IMF urges Pakistan to reassess development projects amid funding gap

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The International Monetary Fund (IMF) has called on Pakistan to undertake a critical reevaluation of its Public Sector Development Programme (PSDP), highlighting a substantial funding shortfall that threatens the country’s federal development initiatives. In a recent report, the IMF revealed that ongoing projects under the PSDP require a staggering Rs10.7 trillion, which overshadows the current year’s budget allocation of just Rs727 billion by nearly 14 times.

The assessment underscores a dire need for Pakistan to address its fiscal management, particularly in light of the significant gap between necessary and available funding. The IMF pointed out that the government’s recent launch of projects totaling Rs2.3 trillion has not been backed by sufficient technical assessments prior to approval. This practice has led to concerns over decision-making processes, as unfunded or flood-affected projects have been overlooked in cost assessments, and the impact of inflation and delays on project costs has been ignored.

The Planning Commission of Pakistan acknowledges these issues, recognizing that inflationary pressures and funding delays could lead to an escalation in project expenses. Moreover, the IMF noted that there has been a persistent trend of exceeding debt limits when it comes to development expenditures.

In response to these challenges, the IMF advocates for a more structured approach to public investment management. The Fund suggests the implementation of a five-year policy to guide project selection and calls for a transparent mechanism for funding allocation. These measures aim to ensure that development efforts are both sustainable and effective.

As Islamabad awaits the Executive Board’s approval following delegation-level negotiations, there is anticipation that an SBA staff-level accord could unlock an additional US$700 million installment. This would bring the total disbursements under the arrangement to nearly US$1.9 billion, offering a potential financial lifeline amid these budgetary constraints.

The call for reassessment comes at a crucial time for Pakistan as it grapples with managing its development goals within the confines of its fiscal reality. The IMF’s recommendations provide a roadmap for more prudent financial planning and project management that could help stabilize the country’s economic trajectory.

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