Punjab’s development budget is nearly one-third more than the federal development budget
ISLAMABAD:
The federal government on Monday cleared Rs4.3 trillion worth national development programme for the new fiscal year, three-fourth of it funded by provinces, including Rs87 billion allocations for what Planning Minister Ahsan Iqbal called the “cost of a coalition government”.
The Annual Plan Coordination Committee (APCC) recommended the total national development budget of Rs4.264 trillion for fiscal year 2026-27 for the final endorsement of the National Economic Council (NEC).
Prime Minister Shehbaz Sharif chairs the NEC meeting that will meet on Wednesday (tomorrow) to endorse the plan.
The sources said that the prime minister has also asked the finance ministry to find around Rs200 billion additional fiscal space for the proposed federal Public Sector Development Programme (PSDP), which currently stands at Rs1.126 trillion.
While speaking to the media, Iqbal said that the Rs1.126 trillion federal development budget was effectively negative by Rs15 billion after excluding fixed allocations for various sectors, projects and areas.
However, the finance ministry was not comfortable to further increase the proposed PSDP size, citing restrictions imposed by the International Monetary Fund (IMF), the sources said. The final position will be known by Wednesday, they added.
The government’s options could include further increasing the Federal Board of Revenue (FBR) tax collection target to create more fiscal space or cutting expenditure in other areas.
Headed by Iqbal, the APCC recommended the federal PSDP at R1.126 trillion including foreign aid of Rs267 billion ,higher by 35% over this year’s reduced budget. However, the minister publicly expressed his frustration over the extremely low size of the federal PSDP, which cannot cater the need of ongoing projects.
The APCC also recommended provincial Annual Development Plans at Rs3.138 trillion including foreign aid of Rs660 billion for the next fiscal year. This is 2.5% higher than this year’s upward revised allocation of little over Rs3 trillion.
After the 18th constitutional amendment, most of the resources are in the hands of the provinces. However, still the federal government was funding the provincial projects from its own budget despite there being no constitutional requirement. Funding provincial projects by the federal government is also a breach of the National Fiscal Pact, signed as part of the IMF conditions.
Iqbal said that the federal government would spend Rs87 billion on projects recommended by the coalition partner.
“The Rs87 billion is the cost of the coalition government”, Iqbal said while responding to a question.
The Rs87 billion is almost equal to the amount that has been allocated to Pakistan’s three strategically important dams, Dasu Dam, Diamer Basha Dam and the Mohmand Dam, which is far lower than their pressing needs. Rs25 billion each is proposed for Dasu and Diamer Basha dams while another Rs39 billion is allocated for Mohmand Dam.
The minister said that owing to prevailing fiscal constraints, the PSDP 2026-27 needs to be directed towards high impact ongoing projects of national significance that can spur the sector growth.
Iqbal said that there was a demand of over Rs4.1 trillion by various ministries and the planning ministry asked the finance ministry to allocate at least Rs2.9 trillion to just complete the ongoing projects.
The need for completing the ongoing projects has now jumped to over Rs10.8 trillion and at this pace of allocation it will take over a decade to complete these projects without adding any new project, Iqbal said.
However, despite no fiscal space the federal government has allocated a token amount of Rs250 million for Lahore-Bahawalnagar Punjab motorway having total cost of Rs263 billion. Sindh has opposed adding the Punjab motorway in federal PSDP.
The planning minister said that over 90% projects portfolio face cost and time overrun and there is high demand for rupee cover allocation for foreign funded projects.
The minister said that for the next fiscal year, the ministries had demanded Rs1.1 trillion rupee cover for foreign-funded projects and even the rationalised demand for rupee cover was Rs426 billion. But the actual allocation was Rs267 billion.
Economic Affairs Minister Ahad Khan Cheema remained present in the APCC meeting.
The Planning Commission’s dilemma is shrinking development budget and pressing demands, which has annoyed many people, said Iqbal.
But yet, the federal government not only allocated Rs87 billion for coalition partners’ recommended projects but also set aside another Rs70 billion, to give Rs500 million for small development schemes recommended by every member of the National Assembly belonging to the treasury benches.
According to the APCC, Punjab would spend Rs1.45 trillion on development in the next fiscal year, which is 7% higher than this fiscal year. Punjab’s development budget is nearly one-third more than the federal development budget.
Sindh will spend Rs816 billion on development schemes, down by Rs29 billion over this year. Khyber-Pakhtunkhwa plans to spend Rs564 billion -Rs63 billion higher than this year. Balochistan’s new development budget is Rs308 billion, Rs53 billion less than this year.
Iqbal said that the National Highway Authority alone demanded Rs1.4 trillion for the next fiscal year but it would get Rs264 billion for the next fiscal year. Rs20 billion has been proposed for the Sukkur-Hyderabad Motorway against the demand of Rs122 billion.
The minister said that Rs80 billion were needed for Karakoram Highway project but very little amount is being given against the demand.
Despite describing water as “our security challenge” that required Rs970 billion for the next fiscal year, the government has proposed only Rs140 billion. At one place, the allocation is mentioned at Rs179 billion for the water sector.
Iqbal said that due to prevailing economic and energy shocks, the Finance Division twice cut the outgoing fiscal year allocation by Rs173 billion to Rs837 billion.
