According to the website of the Ministry of Planning, Development and Reforms, the government released 6.9 billion rupees for the water sector during the first six and a half months of 2016-17 against the budgeted amount of 31.71 billion rupees or 22 percent of what was budgeted. Projects under this head include construction and development of reservoirs for water conservation, irrigation and power generation. Pakistan is defined as a water deficit country and is fast approaching conditions of chronic water stress. The need for building reservoirs was identified more than a decade ago yet successive Pakistani governments, including the incumbent, have given extremely low importance to this sector which is vital for sustaining life. This is reflected by inadequate budgetary allocations year after year, made all the more a matter of serious concern as even the inadequate budgeted amount has rarely been released by the end of the fiscal year.
The power sector, a major focus, at least rhetorically of cabinet members, including Prime Minister Nawaz Sharif, received 60.3 billion rupees, including the 34.6 billion rupee foreign aid, against the budgeted amount of 130 billion rupees or only 26.6 percent has been disbursed so far. In marked contrast and in line with the sustained focus of the Sharif administration on road building even during its third tenure 111.4 billion rupees was released for projects of National Highway Authority (NHA), including 65.7 billion rupees foreign aid, against the budgeted total of 188 billion rupees - or over 59 percent of the total budgeted was received by NHA.
This raises questions under the ongoing game changer China Pakistan Economic Corridor (CPEC) on two counts. First and foremost, the Pakistan government would perhaps argue that PSDP disbursements were slashed to keep the fiscal deficit sustainable. Details of the fiscal operations released by the Ministry of Finance last week showed that the deficit escalated to 2.4 percent of Gross Domestic Product (GDP) during the first half of the current year - the highest in four years and only 0.2 percent lower than the much denigrated 2012-13 figure of 2.6 percent. The reason was gross miscalculation on the part of the Ministry of Finance during the budget exercise on account of non-tax revenue accounting for: (i) 8.8 billion rupees PSE mark-up against the budgeted 81 billion rupees, (ii) 75 billion rupees projected profit of Pakistan Telecommunication Authority against only 599 million rupees generated in the first half of the year; (iii) 12 billion rupees dividend against a projected target of 85 billion rupees; and (iv) 87 billion rupees surplus SBP profit against the budgeted 280 billion rupees. In addition, tax revenue was 5.2 percent against the budgeted 12.9 percent - again a gross miscalculation on the part of the budget formulators though it is unclear whether it was due to incompetence or deliberate budget data fudging to show a lower fiscal deficit than was envisaged.
And secondly, the public was informed by the government at the time the memoranda of understanding (MoUs) were being signed with China that out of a total of 46 billion dollars envisaged Chinese investment under CPEC around 35 billion dollars has been earmarked for the energy sector; however the releases during the ongoing year clearly show that road building has received a much higher foreign aid allocation - 65.7 billion rupees - relative to the power sector's 34.6 billion rupees.
There is clearly a need for the government to come clean on its fiscal deficit reduction strategy and prior to slashing PSDP for one sector over another one would hope that there is debate in the cabinet on the subject instead of the cabinet merely rubber stamping recommendations made by the Prime Minister or Finance Minister.
Copyright Business Recorder, 2017