Pakistan’s Rs4.1 Trillion Development Budget: Political Priorities or National Progress?

A Record Budget in a Resource-Strapped Economy

In an extraordinary contradiction, Pakistan’s federal and provincial governments are set to approve a record Rs4.1 trillion national development outlay for FY2025-26 — despite chronic fiscal constraints and underperformance in actual spending.

While the headline number signals ambition, a deeper look reveals worrying trade-offs, political maneuvering, and misplaced priorities that could further entrench systemic inefficiencies.

Record Spending… But With What Resources?

The Annual Plan Coordination Committee (APCC), chaired by Planning Minister Ahsan Iqbal, is expected to approve a combined Rs4.1 trillion in development budgets, an 8% increase from last year’s approved allocations. This includes:

• Federal PSDP: Rs1 trillion (down from Rs1.4 trillion)

• Provincial Development Budgets: Rs2.8 trillion (up 28% from last year)

• SOE/Corporate Spending Outside PSDP: Rs288 billion

But here’s the catch:
Despite setting aside Rs1.4 trillion last year, actual federal PSDP spending stood at just Rs596 billion by May — a mere 43% of the budget.

The federal government is again planning to borrow Rs270 billion externally, while provinces will borrow Rs802 billion, just to finance development.

Development or Distraction? Political Priorities Dominate

While the government claims to be following a high-impact, high-return development strategy in line with the “Uraan Pakistan Programme” and the 5Es five-year plan, the proposed allocations tell a different story.

Key examples of political priorities taking precedence:

• National Highway Authority (NHA) budget increased by 27% to Rs229 billion

• Parliamentarian schemes under the SDG programme retained at Rs50 billion

• Provincial nature projects under federal PSDP ballooned from Rs19 billion to Rs93.4 billion

Meanwhile, core sectors have been gutted:

This shrinking of critical development areas — amid real threats like India’s water policy, a looming energy crisis, and collapsing education quality — reflects short-termism at its worst.

Provinces Go All-In — But Can They Deliver?

The provinces, empowered by the 2010 National Finance Commission (NFC) Award, are flush with cash — and they’re spending like it:

• Punjab: Rs1.19 trillion (up 41%)

• Khyber Pakhtunkhwa: Rs440 billion (up 63%)

• Sindh: Rs887 billion (up 7%)

• Balochistan: Rs280 billion (up 13%)

However, rising allocations don’t always translate to effective delivery. Many projects remain stuck at the Departmental Development Working Party (DDWP) level, with poor monitoring and repeated cost escalations.

Pakistan’s 2025-26 Budget: It’s Time for Game-Changing Moves

In fact, the Planning Ministry has identified 183 slow-moving projects, suggesting they be capped or closed — a potential Rs1 trillion in savings.

The Real Fiscal Picture: Grim and Constrained

Pakistan is still operating under the watchful eye of the IMF, and the fiscal space is severely limited. Some measures being proposed to maintain appearances include:

• Moratorium on new projects up to Rs1 billion (unless under compelling conditions)

• Ban on small-scale politically-motivated projects

• Focus on completing foreign-funded or high-impact projects

• Cap on provincial-nature projects under federal PSDP

Yet, 30-40% of federal PSDP continues to be allocated to projects that should be handled by provinces, delaying national projects and wasting finite capital.

Strategic Drift or Deliberate Choice?

With 1,071 ongoing development projects worth Rs13.4 trillion requiring Rs10.2 trillion more for completion, Pakistan faces a brutal choice:

• Keep spreading money thin across politically expedient schemes and risk a decade of delay in meaningful national infrastructure

• Or consolidate funds, focus on strategic high-impact areas like water, power, education, and complete critical national projects in 3–4 years

The government’s current trajectory leans toward the former.

Conclusion: Realignment Is Urgent

Pakistan is poised to pass a record development budget that lacks development logic. Cutting water and education funding in a country facing climate stress and a youth bulge is not just irresponsible — it’s dangerous.

If the government wants to restore credibility, spur real economic transformation, and meet its 5Es goals, it must:

• Prioritise completion over expansion

• Allocate funding based on national impact, not coalition politics

• Redirect funds from vanity road projects to resilient infrastructure

• Hold provinces accountable for delivery, not just spending

Until then, budget growth without strategic discipline will only deepen Pakistan’s crisis — not resolve it.