Federal Minister for Planning, Development, and Special Initiatives Ahsan Iqbal on Monday said the government will have to prioritise high-value projects, as only Rs880 billion has been allocated for development in the upcoming budget for the fiscal year 2025-26.
The government has adopted austerity measures for the upcoming budget — set to be announced on June 10 — in line with the demands of the International Monetary Fund (IMF) to implement stricter spending policies and raise revenues to reduce the budget deficit and improve debt sustainability, as part of its $7 billion loan programme. The global money lender also expects Pakistan to achieve a 3.6 per cent economic growth with 7.7pc inflation next year.
Speaking to reporters in Islamabad after a meeting of the Annual Plan Coordination Committee, the planning minister noted that since 2023, the development budget had decreased, stating that Pakistan was observing “tight financial discipline in order to balance spending and income” — a process he said had been agreed upon with the IMF.
“Pakistan has faced such severe inflation that the federal government would end up spending the money it collected from the provincial governments to pay off loans,” he explained.
“The reason we have these debts is because the govt in power between 2018 and 2022 took multiple loans and the policy rate rose to 23pc due to heavy inflation,” Iqbal added. “Repaying those loans became 55pc of our spending. As a result, this has affected our development budget.”
“Since resources are limited, we need to focus on high-priority projects for national development. We need to ensure ‘value for money’ in selecting projects.
“Efficiency and prioritisation of investment are two important pillars to fulfil lack of resources,” the federal minister said earlier while addressing the committee meeting.
He said that fiscal space will be provided in the next PSDP for projects of strategic importance. He said efforts have been made to align the development budget with national priorities while staying within limited resources.
The minister recalled that when the PML-N was voted out of government in 2018, the defence and development budgets were Rs1 trillion each.
Breaking down the development budget, Iqbal said that Rs664bn would be allocated to infrastructure projects including energy, water, transport and planning.
“The energy, water and highway sectors will be prioritised,” he noted.
He added that Prime Minister Shehbaz Sharif had ordered that Rs120bn of the Rs1 trillion development budget be allocated to upgrade the N-25 Highway in Balochistan, which runs from Chaman to Karachi through Quetta.
“The road will be upgraded to an expressway,” he said. “Excepting this project, we have Rs880bn with which we have to balance the PSDP (Public Sector Development Programme).”
Iqbal further said that special areas such as Azad Jammu and Kashmir (AJK) and Gilgit-Baltistan would receive Rs63bn, while the merged districts in Khyber-Pakhtunkhwa would receive Rs70bn.
“Science and IT (Information Technology) will receive Rs53bn, bodies performing institutional reform will get Rs9bn, while the production sector will receive Rs11bn. Altogether, this makes Rs1tr,” he outlined.
