Islamabad June 3 2025: Pakistan set PKR 1,000 billion target for the federal PSDP, including PKR 270 billion in foreign aid for fiscal year 2025-26 compared to PKR 1,400 billion set for previous year.
Federal Minister for Planning, Development and Special Initiatives, Prof. Ahsan Iqbal, announced that the proposed PSDP has been restructured in line with core principles of sustainability, impact, and equity.
The Finance Division, after consultations with the IMF, has firmed up an Indicative Budget Ceiling of PKR 1,000 billion for the federal PSDP, including PKR 270 billion in foreign aid. The PSDP 2025–26 portfolios have been developed following extensive consultations with Ministries and Provinces through Priority Committee meetings and high-level reviews chaired by the Deputy Prime Minister and Advisor to the Prime Minister. The final recommendations reflect a strict prioritization of ongoing high-impact, foreign-aided, and near-completion projects. In total, 1,120 projects have been included in the proposed PSDP, of which a significant number are designed to be completed within the next 3–4 years if fiscal space is maintained. Pakistan faces serious challenge of water security therefore Diamer Bhasha Dam is given top priority. Hyderabad-Sukkur Motorway will be started during 2025-26. Balochistan will get highest share in development funds of nearly PKR 250 billion.
Sectoral allocations have been finalized with PKR 644 billion allocated to infrastructure, including PKR 332 billion for transport and communications and PKR 144 billion for energy. PKR 150 billion has been proposed for the social sector, including PKR 63 billion for education and higher education and PKR 22 billion for health. Special areas like AJK and GB will receive PKR 63 billion, while PKR 70 billion has been allocated for merged districts of Khyber Pakhtunkhwa. Science and IT sectors have been allocated PKR 53 billion, while PKR 9 billion has been proposed for governance. Production sectors, including food, agriculture, and industries, will receive PKR 11 billion. In addition, State-Owned Enterprises have submitted development plans amounting to PKR 288 billion, with major contributions from entities like WAPDA, NTDC, OGDCL, and others.
The Minister informed the participants that one of the most serious challenges has been the increasing tension and security risks following the events of May 7, 2025, when hostilities broke out along the eastern border. This conflict has led to increased defense spending requirements and exerted additional pressure on the already limited development budget. He candidly acknowledged the dilemma faced by the government: choosing between critical national defense and the developmental needs of the people. However, he reassured participants that the government remains committed to maintaining a careful balance. The Minister stated that the strength of a nation lies not just in its defense capabilities, but also in the health, education, and economic empowerment of its citizens. The government will not allow Pakistan’s development journey to be derailed. Instead, it will adopt innovative planning, smart budgeting, and rigorous monitoring to ensure that the needs of both defense and development are addressed.
The APCC also deliberated on critical policy reforms. It endorsed the proposal to stop at-source deduction of Cash Development Loans (CDL) from PSDP funds, as this practice hampers project cash flows and delays implementation. The Committee reiterated the policy that provincial nature projects should be funded by provinces, except in cases involving strategic national interest or implementation in deprived regions. Furthermore, the APCC recommended imposing a moratorium on DDWP-level project approvals during the tenure of the IMF programme, except in exceptional cases with full justification and review by the CDWP. It was also proposed that no development funds be diverted to recurring expenditures during the fiscal year.
In his concluding remarks, Ahsan Iqbal reiterated the federal government’s unwavering resolve to transform adversity into opportunity. He emphasized that Pakistan’s current economic path, though challenging, is also full of potential. URAAN Pakistan provides the guiding vision, rooted in five core pillars: Exports, E-Pakistan, Energy & Infrastructure, Environment & Climate Resilience, and Equity, Ethics & Empowerment. Through this framework, the government aims to restore public trust, inspire innovation, and unlock economic potential across all sectors and regions. He called upon all stakeholders—federal ministries, provincial departments, development partners, and the private sector—to move forward with shared commitment and unity of purpose.
He concluded by stating, “We are not just managing a budget—we are shaping the future. The world may see limitations, but we see opportunities. Our history is full of moments when the Pakistani nation rose above challenges through resolve and resilience. This is one such moment. Together, let us rise and lead Pakistan towards sustainable development, economic dignity, and national pride. URAAN Pakistan is not just a programme—it is the spirit of our national ambition.”
During the meeting, a detailed review of PSDP 2024–25 was presented. It was noted that the National Economic Council had approved a National Development Outlay of Rs. 3,792.3 billion, which included Rs. 1,400 billion for the Federal PSDP, Rs. 2,095.4 billion for Provincial ADPs, and Rs. 196.9 billion for State-Owned Enterprises (SOEs). However, due to financial constraints, the federal PSDP was later reduced to Rs. 1,100 billion. As of 31st May 2025, Rs. 1,036 billion had been authorized for release, and Rs. 596 billion had been utilized. A total of 1,071 projects were included in the PSDP, with an approved cost of Rs. 13,427 billion, of which Rs. 3,216 billion had already been spent by June 2024. A throw-forward liability of Rs. 10,216 billion remains, underscoring the urgent need for project rationalization and financial discipline.
The Minister highlighted that there is a dire need to increase the development budget of the country, which has direct bearing on growth and job creation. However, due to fiscal discipline agreed with IMF government is constrained to not increase PSDP. The only way to increase development spending is to increase the revenues by increasing Tax/GDP ratio from 10% to 16-18%. He said that by being lowest tax paying economy we can’t aspire to grow. Every tax paying citizen must become partner of the government in rooting out the menace of tax theft. The government has undertaken number of reforms to overhaul tax administration. To ensure maximum value for the investment in development sector, Ministry has taken multiple reviews of project performance, including quarterly and mid-year reviews for better investment efficiency. A comprehensive assessment of the ongoing project portfolio was conducted. As a result, over 118 slow-moving or redundant projects, mostly approved at the DDWP level, were recommended for capping or closure, potentially saving Rs. 1,000 billion and freeing resources for high-impact initiatives. Moreover, the Planning Commission facilitated re-appropriations of Rs. 84 billion to fast-moving projects and critical interventions, while Rs. 80 billion were reallocated through TSGs for emergent national priorities such as the solarization of tube wells in Balochistan.
