Requirements total Rs4.097trn: Rs1.126trn set aside for FY27 PSDP: Ahsan
ISLAMABAD: Federal Minister for Planning, Development and Special Initiatives Ahsan Iqbal has said that the Ministry of Finance has allocated Rs1.126 trillion for the Public Sector Development Programme (PSDP) 2026–27 against total development requirements of Rs4.097 trillion, resulting in a funding gap of nearly Rs3 trillion.
The minister said that the government has set a 4 percent Gross Domestic Product (GDP) growth target for fiscal year 2026–27, up from an estimated 3.7 percent in the current fiscal year (2025–26). While addressing the Annual Plan Coordination Committee (APCC) meeting on Monday, the minister expressed serious concern, saying the government may be forced to shelve development projects worth nearly Rs3 trillion in the new financial year, after receiving project demands of around Rs4 trillion against a PSDP 2026–27 allocations of only Rs1.126 trillion.
He said projects worth around Rs3 trillion would either be rejected or not approved.
He said the country’s development budget fell short of requirements, making the timely completion of projects increasingly difficult and posing a serious challenge to the planning process.
“The PSDP allocation of Rs1.126 trillion includes Rs125 billion earmarked for the N-25 Highway project in Balochistan, which, he said, is a non-negotiable priority identified by the Prime Minister and will be completed at all costs,” he said. He added that around Rs87 billion had been set aside for projects proposed by coalition partners, while approximately Rs100 billion had been earmarked for development initiatives in Balochistan.
The minister emphasized the need to prioritize and complete ongoing development projects, saying that limited fiscal space and a growing throw-forward had made it impossible to fund all schemes under the Public Sector Development Programme (PSDP) 2026–27.
He said these funds should ideally be transferred through the National Finance Commission (NFC) mechanism, but in the absence of a consensus arrangement, they continue to be financed from the federal government’s share.
He said projected GDP growth would be driven by stronger performance in the agriculture, industry, and services sectors. He added that agricultural growth is projected at 3.8 percent in fiscal year 2026–27, compared with 2.9 percent in 2025–26.
“The services sector is projected to grow from 4.1 percent in 2025–26 to 4.2 percent in 2026–27, while industrial growth is expected to increase from 3.5 percent to 4.0 percent. Among key subsectors, large-scale manufacturing is projected to grow from 4.5 percent to 6.1 percent, construction from 2.2 percent to 5.7 percent, wholesale and retail trade from 3.7 percent to 4.2 percent, information and communication from 7.5 percent to 7.7 percent, important crops from 0.6 percent to 3.6 percent, and livestock from 3.8 percent to 3.9 percent,” he said.
At the APCC meeting, the planning minister called for a national campaign to curb tax evasion and expand the tax base, emphasizing that citizen participation is crucial for building a fair and sustainable economy.
According to the minister, around Rs10 trillion is required to complete the existing development pipeline. He said a large portion of the national budget is currently being consumed by debt servicing, limiting fiscal space for development spending. He added that PC-I proposals worth Rs5 trillion are currently under review.
He said that while provinces have strengthened their development spending capacity, the federal government continues to face resource constraints, leading to a widening gap between federal and provincial development budgets.
He said ministries have projects worth Rs3.377 trillion under implementation and have also proposed around 720 new schemes, besides submitting more than 5,500 additional project proposals for consideration.
He said the government will need to increase development spending in the long run while ensuring that priority projects are completed and removed from the development portfolio.
The minister further said that some less important projects may be discontinued due to limited resources, adding that completing ongoing projects remains the government’s top priority.
He also said that Pakistan’s economy is recovering and the government will continue efforts to provide relief to the public through better development planning.
Highlighting the scale of the challenge, the minister said the federal development portfolio carries a throw-forward of around Rs10 trillion, while ministries have sought nearly Rs4 trillion for ongoing projects.
He said that Rs153 billion has been allocated for Azad Jammu and Kashmir (AJK), Gilgit-Baltistan (GB), and the merged districts.
He termed the situation a major dilemma for the Ministry of Planning, saying development allocations are being made within a shrinking budget despite growing infrastructure and social sector needs.
Ahsan said that nearly Rs70 billion has been allocated for Sustainable Development Goals (SDGs)-related initiatives.
Explaining the financial constraints further, he said the remaining fiscal space was significantly reduced after accounting for rupee-cover requirements for foreign-funded projects supported by multilateral institutions, including the Asian Development Bank and the World Bank.
The minister said that the demand for rupee cover had initially stood at Rs832 billion but was rationalized to Rs426 billion after consultations between the Economic Affairs Division and relevant ministries.
He said that after adjusting for these commitments and a Rs180 billion PSDP cut carried over from the previous year, the development programme is in a deficit position, leaving virtually no room for new projects.
He urged all stakeholders to keep fiscal realities in mind while presenting development proposals and prioritize schemes that deliver maximum public benefit and contribute to national growth.
Reuters adds: Pakistan’s gross domestic product is expected to grow at 3.7% in the fiscal year ending June 2026, after logging growth of 3.2% in the previous year, its planning minister said on Monday.