Development budget likely to be further cut.

Byline: Khaleeq Kiani

ISLAMABAD -- Pakistan's development spending will be further cut during the current and next fiscal years as part of a larger fiscal rearrangement to put the $6 billion Extended Fund Facility (EFF) back on track following about $1.4bn additional emergency funding by the International Monetary Fund (IMF) that provides the country a breathing space to fight the post-coronavirus situation.

The latest IMF record suggests that the country's consolidated development expenditure for the current year would be down by 34 per cent to Rs953bn, compared to the pre-virus estimate of Rs1.437 trillion. The major reduction of more than 45pc would be in provincial annual development plans (ADPs) to Rs461bn against Rs844bn estimated before the Covid-19 outbreak.

The federal government's Public Sector Development Programme will be down by 17pc to Rs488bn from the pre-coronavirus estimate of Rs588bn even though the government had originally allocated Rs701bn for the PSDP and the planning authorities were adamant on utilising the full allocation.

Move part of larger fiscal rearrangement to put $6bn IMF programme back on track

A senior government official explained that the development budget had already been scaled down because of the poor performance of the Federal Board of Revenue (FBR) against its revenue targets, but later development activities came to a halt because of the countrywide lockdown. The setback, he said, was on both sides - lower revenue collection and negligible construction activities.

Also, interest payments are estimated to come down by over 6pc to Rs2.7tr this year against the pre-virus estimate of Rs2.88tr. Of this, the major interest payment of about Rs2.38tr would be on domestic debt and Rs326bn on foreign debt.

In contrast, defence expenditure would slightly go up by 4pc to Rs1.2tr, compared to the budget estimate of Rs1.15tr. For next year, the defence budget has been estimated at Rs1.33tr, up by 15.5pc when compared to the current fiscal year.

IMF's resident representative in Islamabad Teresa Daban Sanchez on Sunday said the IMF 'staff and the authorities continue to work closely to bring second review to the IMF board as soon as possible'.

In an explainer earlier, the IMF said it was 'premature at this time to set out a concrete timeline for the resumption of the EFF' as Covid-19 shock in Pakistan was still unfolding and the full magnitude of its impact, both in Pakistan and globally, still unknown...

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