Govt clears Rs4.3tr national development plan for FY2026-27

WEB DESK: The federal government on Monday approved a Rs4.264tr national development programme for the fiscal year 2026-27, with provinces accounting for nearly three-quarters of the total allocation, while Planning Minister Ahsan Iqbal described Rs87b earmarked for coalition partners’ projects as the “cost of a coalition government”.

The Annual Plan Coordination Committee (APCC), chaired by Iqbal, recommended the development budget for final approval by the National Economic Council (NEC), which is scheduled to meet on Wednesday under Prime Minister Shehbaz Sharif, according to The Express Tribune.

Sources said the prime minister had also directed the finance ministry to explore an additional Rs200bn fiscal space for the federal Public Sector Development Programme (PSDP), currently proposed at Rs1.126tr.

Addressing a press conference after the meeting, Iqbal said the federal development budget was effectively reduced after accounting for fixed allocations to various sectors and projects.

He added that ministries had sought more than Rs4.1tr for development spending, while at least Rs2.9tr was required merely to complete ongoing schemes.

Coalition projects and funding constraints

The APCC proposed a federal PSDP of Rs1.126tr, including Rs267bn in foreign assistance, representing a 35 per cent increase over the revised allocation for the outgoing fiscal year.

However, Iqbal expressed dissatisfaction with the size of the programme, arguing that it remained insufficient to meet the requirements of ongoing projects.

He said the government had allocated Rs87b for projects recommended by coalition partners, calling it the “cost of a coalition government”.

In addition, Rs70bn has been set aside to fund small-scale development schemes proposed by treasury lawmakers, with each member of the National Assembly receiving up to Rs500m for local projects.

According to sources, the finance ministry remains reluctant to expand the PSDP further due to fiscal limitations and commitments under the International Monetary Fund (IMF) programme.

The government may seek additional fiscal space either by increasing revenue targets for the Federal Board of Revenue or reducing expenditure elsewhere.

Mr Iqbal noted that the total cost of completing ongoing federal projects had risen to more than Rs10.8tr and warned that, at current funding levels, completion could take over a decade even without the addition of new schemes.

Provincial allocations and infrastructure priorities

The APCC also approved provincial annual development plans worth Rs3.138tr, including Rs660bn in foreign funding. Punjab is set to spend Rs1.45tr on development projects next year, a seven per cent increase over the current fiscal year, while Sindh’s allocation has been reduced to Rs816b.

Khyber Pakhtunkhwa plans development spending of Rs564bn, while Balochistan’s allocation stands at Rs308bn.

Despite describing water security as a critical national challenge, Iqbal said the sector had received far less than required. While development needs in the water sector were estimated at Rs970bn, the proposed allocation ranges between Rs140b and Rs179b.

Among major infrastructure projects, Rs25bn each has been proposed for the Dasu and Diamer-Bhasha dams, while Rs39b has been allocated for the Mohmand Dam.

The National Highway Authority, which sought Rs1.4tr for next year, is expected to receive only Rs264bn. The Sukkur-Hyderabad Motorway has been allocated Rs20b against a demand of Rs122bn.

Iqbal said most development projects continued to face significant cost and time overruns, while foreign-funded schemes were also struggling due to inadequate rupee cover allocations.

He added that the Planning Commission was facing mounting pressure as shrinking fiscal space collided with growing development demands across sectors.