PSDP: no longer affordable

November 23, 2023

Business Recorder

Editorial

An International Monetary Fund (IMF) report titled “Pakistan: Technical Assistance Report – Public
Investment Management Assessment” has concluded that Pakistan’s Public Sector Development
Programme (PSDP) is unaffordable and should be reassessed as 10.7 trillion rupees is the total cost
of PSDP projects completion, more than 14 times the budgeted allocation of 727 billion rupees last
fiscal year.

While every large infrastructure project’s completion is, by and large, over a number of years and
therefore does not require the total cost of a project upfront, yet PSDP projects almost routinely go
into cost over-runs due to delays brought on by the lack of timely disbursements by the Finance
Ministry.

The report further notes that a project typically requires two to three times more than its original
estimated cost due to inflation, damage to work already done, loss of materials due to inactive
building sites and increased builder costs - an escalation in costs sourced to funding delays.

And yet bafflingly new projects continue to be added, the report correctly pointed out, at a
significant rate especially after the extremely narrow fiscal space prompted administration after
administration to support funding for only those projects nearing completion at the cost of those
whose work in progress is less than a certain percentage – the actual percentage determined by the
available resources.

While the IMF report argued in academic terms yet to put it more accurately the reason why the
PSDP in terms of the number of projects and their scope is extremely ambitious year after year is to
allow the economic team leaders to claim that the government is focused on development and not
to highlight the two rather glaring ground realities:

(i) the PSDP budgeted allocation, grossly insufficient as it is year after year to complete
projects as noted in the Fund report, is further slashed at the end of the year to bring
the budget deficit to a sustainable level, especially during the time when the country is
on an IMF programme; and its corollary (something that naturally follows: result),
(ii) current expenditure that supports elite capture of our resources has yet to be slashed in
an effort to prioritise PSDP budgeted allocation.

The obvious lesson learned is that no one - not the stakeholders including the multilaterals and the
general public - is beguiled any longer by the continuing attempt of Pakistani administrations to
identify ambitious high-cost projects year and after year, and then failing to provide the budgeted
funding due to lack of resources, thereby raising the costs manifold.

This trend has not deterred many a head of government to inaugurate the same project a number of
times, an absurdity that continues to this day; an example being the Diamer-Bhasha Dam, which was
inaugurated by the then prime minister Nawaz Sharif, in 1998, the then President Pervez Musharraf
in 2006, the then prime ministers Yousaf Raza Gilani and Imran Khan in 2011 and 2020, respectively.
One can only hope that this absurd practice is abandoned and those at the helm of affairs
acknowledge that inaugurations do not raise their approval ratings or indeed are seen to reflect their
commitment to the uplift of the people of the country.

While Business Recorder has always supported a large PSDP because its contribution to growth is
significant in this country yet the way forward is to support PSDP through a commensurate cut in
current non-development expenditure that constitutes 92 percent of the total 2023-24 budget
(against the budgeted 91 percent the year before), inclusive of items that continue to support elite
capture of our scarce resources as well as failure to implement structural reforms with particular
reference to pension reforms that are funded entirely at the taxpayers’ expense and do not require
employee contributions like in other countries.

Copyright Business Recorder, 2023