Govt cuts development budget by 10%, mulls smart lockdown to tackle fuel crisis

• Govt provides subsidy to keep prices of petrol and diesel unchanged.
• Funds from Rs350bn for contingency measures being used to provide fuel subsidy.
• Funds of ministries and divisions cut down by Rs68 billion.
  

ISLAMABAD: The government has reduced the current fiscal year’s development budget by 10%, from Rs1,000 billion to Rs900 billion, with the saved funds to be used for austerity measures, The News reported on Thursday.

In the wake of geopolitical tensions that had hiked the POL prices in the international market, the government has been left with no option but to proceed with austerity measures to save and divert resources for absorbing the subsidy. 

Over the last two weeks, the government has provided a subsidy to keep the prices of petrol and diesel unchanged; however, it had to substantially increase the prices of Hi-Octane and kerosene.

The government had earmarked Rs390 billion in the budget for contingency measures. Out of this, funds were utilised for the construction of Daanish Schools and are now being used to provide a subsidy on fuel; however, it remains unclear how much of the Rs390 billion is still available. The government is exploring various options for a smart lockdown in a bid to avert a looming crisis related to both supply disruptions and price shocks. 

According to the Ministry of Planning, funds of ministries and divisions were cut down by Rs68 billion while from corporations budget, Rs32 billion were slashed.

The Ministry of Finance has sent an official communication to the Ministry of Planning, Development and Special Initiatives, apprising it of the reduction in Public Sector Development Programme (PSDP) to the tune of Rs100 billion. When contacted, Minister for Planning Ahsan Iqbal said that the development budget had been slashed by Rs100 billion, representing a 10% cut in the PSDP. 

“We have received a letter from the Ministry of Finance about a Rs100 billion cut in the PSDP,” said the minister, adding that the ministry had instructed all ministries and departments to reduce their development budgets by 10%>

On the eve of the budget, the government had allocated Rs685.9 billion for ministries, divisions and departments under the Public Sector Development Programme, including a local component of Rs583 billion and Rs102 billion as foreign component. In addition, allocations of Rs314 billion were made for corporations, including NHA and the Power Sector Corporation, bringing the total allocation to Rs1,000 billion.

Out of the Rs583 billion allocated to ministries and divisions, Rs254.55 billion has been utilised so far during the first eight months (July-February) of the current fiscal year. Out of the total allocation of Rs314 billion for corporations, the utilisation of funds stood at Rs106.7 billion during the same period. The total utilisation of PSDP funds stands at Rs361.2 billion during the first eight months of the current fiscal year.