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Rules changed to expedite PSDP releases

Rules changed to expedite PSDP releases

ISLAMABAD: The government on Thursday announced to have “shortened budget release process” to speed up execution of development projects and schemes.

Under the revised mechanism, the government has decided to make available 50 per cent of total annual allocations to development projects in the first half of this fiscal year. As per the existing scheme, 40pc funds were being provided to Public Sector Development Programme (PSDP) projects in first six months with 20pc in each of the first two quarters.

The announcement came days after the International Monetary Fund (IMF) advised the federal and provincial governments to ensure maximum utilisation of development funds as a stimulus to revive economic growth estimated for the current year at a miserly 2.4pc.

“The step is aimed at easing funds flow and removing bottlenecks, to boost economic development,” said the Ministry of Finance in a statement. It claimed the steps include increased availability of funds, friendly processes and incentives for early and proper utilisation of funds.

Talking about the procedure, the ministry said half of the budgetary allocations for approved PSDP projects have been made instantly available to Ministry of Planning & Development by revising Finance Division’s release strategy. “Now 50pc funds are available for the first two quarters, without any complication.”

As such, the releases would now be made 20pc in first quarter, 30pc each in second and third quarter and remaining 20pc in the last one.

The ministry said there shall be an incentive of advance releases to the executing agencies which will utilise funds appropriately within required time period. Also, there shall be no “ways and means clearance” of Finance Division for approved PSDP projects for the first three quarters of this fiscal year.

Earlier, the Planning Commi­ssion used to authorise funds to development schemes on the basis of cash plans of the executing agencies but finance ministry used to withhold sizeable funds under the premise of “ways and means clearance” to slow down disbursements for development and meet urgent requirements of current expenditure or other obligations. It was one of the key reasons for project delays and their cost overruns.

The ministry also said the existing “practice of endorsement by officers of Finance Division on the PSDP funds releases sanctioned by the Principal Accounting Officers (secretaries of the various divisions) is also being withdrawn forthwith.”

The whole process of authorisation, releases and sanctioning of PSDP allocated funds shall be dealt between Ministry of Planning, Development & Reforms and the ministries, divisions and PAOs concerned.

An updated release plan for approved PSDP projects to formalise the new strategy is part of the Public Finance Management Act 2019 passed as part of the Finance Bill 2019-20 under the requirements of the World Bank and IMF.

The planning and other line ministries and divisions have been amply enabled to speed up utilisation of PSDP funds in accordance with the revised release strategy and Public Finance Management Act, 2019. These steps are aimed to ensure adequate money supply, less tier control and ease of operation in the development programme.

Published in Dawn, November 8th, 2019

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