Finance ministry allocates Rs1.126 trillion for PSDP 2026-27

ISLAMABAD: Federal Minister for Planning, Development and Special Initiatives Ahsan Iqbal on Monday said the Ministry of Finance has allocated Rs1.126 trillion for the Public Sector Development Programme (PSDP) for the fiscal year 2026-27.

Addressing the Annual Plan Coordination Committee (APCC) meeting on the upcoming budget, the minister said the allocation falls significantly short of development funding requirements, posing a major challenge for the government’s planning and development agenda.

He emphasized the need to prioritize and complete ongoing development projects, noting that limited fiscal space and a growing throw-forward burden have made it impossible to finance all proposed schemes under the PSDP.

Ahsan Iqbal said some lower-priority projects may not be accommodated due to resource constraints, adding that the government’s foremost priority is the completion of ongoing development programmes.

Highlighting the scale of the challenge, he said the federal development portfolio currently carries a throw-forward of nearly Rs10 trillion. Ministries have sought approximately Rs4 trillion for ongoing projects alone.

According to the minister, ministries are implementing projects worth Rs3.377 trillion and have proposed around 720 new schemes, in addition to submitting more than 5,500 project proposals for consideration.

He said the total demand for development funding stood at Rs4.097 trillion, while the Ministry of Finance allocated only Rs1.126 trillion, leaving a funding gap of nearly Rs3 trillion.

“We have to allocate Rs1.126 trillion against demands exceeding Rs4 trillion on a selective basis,” he said, adding that many important projects could not be accommodated within the available fiscal space despite their significance for national development.

The minister said the PSDP allocation includes Rs125 billion for the N-25 Highway project in Balochistan, which he described as a non-negotiable priority identified by Prime Minister Shehbaz Sharif.

He added that Rs87 billion has been earmarked for projects proposed by coalition partners, while around Rs100 billion has been allocated for development initiatives in Balochistan.

Furthermore, Rs153 billion has been set aside for Azad Jammu and Kashmir (AJK), Gilgit-Baltistan (GB), and the merged districts.

Ahsan Iqbal said these funds should ideally be transferred through the National Finance Commission (NFC) mechanism, but in the absence of a consensus arrangement, they continue to be financed from the federal government’s share.

The minister also said nearly Rs70 billion has been allocated for initiatives related to the Sustainable Development Goals (SDGs).

Explaining the fiscal constraints, he noted that substantial resources are required for rupee-cover obligations linked to foreign-funded projects supported by multilateral institutions, including the Asian Development Bank (ADB) and the World Bank.

According to him, the demand for rupee cover initially stood at Rs832 billion but was reduced to Rs426 billion following consultations between the Economic Affairs Division and relevant ministries.

He added that after accounting for these commitments and a Rs180 billion PSDP cut carried over from the previous fiscal year, the development programme is left with virtually no fiscal space for new projects.