PM Shehbaz directs PKR 200 billion increase in federal development budget

Prime Minister Shehbaz Sharif has directed authorities to increase the proposed federal development budget by PKR 200 billion, saying the initial allocation of PKR 1.126 trillion is insufficient.

The directive comes ahead of a National Economic Council (NEC) meeting on June 3, where Pakistan's Public Sector Development Program (PSDP) for fiscal year 2026-27 is expected to be finalized.

What is PM Shehbaz proposing for the federal development budget?

Shehbaz Sharif has asked the Ministry of Finance and the Ministry of Planning to secure an additional PKR 200 billion for development spending.

If approved, the federal PSDP would rise from PKR 1.126 trillion to PKR 1.326 trillion for fiscal year 2026-27. The government has also said it will inform the International Monetary Fund of the proposed increase.

How does the government plan to fund the extra PKR 200 billion?

To create fiscal space for the higher allocation, the prime minister directed the Ministry of Finance and the Federal Board of Revenue to explore options for generating an additional PKR 200 billion in revenues.

However, both bodies have expressed reservations about raising the formal tax collection target from PKR 15.264 trillion to PKR 15.464 trillion. They cited revenue constraints and difficulties in implementation as key concerns.

As a result, officials are working on alternative fiscal and financial measures to accommodate the additional spending. The goal is to boost the development outlay while maintaining overall budget discipline. No specific alternative measures have been confirmed publicly at this stage.

What will the NEC decide on Pakistan's PSDP for 2026-27?

The National Economic Council is Pakistan's highest forum for approving development priorities and macroeconomic targets.

It is expected to consider the revised development allocation at its meeting on Wednesday, June 3. The outcome will determine the final PSDP envelope for the upcoming fiscal year.

The proposed increase in development spending reflects the government's broader push to accelerate infrastructure projects and support economic growth.

The federal budget for fiscal year 2026-27 is being prepared against a backdrop of fiscal consolidation and ongoing IMF engagement.

The NEC meeting is expected to bring greater clarity on how the government balances its development ambitions with fiscal constraints.