Average PSDP project in Pakistan takes 14.1 years: IMF

IMF Mission Chief for Pakistan Mr. Nathan Porter and IMF Resident Representative for Pakistan Ms. Esther Perez Tuiz called on Caretaker Prime Minister Anwar-ul-Haq Kakkar on November 15, 2023.  - PID
IMF Mission Chief for Pakistan Mr. Nathan Porter and IMF Resident Representative for Pakistan Ms. Esther Perez Tuiz called on Caretaker Prime Minister Anwar-ul-Haq Kakkar on November 15, 2023. – PID
  • The fund says there are 244 new PSDP projects worth Rs 2,261.9 billion.
  • 909 development projects worth Rs 7,961.5 billion are underway.
  • The hybrid public investment efficiency gap is estimated at around 38%.

ISLAMABAD: The International Monetary Fund (IMF) has assessed that the average time to complete development projects in Pakistan is 14.1 years if no new projects are included in the Public Sector Development Program (PSDP) list.

IMF has come out with a technical assistance report titled ‘Public Investment Management Assessment (PIMA)’ to evaluate Pakistan’s development framework, which is expected to be launched soon.

The IMF assessed that the PSDP included 244 new development projects with an estimated cost of Rs 2,261.9 billion during the last financial year 2022-23. The number of ongoing development projects is 909, with a total cost of Rs 7,961.5 billion, it said.

Therefore, the average time to complete a project was 14.1 years, provided that the development budget remained the same and no projects were included in the PSDP.

While the Planning Commission gives funding priority to ongoing projects, reforms are needed to provide a more reliable basis for the PSDP budget. The total cost of completing ongoing projects, the “throw forward”, is much larger than the realistic funding available in the medium term.

This shows that if the annual PSDP budget remains the same, and no new projects are added, it will take approximately 14 years to complete the existing sanctioned projects. However, in practice, new projects continue to be added at a significant rate.

Additionally, the estimated years to completion may be underestimated because i) projects not receiving funding in 2022-23 (known as unfunded projects) are not counted in the funding backlog ii) the 2022-23 PSDP does not include flood-related projects which have been approved subsequently and iii) the delay has resulted in a significant cost overrun.

The Planning Commission estimates that a typical project requires 2-3 times more than its original estimated cost due to inflation, damage to work already done and loss of material at idle construction sites and increased builder costs – Which the Planning Commission holds largely responsible for funding-induced delays.

While the PSDP provides information about total project costs, this information will be more useful than realistic funding available in the medium term.

The IMF says that the hybrid public investment efficiency gap in Pakistan is estimated at about 38%, which indicates that there is considerable potential to improve the reach and quality of its infrastructure. The hybrid efficiency gap is a measure of the potential quality and access to infrastructure, given the current level of capital stock per capita.

Pakistan’s efficiency gap is only slightly larger than the peer group average, but larger than the average for the Emerging Economies, Middle East, North Africa and all country groups. This gap shows that the country is not fully utilizing capital investment expenditure to provide optimal access and quality of public services and infrastructure for its population.

In recent years, an increasing share of public investment has been implemented by provincial governments. In 2011, the 18th amendment to the Constitution granted greater autonomy and power to the provinces and special regions of Azad Jammu Kashmir and Gilgit-Baltistan, including control over education and health. It also increased the four provinces’ share of federal resources and allowed them to collect and retain revenue from certain sources.

As a result, capital investment executed at the sub-national level (this includes provinces, special regions and their respective districts) has moved upwards, accounting for an average of 60% of total capital expenditure over the past six years.

At the federal level, capital expenditure is executed directly by line ministries or by autonomous and semi-autonomous agencies, such as National Highways Authority, Water and Power Development Authority, Airport Authority and Port Authority.

Overall, these agencies have executed about one-fifth of the capital expenditure in recent years, a figure comparable to the capital expenditure incurred by line ministries.

Originally published in news

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