Pakistan cuts proposed federal development spending by PKR 270 billion ahead of budget

Pakistan's federal government has reduced its proposed Public Sector Development Program for fiscal year 2026-27 by PKR 270 billion, official sources said.

The National Economic Council (NEC) is expected to consider a federal development allocation of PKR 1.05 trillion at a meeting Tuesday, chaired by Prime Minister Shehbaz Sharif, ahead of the formal budget announcement later this week.

Why has Pakistan cut its federal development budget for FY2026-27?

The proposed federal PSDP has been reduced from a previously discussed PKR 1.32 trillion to PKR 1.05 trillion, a cut of PKR 270 billion.

The reduction reflects fiscal constraints and the government's efforts to maintain budget discipline, as it balances infrastructure investment needs with economic reform commitments.

The NEC, Pakistan's highest economic planning forum, is expected to review and approve a consolidated national development program totaling PKR 4.194 trillion for the next fiscal year.

The overall outlay includes PKR 1.05 trillion for the federal PSDP and PKR 3.138 trillion for provincial annual development programs.

Provincial governments are expected to account for nearly three-quarters of total development spending. Punjab is likely to receive the largest allocation, with a proposed development program of PKR 1.45 trillion, followed by Sindh at PKR 816 billion.

How much will each province receive in development funding for FY2026-27?

Khyber Pakhtunkhwa's development program is expected to be set at PKR 564 billion, while Balochistan is likely to receive PKR 308 billion, according to officials familiar with the proposals. Together, the four provinces account for the bulk of the national development program's PKR 3.138 trillion provincial component.

The NEC meeting is expected to be attended by the chief ministers and finance ministers of all four provinces, along with the prime minister of Pakistan-administered Kashmir and other senior officials. The council's approval of the development framework will clear the way for the federal budget's formal presentation.

When is Pakistan's federal budget for FY2026-27 expected to be announced?

The federal budget for fiscal year 2026-27 is expected to be unveiled later this week, following NEC approval of the development program.

Pakistan's development spending plans come as the government seeks to balance public investment in infrastructure and social sectors with fiscal consolidation targets under its ongoing economic reform program.