Budget 2026–27: Rs1.126tr PSDP under review as Pakistan’s development pipeline swells to Rs10tr

The Annual Plan Coordination Committee (APCC) on Budget 2026–27 met in Islamabad on Monday, with Federal Minister for Planning Ahsan Iqbal chairing the session as the government reviewed development priorities, fiscal constraints and proposed allocations for the next financial year. Officials said the committee is expected to finalise key development priorities for FY2026–27, with a proposed Rs1,126 billion allocation for the Public Sector Development Programme (PSDP) under consideration, alongside a suggested 4 per cent GDP growth target.

The meeting was attended by representatives of federal ministries and provincial governments, including Khyber Pakhtunkhwa Finance Adviser Muzammil Aslam and Sindh Provincial Minister Jam Khan Shoro, who participated in the deliberations.

Development budget stagnation and fiscal pressures

Speaking at the meeting, Ahsan Iqbal said Pakistan’s development budget has remained largely stagnant over the past eight years, despite rising infrastructure and development needs.

He pointed out that Rs1,126 billion had been allocated under the PSDP for the current fiscal year, while a much larger financing requirement persists for ongoing projects.

According to the minister, around Rs10,000 billion are required to complete the existing development pipeline, which he said has expanded significantly in recent years. He added that a large portion of the national budget is currently being consumed by debt servicing, limiting fiscal space for development spending.

Iqbal noted that while provinces have strengthened their development spending capacity, the federal government continues to face resource constraints, leading to a widening gap between federal and provincial development budgets.

Rs10 trillion project pipeline and shifting priorities

The minister said Pakistan’s total development pipeline has now reached nearly Rs10 trillion, with PC-1 proposals worth Rs5,000 billion currently under review.

He said the government had also prepared proposals worth Rs720 billion for new development schemes, but cautioned that non-essential projects may not be continued in the coming fiscal framework.

“Completing ongoing development projects remains the government’s top priority,” he said, stressing the need for focused allocation of limited resources.

Iqbal added that ministries had collectively demanded nearly Rs3,000 billion for development projects in the next fiscal year, but available fiscal space remains significantly lower.

He also highlighted that investment in development initiatives has declined over time, further constraining growth prospects.

PSDP composition and regional allocations

Officials said the PSDP currently includes 786 projects, of which 197 are large-scale schemes. Around 81 per cent of PSDP funds are allocated to major projects, while 15 per cent are directed towards medium-sized initiatives.

For the upcoming fiscal year, the development budget is estimated at Rs1,126 billion. This includes Rs125 billion earmarked for the N-25 highway and Rs87 billion allocated to projects linked with coalition partners.

In addition, Rs100 billion has been proposed for development in Balochistan, while Rs153 billion has been set aside for Gilgit-Baltistan, Azad Jammu and Kashmir, and the merged districts.

“These regions ideally fall under the NFC award distribution, but the federal government continues to provide additional funding,” the minister noted.

Officials also informed the meeting that the PSDP currently faces a Rs15 billion shortfall, while discussions on final allocations and priorities are still ongoing.