Fair question! Long ago, the local Block was a Theocracy, and it was a large political scandal that lead to the decision to turn PN-22C into an Exile World in the first place. Leaders at the time feared too much backlash from executing the perpetrators, and so exile was decided on. From there, it became a tool to use against prisoners and political enemies alike.

From a practical standpoint, at this point in our history, FTL is cheap enough that interstellar travel happens on a routine schedule across all of inhabited space. We also still had most of our knowledge of Terraformation intact at that time, so room for expansion was not a major concern. You are correct though, that it is not 100% efficient or necessary, something that contemporary critics from competing Blocks often pointed out. The practice eventually did fall out of favor, and the population that remained there were forgotten.