The government has proposed Rs. 630 billion for Public Sector Development Programme (PSDP) with a growth rate of over 2 percent in the upcoming budget for 2021-22.
A consultative meeting of the Annual Plan Coordination Committee (APCC) was held in the Planning Commission on 4th June 2020. Deputy Chairman Planning Commission Jahanzeb Khan chaired the meeting.
Federal Ministries, State Bank, Ministry of Finance, provincial and special area governments participated in the meeting. Secretary Ministry of Planning, Development, and Special Initiatives said that APCC is a consultative body, and the macroeconomic and development framework will be subject to adjustment in the light of the recommendations of the APCC.
Deputy Chairman highlighted the importance of finalizing the COVID-19 responsive Annual Plan.
APCC was told that the economy was heading towards revival until the beginning of March 2020; however, with the emergence of the COVID-19 pandemic economic landscape has changed. Before COVID exchange rate stability, barring tax revenues overall fiscal performance was satisfactory, reserves were build-up, current account deficit was reduced massively, inflation after peaking in January started deceleration, remittances were improving and QIM was going up with a reduction in the extent of contraction and IMF targets for 3 quarters were fully met.
Economic growth was set to rise over 3 percent but because COVID came down to negative 0.4% as industrial and services sectors were badly affected. Pressure on government spending mounted, exports contracted in April 2020 but imports fell much more quickly.
Next year will be challenging too, but the economy will learn to live with the COVID phenomenon, and growth will improve to over 2%, with agriculture despite locust attack impact will post positive growth and some revival is expected in the services sector.
Inflation will be in the lower single-digit next year, and an external account will be comfortably placed with a lower current account deficit. However, exports and remittances are likely to face a challenging global environment.
The major strategy for PSDP 2020-21 is to focus on the completion of ongoing projects; the COVID-19 responsive development program; more funds have been proposed for the social sector compared to infrastructure than the past years and funding of only approved projects as per the provision of Public Finance Management Act 2019.
In the Water Sector, large multipurpose dams particularly Diamir Bhasha, Mohmand, Dasu Dams, and drainage projects have been proposed adequate funds. Small scale provincial nature dams and drainage projects for less-developed districts have been proposed allocations.
Major ongoing projects of Railways including ML-1, Maritime Affairs Karachi Shipyard, and Inter-provincial/ regional connectivity have been proposed financing. Similarly, major portion of western route has also been proposed funds.
In the Energy Sector, the focus remained on projects of power evacuation, expansion, improving transmission, and distribution system to minimize line losses and circular debt. Projects for supply of power and gas to SEZs have also been proposed financing.
Health Sector is a priority in the wake of COVID-19 to provide improved health services, preventions and control of communicable diseases, production of medical devices, and capacity enhancement of health institutions. The primary focus would be on strengthening promotive, preventing care, and the public health and hygiene system with supporting community resilience in the country.
In the PSDP 2020-21, Out of the total, 59% proposed allocation has been provided to Infrastructure, 35% to Social Sector, and the remaining 6% to other Sectors. For next year preference has been given in allocation of funds to Social Sector by proposing an allocation 35% (Rs. 185 billion) of PSDP compared to the financial year 2019-20 where this allocation was in the range of 16%.
The Government has taken this step to improve the life of the common man by providing good health, education, clean environment, clean drinking water and improving overall life standards of the masses.
The Transport & Communications sector has been proposed Rs. 159 billion, Energy, Rs. 70 billion, Water Rs. 64 billion, Health & Population Rs. 18 billion, Education including HEC Rs. 34 billion, Physical Planning & Housing Rs. 19 billion, SDGs Rs.41 billion, Special areas (AJ&K , GB) Rs.40 billion, and merged district of KP Rs. 40 billion.
Under the special program for improving the quality of life of common people. Rs. 100 billion have been proposed. The total proposed outlay of the PSDP 2020-21 is Rs 630 billion.
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