Mettis Global News
Mettis Global News
Mettis Global News
Mettis Global News

Trending :

PSDP target for FY23: Not enough

PSDP target for FY23: Not enough
PSDP target for FY23: Not enough
Share on facebook
Share on twitter
Share on linkedin
Share on whatsapp

June 10, 2022 (MLN): The budget for FY23 is going to be very challenging and different from the previous budget which was expansionary in nature. With an aim of focusing on fiscal consolidation and austerity measures, the government is likely to allocate Rs800 billion for Public Sector Development Program (PSDP).

This time, the PSDP target is 11% lower than the target of Rs900 billion in FY22. However, the target is 33% higher than the revised allocation as later in FY22, the government revised down PSDP target to Rs603 billion due to fiscal constraints.

From the proposed PSDP target, 90% has been set for existing projects while 10% is set for new projects. On a consolidation basis (Federal & Provincial), PSDP is anticipated to clock in at Rs1.4 trillion in FY23, as against Rs1.2 trillion in FY22.

From analysts’ perspective, the PSDP allocation for FY23 is being deemed ‘insufficient’ for meeting the financing requirements of even the ongoing development projects let alone finance new ones.

“In fact, there are projects in the list of PSDP that will not be able to be completed during the next 15-20 years, keeping in view their allocations on an annual basis”, analyst at Taurus Securities said.

Also, the new government, led by Shehbaz Sharif, is expected to launch 200 new development schemes. The federal minister for Water resources, Khurshid Ahmed, has proposed to allocate 10% share of the total PSDP for the construction of dams to curtail water shortage in the country.

With limited fiscal space the government will be targeting to keep spending low during the next budget, moreover, given the challenging target of achieving a primary surplus in FY23, the final PSDP allocation is likely to be revised down from Rs800 billion.

Looking at the actual disbursement, the government is far behind on its PSDP target set during FY22 as it allocated Rs466 billion during 10MFY22 so far which is 52% of the budgeted amount of Rs900 billion for FY22 as per official data. Given the high current expenditures and reduced fiscal space, it has been becoming increasingly difficult for the government to spend a higher share of their overall expenditures on development. Meanwhile, it is important to note that the government had frozen PSDP disbursements during 4QFY22 as funds being diverted towards petroleum and energy subsidies.

“PSDP historically has hardly been disbursed in the same quantum it was budgeted. Hence, no major headway may be seen in public sector spending via PSDP”, analyst at Arif Habib Limited said, adding that given the resource constraints and role of the private sector to the overall economic growth, the government most likely would want to promote public private sector partnerships in order to reduce the burden on the PSDP.

Besides, due to tight allocation amid fiscal constraints, the overall economic activity during FY23 is likely to suffer as low spending on the development budget and no major reduction in current expenditure will affect the country’s growth.

From the sectors’ perspective, the reduction in PSDP will result in declining infrastructure activities and thus lesser demand for cement and steel, analyst at Spectrum Securities said.

On the contrary, Darson Securities said that PSDP's target looks positive in terms of spending on infrastructure projects that already had been taken because GOP's motto is the completion of existing projects for which 90% of PSDP allocation would be for the current projects. Therefore, demand drivers for existing projects would be positive and generate cement demand.

Copyright Mettis Link News

Posted on: 2022-06-10T13:47:28+05:00

33341