By Muskan Naveed ISLAMABAD, Feb. 21 (INP-WealthPK): The Public Sector Development Programme (PSDP) is a major instrument through which governments throughout the world ensure sustainable development of their economies. In the developing world, PSDP plays a vital role as the government’s intervention in the form of investment is crucial in helping the economy take off. As the developing world suffers from low levels of private investment, the government’s PSDP spending makes up for low private investment. This also helps spur private investment. Pakistan’s PSDP spending While in the developed countries, government investment is only complimentary to private investment, developing countries have to ensure high government investment to make up for less private investment. In Pakistan, the PSDP spending has, more or less, ranged from Rs500 billion to Rs900 billion over the past five years – with the current year’s PSDP budget of Rs900 billion considered to be one of the largest. The current PSDP comprises approximately 10% of the budget, which shows the government’s commitment towards investment in public welfare projects. However, the International Monetary Fund has proposed cutting the PSDP expenditure by 22% or by Rs200 billion in order to restrict the widening budget deficit. Implications of PSDP cut While the government spending is crucial for the long-term sustainable development and progress of the country, cuts in PSDP are often made with convenience to curtail budget deficit, often at the cost of scaling back the crucial infrastructure development. In order to comply with the IMF conditions, Pakistan has agreed to a PSDP cut. This move is expected to slightly lower the fiscal deficit and result in favourable macroeconomic conditions which will, in turn, boost the economic outlook of the country – making up for the cut in public spending. Annual plan for 2021-22 The PSDP plan for the fiscal year 2021-22 has laid emphasis on the pressing issues facing Pakistan. One of the major focuses of the annual plan is the global pandemic and ways to mitigate its effects. Moreover, there is also an increasing effort to curb regional parities for a more inclusive and equitable growth in the country. The Regional Equalisation Programme is designed to ensure a balanced growth by focusing on less developed areas of the country. With the cut, it is important that the public spending is done in a manner that attracts private investment. The annual plan for the PSDP has detailed the focus on key areas of public investment which are poised to crowd-in private investment – hence, making up for any loss in social welfare spending caused by the cut.