Federal funding halted for 357 ongoing projects in provinces

ISLAMABAD: The interim federal government has halted funding for 357 ongoing projects in the provinces, being carried out under the Public Sector Development Programme (PSDP), citing a shortage of funds.

Sources reveal that recent discussions between the interim federal and provincial governments focused on the potential transfer of federal PSDP projects to their respective provinces.

It was disclosed in the meeting that the federal government had allocated Rs1,373 billion for 357 projects in the provinces, while the previous Pakistan Democratic Movement (PDM) government had earmarked Rs314 billion (33% of financial resources) for provincial projects in the federal PSDP 2023-24.

In 2021, the National Economic Council (NEC) had approved a policy stipulating that the federal government would finance provincial projects in exceptional cases on a 50:50 cost-sharing basis. However, the PDM government violated this policy, allocating funds disproportionately to appease coalition partners.

It is noteworthy that the 18th Constitutional Amendment and 7th NFC have enhanced provincial autonomy and financial strength, enabling them to initiate devolved subjects through their Annual Development Programmes (ADPs).

Sources said that the federal government has informed provincial finance ministers that crucial national strategic projects are not receiving funding due to resource constraints, leading to cost and time overruns, and ultimately depriving them of accrued benefits.

Despite resource constraints, the federal government continues to allocate substantial funding to Azad Jammu and Kashmir, the Gilgit-Baltistan government, and the merged districts of Khyber Pakhtunkhwa, recognizing its federal responsibility and commitment.

Govt approves more than Rs71 billion for seven key development projects

Furthermore, the interim federal government has decided to exclude 137 non-starter projects with zero financial progress from the PSDP 2023-24, resulting in savings of Rs116 billion.

Additionally, the federal government has decided that funds for the Sustainable Development Goals Achievement Programme (SAP), totaling Rs29 billion, will not be released.

The federal government plans to consider shifting 49 projects with financial progress from 0 to 20% to respective provinces for further financing through ADPs or defer them, saving an additional Rs29 billion.

Sources said that the federal government will prioritize completing the 20 projects with over 80% progress during the current fiscal year through re-appropriations/adjustments.

Approximately 150 projects with financial progress between 20% to 80% will be critically reviewed by provinces and completed subject to resource availability, including provincial contributions, the sources said.