Islamabad has approved a Rs1 trillion federal development budget for fiscal year (FY) 2025-26, alongside setting a 4.2 percent growth target. However, Planning Minister Ahsan Iqbal has reportedly highlighted how the budget may fall short, causing economic growth to falter.

 

The Planning Minister chaired the Annual Plan Coordination Committee (APCC) meeting, after which he outlined how the government will be left with a measly Rs880 billion after setting aside funds for the development of certain projects. According to reports, the aforementioned projects include the Diamer Basha Dam, Karachi-Quetta expressway, Karakoram Highway and Hyderabad-Sukkur Motorway.

 

Despite Pakistan’s fiscal position, the APCC cleared a record Rs4.1 trillion national development outlay, with the provinces paying Rs2.8 trillion of the total amount. Data from reports suggests that Punjab leads spending with a staggering Rs1.19 trillion allocation.

 

Sindh trails close behind, allocating a whopping Rs887 billion for their development budget. Khyber Pakhtunkhwa has increased its development budget by 63 percent causing their budget to swell to Rs440 billion. Balochistan ranks last, having the smallest provincial development budget amounting to just Rs280 billion.

 

However, the distribution of federal Public Sector Development Programme (PSDP) funds has stirred political tension. This is because Sindh secured Rs86 billion, causing a cabinet member to allege that Sindh was able to secure funds primarily because of its alliance with the ruling coalition. In stark contrast, Khyber Pakhtunkhwa received only Rs3 billion, drawing criticism from Finance Advisor Muzzammil Aslam.

 

The Planning Minister responded that Rs70 billion has separately been earmarked for Khyber Pakhtunkhwa’s merged districts and that Islamabad is stepping back from projects that fall under provincial scope.

 

While road infrastructure like the Karachi-Quetta expressway and Karakoram Highway remains a top priority, other key sectors may reportedly take a hit owing to financial constraints. As per reports, funding for the water sector has been slashed by 45 percent, despite ongoing concerns about India’s water threats. 

 

The Diamer Basha Dam, which the Planning Minister says should ideally finish in three to four years, might now take two decades at this pace because of funding issues. The power sector’s budget has reportedly been slashed by 41 percent, and the Higher Education Commission’s funding has been cut by nearly 33 percent.