NEC approves 4pc growth target, slashes federal and provincial development spending for FY2026–27

ISLAMABAD:The National Economic Council (NEC), chaired by Prime Minister Shehbaz Sharif, approved key economic targets and the annual development programme for fiscal year 2026–27 on Wednesday, while agreeing to reduce both federal and provincial development spending in an effort to manage fiscal pressures.

According to sources, the council approved a 4 per cent GDP growth target for the next fiscal year and endorsed the Annual Development Programme after reviewing federal and provincial funding priorities.

The high-level meeting was attended by chief ministers and senior officials from across the country. Punjab Chief Minister Maryam Nawaz was unable to attend due to illness, with Senior Minister Marriyum Aurangzeb representing the province. Following the meeting, Sindh Chief Minister Murad Ali Shah and Balochistan Chief Minister Sarfraz Bugti departed from the Prime Minister’s House along with other participants.

Development budgets revised downward

Sources said the NEC decided to reduce the size of both federal and provincial development budgets for the upcoming fiscal year.

The federal Public Sector Development Programme (PSDP), previously approved at Rs1.126 trillion by the Annual Plan Coordination Committee, has been reduced to Rs1 trillion. Provincial development spending has also been revised downward, with the combined provincial development budget set at Rs2.25 trillion, lower than earlier proposed levels.

The move comes as the government seeks to balance development needs with limited fiscal space and growing expenditure requirements in other sectors.

KP raises NFC award, tribal districts funding

Speaking to the media after the meeting, CM KP Sohail Afridi said he had effectively presented the province’s case before the council, particularly on issues related to the National Finance Commission (NFC) Award and funding for the merged tribal districts.

Afridi said the NFC Award had not been updated despite changing fiscal realities and that Prime Minister Shehbaz Sharif assured participants that the 11th NFC Award would be finalised within 180 days.

“If that does not happen, the prime minister has assured us that the matter will be taken forward through a presidential order,” he said.

The chief minister added that the issue of resource allocation for the merged districts was raised during the meeting and that all provinces would be consulted on updating the NFC framework.

He also said the province highlighted concerns regarding wheat procurement and inter-provincial movement of goods, arguing that Article 151 of the Constitution guarantees the free movement of goods and that implementation of the provision is the federal government’s responsibility.

Focus on development and public welfare

Afridi said Khyber Pakhtunkhwa had spent substantial resources on maintaining peace and security and would continue investing in education, health and law and order.

He emphasised that cooperation with the federal government on economic matters should be viewed separately from political differences.

“We participate in these forums to protect the interests of our people. Wherever the province benefits, we will engage,” he said.

The chief minister added that the provincial government would continue prioritising social welfare initiatives and environmental protection, including allocating additional resources for forest conservation and expansion.

The NEC’s decisions are expected to shape the federal budget for FY2026–27, which is likely to be presented in parliament later this week.