Project Costs
ISLAMABAD: As their tenure neared its end, the caretaker government sanctioned a significant 30% cost escalation for ongoing contracts across numerous development projects funded under the federal government’s Public Sector Development Programme (PSDP).
Pakistan’s extensive development portfolio has historically been plagued by issues of time and cost overruns, resulting in frequent revisions of financial estimates and missed opportunities.
The International Monetary Fund (IMF) estimates for the fiscal year 2022-23 revealed a federal PSDP portfolio worth Rs10.32 trillion, encompassing 1,153 development projects.
Among these were 909 ongoing projects valued at Rs7.96 trillion, alongside 244 new projects with an estimated cost of Rs2.26 trillion.
Despite the enormity of the program, the 2022-23 budget allocated a mere Rs727.5 billion, prompting the IMF to project an average completion time of 14.1 years per project, assuming no new projects commenced during this period.
The decision to escalate project costs was attributed to inflation, sluggish pace of work, and contractor attrition.
This increase, applicable only to projects signed before September 2022, was approved by the Executive Committee of the National Economic Council (Ecnec) led by caretaker finance minister Dr. Shamshad Akhtar, a day before the February 8 polls.
Under the approved criteria, contracts signed before September 2022 would witness a 30:70% fixed vs. adjustable cost ratio, with a minimum weightage of adjustable cost elements set at 3%.
However, the revised procedures would not affect contracts signed after September 30, 2022.
The IMF has expressed dissatisfaction with Pakistan’s development approach, citing poor execution and lack of transparency in cost evolution for major projects.
Insufficient information on project costs has led to instances of significant cost overruns, as highlighted by the Auditor General of Pakistan in performance audits of various projects.
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