The federal government has reduced the development budget by Rs100 billion to finance fuel-related payments, with officials confirming that funds were redirected to the Prime Minister’s Austerity Fund instead of utilising contingency allocations.

 

Federal Minister for Planning Ahsan Iqbal stated that the Public Sector Development Programme (PSDP) had been cut by Rs100 billion after the finance ministry asked the planning ministry to surrender the amount for fuel support measures.

 

The development follows a request by the Ministry of Petroleum to the finance ministry to release Rs71 billion to the Oil and Gas Regulatory Authority (OGRA) for clearing price differential claims for March 14–27, which are to be passed on to oil marketing companies.

 

Iqbal stated that the move would increase fiscal pressures, adding that liabilities were being deferred instead of managed through budgetary planning. He further stated that instead of increasing allocations, the development budget had been reduced despite additional funding demands from ministries during the mid-term review.

 

For the current fiscal year, the National Assembly had approved Rs1 trillion for development spending, while ministries had sought an additional Rs495 billion to continue ongoing schemes.

 

According to officials, allocations across ministries have been reduced proportionally. The largest cut of Rs22.3 billion has been made to the National Highway Authority, followed by Rs12.9 billion in the water resources sector and Rs10.2 billion in provincial project allocations.

 

The Power Division’s budget has been reduced by Rs9.1 billion, while Rs7 billion has been cut from schemes recommended under the Sustainable Development Goals programme. Allocations for Azad Kashmir and Gilgit-Baltistan have been reduced by Rs8.2 billion, and Rs6.5 billion has been cut from the merged districts of Khyber Pakhtunkhwa (KP).

 

Other reductions include Rs4.2 billion from the Higher Education Commission, Rs3.2 billion from the education ministry, Rs2.2 billion each from the railways and science and technology ministries, and Rs1.4 billion each from the health and interior ministries. The Federal Board of Revenue allocation has been reduced by Rs1.7 billion.

 

Prime Minister (PM) Shehbaz Sharif had earlier announced that fuel prices would be kept unchanged, with officials stating that the decision required payments on account of price differentials. The finance ministry stated that an initial Rs27 billion had been released to OGRA from the austerity fund.

 

Officials stated that funds for the austerity pool were arranged through expenditure reductions within the federal government.

 

Reports quoted sources that the contingency allocations, initially set aside at around Rs389 billion under programme commitments with the International Monetary Fund (IMF), had largely been used to offset revenue shortfalls. They further stated that these funds were not intended to cover inefficiencies in tax collection.