ISLAMABAD: Planning Commission of Pakistan has launched “Analytical Review of the PSDP Portfolio” while taking to the senior journalists here in Islamabad Dr. Nadeem-ul-Haque, Deputy Chairman Planning Commission of Pakistan said that for decades, we have looked upon the PSDP for the provision of key infrastructure to stimulate vigorous private investment for achieving the objectives of sustainable economic growth. The PSDP has delivered some key infrastructure such as dams, power stations, roads, universities etc. Yet sustainable growth has eluded Pakistan.
“With this in mind we are beginning to take a long hard look at the PSDP with view to understanding what is the return on the investment the taxpayer is making” said Dr. Haque.
PSDP delivery suffers from difficulties like the inadequacies of fiscal policy, weak Planning Process. PSDP incentives project development but not public service delivery, productivity and no attempt is made to deliver real benefits to the people. Since outcomes are not monitored or reviewed and because of the continuous pressure to initiate projects several weaknesses remain in project development and execution, highlighted by the Deputy Chairman Planning Commission.
The report analyzes the current portfolio of investments in the Public Sector Development Program (PSDP) costing Rs.4.1 trillion with a view to identify issues hindering its effective implementation. PSDP contributes towards economic development of Pakistan. Therefore, emphasis has been given on its rationalization in light of its increasing throw-forward of over Rs.3.0 trillion of approved projects in backdrop of fiscal constraints.
The most critical issues are listed as: What is the consequence of 18th Amendment and 7th NFC Award on federal PSDP, How to address Rs.3.0 trillion throw-forward, Can PSDP finance mega infrastructure projects, like Basha Dam, Cost/ Time overruns of projects occur due to consecutive cuts in PSDP, Backlog of approved projects has been increasing.
Approving forums continue to approve projects without considering fiscal implications. Project cash flows and benefits are vague and if discounted at higher risk adjusted rate (at 35% instead of 12%) then most PSDP projects become unviable.
It is ripe time to review and rationalize the PSDP portfolio so that limited fiscal resources are leveraged towards viable projects of energy, water, transport and other infrastructure sector, being the primary responsibility of the federal Government.
Projects which have positive impact on the economy and society and offer the greatest rates of returns should be financed with priority. To address the above issues, few recommendations are suggested as: Approve fewer projects. Specifically, consider an embargo on approval of projects by DDWP/ CDWP and ECNEC except where there is critical need and donors’ assistance is agreed and committed. Projects that are already part of PSDP ought to be reviewed for deferment until the fiscal space improves. Provincial projects should not be financed from federal PSDP.
To reduce throw-forward liability, potential projects may be transferred to private sector with Public-Private Partnership (PPP), or Built to Operate & Transfer (BOT), or Built to Operate & Own (BOO), Particularly Diamer-Basha Dam. Discourage brick and mortar project. Assurance of full release of PSDP budget without cuts. Carefully re-estimate cash flows and benefits and re-compute NPV for the projects.
With our population increasing at 2 percent annually, there is tremendous stress on our resources. The Government does not have the fiscal space for spending on public services given its immense obligations to provide defence, law and order and servicing the outstanding public debt. In order to move the growth agenda forward, many projects must be privatized or implemented via Public-Private Partnership (PPP) mode.