo, but sources said the pledges seemed unlikely to materialise.

Also, additional security expenditures of around Rs 80 billion due to various military operations, expenditures to tackle suicide attacks, an increase in power sector subsidies of Rs 55 billion and the proposed increase in military and civilian employees’ salaries of around Rs 40 billion are likely to hamper the government’s efforts to implement the PSDP as announced.

During recent talks, the International Monetary Fund (IMF) had proposed a cut of Rs 100 billion in the PSDP, but officials were insisting on cutting between Rs 120 billion and Rs 150 billion.

However, sources said, reduced foreign inflows had forced the government to enforce a Rs 200 billion cut in the PSDP

A report prepared in this regard by the Finance Ministry has been forwarded to the Planning Commission for execution.

“Besides the reduced inflows, the country is facing revenue shortfall of around Rs 15 billion, collections have been below par in the last four months,” a finance ministry official said.

Principal Adviser to the Finance Ministry Saqib Sherani, however, said the “final figures are yet not finalised”, adding that the economy was still “heavily dependent on external financing”.

Meanwhile, officials of the Planning Commission told Daily Times that any cuts would be made after consultation with the country’s leadership.

“The IMF has directed the economic managers of the country not to make any cuts in the health and education sectors,” the official said, adding that major cuts were expected in long-term and infrastructure programmes.

“Between Rs 10 billion and 15 billion are expected to be saved from cuts in the Larkana and Multan packages, cuts in the discretionary funds for MNAs and major savings can be made from limited allocations under the Benazir Income Support Programme as it has yet to be implemented all over the country,” the official said.

http://www.dailytimes.com.pk/default.asp...2009_pg7_1