Reduction in PSDP



THE government has reportedly slashed by fifty percent the Public Sector Development Programme (PSDP) from Rs 725 billion to Rs 350 billion for the current fiscal year-something which will only destroy the public investment initiatives and growth would be compromised in the highly compressed atmosphere.

We understand this has been done on the instructions of the International Monetary Fund (IMF) in order to keep the budget deficit and primary surplus within the desired and agreed limits.

It is through the PSDP spending, an economic activity is generated which, in fact, also encourages the private sector and investors to come forward with their investment.

In our view, reduction in PSDP will only cause harm to the already contracting economy of the country and major projects will face delay which will ultimately enhance their cost.

This will not be feasible under any circumstances and especially at a time when the country is faced with the mammoth task of reconstruction and rehabilitation in the flood affected areas.

The government has repeatedly given assurances to leave no stone unturned for the early rehabilitation of the flood victims and that the development funds will be appropriated towards this end.

The question arises when the flood reconstruction would be divided into short, medium and long-term phases, then how the reduced amount of Rs350 billion will be able to launch even the first phase of reconstruction work in the current fiscal year.

Hence, we will suggest the authorities concerned to sit with the IMF officials, present to them the actual situation and the need for enhanced spending in the flood affected areas.

We believe if a proper plan of reconstruction and rehabilitation will be presented to the IMF, it will not push for reduction in PSDP.

Through this way, we in fact can also secure enhanced funding from the international lender.

The government must also immediately complete damage and assessment survey in the flood affected areas so that the donor conference could be held to mobilize the much needed international support for the reconstruction phase.