The government of Pakistan is in a fix. With the budget coming up, development spending has been cut by 25% to Rs 717 billion. Most significant in these cuts is the size of the PSDP, which has fallen from 1.7% of the GDP in 2013 to 0.9% of the GDP in 2024.
This is a problem for the government, and particularly this set of leaders. One of the most essential jobs of the finance minister, perhaps even his most important role, is to defend the PSDP that the government has set. These are all the projects and development budgets that the government sets for different ministries and areas all over the country.
Instead what we are seeing is important cash in the budget being diverted towards constituency politics, allowing lawmakers to spend on their voters and keep their grip on their seats. This scheme of arrangements is nothing new. The last time the prime minister was in power, parliamentarians had been given tens of billions of rupees near election season to spend at their discretion on their constituencies.
The problem is that the IMF, which Pakistan is counting on for a much larger programme, will not be particularly happy with this. Obstacle like restrictions on procurement, deduction of CDL, skewed release strategy, and requirement of rupee cover for foreign-aided projects in the execution of their respective projects have been cited for these changes.
But alas this reduced PSDP budget faces problems from the IMF as well. While setting an ambitious national development programme target of over Rs3tr for FY25, including a federal PSDP of Rs1.2tr, to pursue a growth rate of 3.6pc, the planning ministry is reported to have opposed the finance ministry’s proposal to cut development spending to meet IMF goals.
The government is hoping to win over voters through major development projects as it has done in the past, which is the same logic with which they are giving lawmakers such hefty discretionary budgets. The PML-N must realise they are not governing in the same conditions as they were in 2013. While they may already have lost a lot of political capital in the past two years, the answer is focusing on long term solutions. There are no quick fixes to popularity problems.
