Pakistan proposes Rs1 trillion development plan for 2026-27 amid fiscal constraints

KARACHI: The Pakistani government has proposed a Rs1 trillion Public Sector Development Program for fiscal year 2026-27 as part of a larger national development outlay of Rs3.675 trillion, according to budget documents obtained by Bol.

The National Economic Council approved the overall plan, which includes Rs2.224 trillion for provincial development programs and Rs451 billion in spending by state-owned enterprises. Officials said the program was prepared under strict fiscal discipline, prioritizing high-impact projects.

The Rs1 trillion federal PSDP, the government’s primary tool for directing domestic and foreign resources into development priorities, consists of Rs745 billion from domestic resources and Rs255 billion from foreign assistance.

The program supports Pakistan’s 13th Five-Year Plan, URAAN Pakistan, and the government’s “5Es” framework, covering exports, e-Pakistan, environment, energy and infrastructure, equity and empowerment.

Among federal ministries and divisions, the largest allocation went to provinces and special areas at Rs233.39 billion, followed by the National Highway Authority at Rs224.51 billion, the Water Resources Division at Rs103.09 billion, and the Higher Education Commission at Rs46 billion.

Officials said social sector spending remains a priority, with increased allocations for higher education and the Daanish Schools initiative, which aims to expand access for underserved communities.

The development portfolio faces significant constraints from “throw-forward” liabilities, the accumulated cost of completing already-approved ongoing schemes, leaving limited fiscal space for new projects, officials said. Tighter controls have been placed on fresh project approvals, with priority given to finishing existing initiatives and those aligned with national strategic goals.

The overall national development outlay draws on Rs838 billion in foreign funding and Rs2.837 trillion from domestic resources, reflecting efforts to sustain development spending while meeting fiscal consolidation targets. Officials acknowledged that demand from active projects considerably exceeds available funding, forcing planners to limit new additions to the portfolio.

The PSDP has been aligned with URAAN Pakistan priorities, including productivity enhancement, expansion of digital infrastructure, development of an artificial intelligence ecosystem, improved regional connectivity, and strengthened energy and water security.

Special emphasis has been placed on development in Azad Jammu and Kashmir, Gilgit-Baltistan and the Newly Merged Districts of Khyber Pakhtunkhwa, with targeted funding for regional programs in each area. The proposed PSDP allocations will be presented to parliament as part of the federal budget process for FY2026-27.